The Big Get Bigger
One of the strategies that companies use when attempting to expand control over a market segment is to engage in mergers and acquisitions. This behavior is evident in the realm of major cloud providers. Here are some recent examples.
- IBM’s acquisition of Red Hat, a developer of open-source enterprise software, is designed to strengthen the company’s cloud offerings as they compete with other market leaders. The deal cost Big Blue $34 billion in cash and stock.
- Google Cloud acquired Elastifile to bolster its storage capabilities. Elastifile provides a software-based technique for managing network-attached storage (NAS) which Google plans to incorporate into its cloud storage offerings.
- Microsoft’s acquisition of GitHub will enable the company to strengthen its relationship with the developer community. The $7.5 billion deal will facilitate the use of Microsoft tools and services by the over 28 million GitHub developers and their products.
These moves by some of the giant cloud providers are concentrating resources and intellectual capital within a small pool of corporations. In the opinion of corporate management, due to the economies of scale that their organizations provide, they can achieve the greatest benefits from these technologies. Believing that altruism is the complete rationale behind the mergers is foolish. All of these companies are driven by the need to continuously generate profits, and acquiring new skillsets contributes to that goal.
The Dangers of Too Much Consolidation
While consolidation may be attractive to the giant cloud providers, the practice may expose customers to some potential issues. As with any industry, consolidation in the cloud will undoubtedly lead to fewer alternative solutions for prospective and current clients. Monopolization of any market segment presents the prospect of price-fixing, taking advantage of the lack of competition for a particular service. The cloud will not be immune to this ailment.
This absence of competitive alternatives ties in with the concept of cloud vendor lock-in. In this scenario, a vendor employs proprietary technology solutions that make it difficult for customers to adopt a new provider. This can be problematic for financial reasons if better deals for the equitable services can be obtained elsewhere. It can also result in the inability to optimize your cloud environment by migrating to advanced technologies that better serve your needs.
There is not much that the average IT professional can do about this phenomenon. It is something that you should be aware of and keep in mind as you plan to move your business-critical applications to the cloud. Your future choices may be more limited than they are today, so make them wisely.