The dust has yet to settle after IT vendors such as SAP, IBM and Oracle embarked on a buying spree late last year for cloud companies that were meant to boost their capabilities in that space. Industry watchers say they will have to work on integrating and aligning them to existing business strategies in order for these deals to prove beneficial.
Dan Olds, analyst at The Gabriel Consulting Group, noted the acquisitions of cloud businesses by IT vendors have been like an "arms race". These deals include IBM's Green Hat buy, SAP's SuccessFactors acquisition, while Oracle and Salesforce.com bought over Taleo and Rypple, respectively.
These were sanctioned as all of these vendors wanted to ensure they have a full cloud arsenal and not fall behind their competitors, Olds said, adding none of these vendors have yet to gain a clear lead over the rest.
Giving an update following the SuccessFactors acquisition, Graham McColough, vice president for cloud at SAP Southeast Asia, revealed the focus for the company has been on technology integration and manpower organization.
The two companies have worked to quickly combine their cloud development teams into one global unit so new products and enhancements can be released on a monthly basis--which is "dramatically faster" than in the past, McColough told ZDNet Asia.
One example of this is the appointment of SuccessFactors CEO and founder Lars Dalgaard to head up SAP's cloud business, as well as being on the global management board, he added.
The executive added the buying spree by vendors reflected a wider trend of customers moving to cloud-based offerings, but it is not the only factor why SAP spent US$3.5 billion to buy the employee management software developer. Any acquisition is only approved if the target helps the German company leapfrog competitors while delivering high business value to customers, he explained.
IBM, too, said its acquisitions are part of the company's continuous efforts to look for the right kinds of companies to broaden and deepen its cloud portfolio. Chung Hao Ning, country leader for cloud computing at IBM Singapore, said these buys are always complementary to the wider cloud computing development efforts internally.
Besides Green Hat, which will provide Big Blue with improved quality and testing development for cloud tools, its January 2012 buy of Worklight will enable it to connect its mobile development platform to the cloud, Chung stated as examples.
Integration, alignment necessary
Dane Anderson, vice president, research director, and region manager at Forrester Research, pointed out that what SAP and IBM did in terms of integrating these companies to boost their existing capabilities in the cloud space is integral to turning these acquisitions into a success.
By doing so, IT vendors are then able to compete effectively in the cloud arena, both in terms of the intellectual property and organization of manpower, Anderson stated.
He acknowledged that harnessing cloud buys will be a challenge for traditional IT providers though, given that both are fundamentally different business models. By moving to cloud, vendors might face having to cannibalize their existing "cash cow" businesses and this might slow down the integration process, the analyst explained.
Charles King, principal analyst at Pund-IT, added these vendors will have to consider how their new cloud buys provide incremental improvements to their broader set of services and how these will increase value and benefits to customers.
"Properly implemented solutions don't have to be large to have a major impact, but they do need to be well-planned and considered," King noted.
Olds also pointed out that the customers will have to be at the forefront of IT vendors' considerations.
"Every IT vendor of note believed embracing cloud computing with its own services was either its ticket to leapfrogging over competitors or something it needed in order to remain relevant in the future," he said.
"The problem was they haven't listened closely enough to what their customers actually want and need today."
Thus, the companies that will do well and make money from cloud computing will be those that are sensitive and responsive to evolving market trends. For instance, since more enterprises are looking to build their own internal clouds than utilizing public cloud services, vendors with products designed to ease private cloud deployment would see better results in revenue and profit, the analyst said.