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Cloud consolidation continues on day of deals

A couple of acquisitions have been struck in the cloud services provision world as more channel players jockey for position in the market

The channel has been expecting some consolidation in the managed services space for quite some time as those looking to gain more of a foothold in that area of the market do so through bringing on board existing expertise.

Where the acquisitions were seen as being most likely was around the born-in-the-cloud startups who would grow to a certain size and then become more attractive to larger channel players.

But so far there has been a mix and some of the larger managed service providers have not been immune from the consolidation trend with Interoute's acquisition of Easynet underlining that it is not just smaller firms that are attractive M&A targets.

The Easynet deal has been driven by a need for Interoute, which is the owner and operator of its own network and has a cloud platform, to add to that a range of managed services that can provide more support for customers.

The deal, which values Easynet at £402m, would have taken Interoute's revenues for the year ended 30 June up to the €700m mark.

Gareth Williams, Interoute's CEO, said that the deal was all part of its ambition to become one of the main players across Europe.

"These are exciting times for Interoute and our customers as we create a leading, independent European ICT provider.  It's the next step in our acquisition strategy and moves us much closer to our goal of being the provider of choice to Europe’s digital economy," he said.

From the perspective of Easynet the deal has been seen as the best way of providing more value for its customers and give it more of a chance to take more European business.

"I believe this acquisition will bring great benefits to both Interoute's and Easynet’s customers.  The combined companies can offer broader and deeper connectivity options, as well as an expanded portfolio of products and services, and the acquisition will further expand an already market-leading cloud hosting capability in Europe," said Mark Thompson, CEO of Easynet.

Another deal that was struck involved two existing cloud players - Vapour Media and EveryCloud - also came about because the view was that the two firms would have more chance of making a greater impact if combined into a single organisation.

Both firms target the SME customer base via resellers providing a range of services including a white label proposition including some backup and storage and access to a private MPLS network and a VoIP platform.

The rationale for the deal is to take advantage of the growth in cloud and the decline in traditional network services and to bring together under the Vapour Media name a 'converged cloud provider'.

Tim Mercer, Vapour Media, said: “In the business environment there is the opportunity for a connectivity-driven revolution that enables business growth and improvement through cloud services. This market is incredibly fragmented and for resellers there is no single ‘go to’ partner."

“Traditional IT companies, telcos and cloud start-ups are offering a bewildering array of solutions to embrace this. These worlds are colliding and SMEs are stuck in the middle. There is a place for a new breed of provider, marking a move away from telcos dabbling in computing or IT businesses dabbling in comms. There is a requirement for an integrated cloud provider that can credibly provide an all-in-one offering.”

Those with a crystal ball won't have to look too hard into it to make a prediction that this will not be the last deal this year that will see a managed service player acquired to add more options to an existing business.

With the pressure to deliver managed services continuing to grow from customers and vendors the channel will have to make moves to develop or acquire those skills fairly soon or risk losing out to competitors.

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Managed Services providers have local presences (near customers) and localized data center resources. These are both valuable strategic assets in trying to compete with web-scale providers, or moving down markets for Midsized or SMB customers. We can expect to see greater consolidation over time, as the MSPs need to reach better levels of buying power to keep pricing competitive with the web-scale providers (e.g. AWS, Azure, etc.)
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