Some M&A Targets for the Cloud Incumbents

We are at the tail end of earnings season and the cloud has again played a pivotal role. Cloud platforms are a relevant line item in the reports of incumbents such as Amazon, Microsoft, Alphabet, IBM, Salesforce, Oracle, Alibaba and others. With these incumbents fighting hard for cloud dominance, any little differentiation counts. As a result, the climate for M&A has never been more favorable in the cloud space.

The recent performance in public markets has given companies like Amazon, Alphabet and Microsoft a massive war chest for M&A. Recent examples such as Google; acquisition of Apigee showed that the cloud incumbents are not afraid of spending big sums in order to accelerate their capabilities.

Another aspect to consider when evaluating the M&A climate for cloud companies is the fact that PaaS incumbents are trying to match each other feature by feature. In that dynamic, every time a PaaS vendor releases a new capability, its top competitors rush to match that feature. Strong M&A can definitely help PaaS leaders to both bridge the gap with competitors in some areas as well as to create a high bar for differentiation in others. Fro example, when Google acquired API market leader Apigee, it didn’t only provide an answer to competitive offerings such as Azure API Gateway or AWS Api Gateway but it also made it really difficult for those competitors to match Apigee’s advanced feature set.

Aggressive M&A Targets for the PaaS Incumbents

Factoring in that the cloud leaders have rich cash reserves at their disposal and that large acquisitions are becoming more common in the cloud space, let’s speculate about some aggressive potential M&A targets for PaaS incumbents.

AWS

The are not many weaknesses in the AWS platform but I selected three areas of potential M&A focus: integration, infrastructure and citizen developer tools. Integration is an area on which AWS has no answer to technologies such as Azure Logic Apps. Zapier could be a target that fits nicely AWS’ dev friendly mantra. In the self-service citizen developer tools space, AWS is trailing both Microsoft and Google’s offerings. IFTT could be an interesting choice in this area. Finally, if AWS wants to expand its leadership in the cloud infrastructure space, why not to acquire Docker? ;)

Azure

In terms of capabilities, Azure might be the most complete cloud platform in the market. For the M&A perspective. I like areas such as machine learning and data quality management. Until now, Azure has done a remarkable job building its machine learning and artificial intelligence capabilities and now its time to keep accelerating. I think companies such as Algorithmia could be an interesting addition to the stack. Data quality management is an absent member of the Azure cloud. Trifacta, Tamr, or Paxata could be interesting targets in this area.

Google Cloud

Aggressive M&A seems to be one of Google Cloud’s core strategies in order to close the gap with AWS and Azure. Identity management and IOT top my list of Google Cloud areas of focus for M&A. Google Cloud’s identity management suite is relatively limited compared to AWS’s and Azure’s. In this domain, I like recent-IPO Okta or Ping Identity as M&A targets. In the IOT space, Google Cloud has no capabilities that can compete with Azure and AWS IOT stacks. Xively seems to have the right combination of developer friendliness and scalability that Google likes. Zapier is also an interesting choice to bring much-needed integration capabilities to Google Cloud.

Written by

CEO of IntoTheBlock, Chief Scientist at Invector Labs, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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