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Posted by Peter O'Neill on July 29, 2010
Continuing my musings about the impact of cloud on our industry (see last week’s blog), I’m in the middle of a cloud project where we are identifying and profiling potential channel partners for an ISV that is about to launch a systems management product for cloud environments. I must say, I’m surprised by the number of channel partners already talking about cloud.
It reminds me of a conversation with staff at Nimsoft, a company recently acquired by CA, about how they were promoting their cloud offerings. My personal view is that Nimsoft managed to complete their exit strategy so quickly and successfully because they focused all of their new product announcements and general positioning toward the cloud. Coincidentally, CA had decided to turn up the heat on its own cloud campaign and promptly bought three technology companies to strengthen the cloud offering and show their commitment — Nimsoft, Cassat, and 3Tera.
While Cassat and 3Tera were cloud-specific solutions, Nimsoft was already successful as a provider of systems monitoring software to enterprises and managed service providers. My theory is that their cloud image was the result of a considered repositioning exercise that culminated in their placement on CA’s wish list. Here’s another example: Yesterday, Adobe announced its intention to acquire Day Software, the Swiss content management ISV. Day Software had a consistent ECM business with modest growth, but I notice that they turned up the cloud messaging over the last months — I suspect this is what got them into Adobe’s sights.
I believe that most of the software majors are now looking around in the market to beef up their cloud offerings and will be willing to open up their cash accounts to acquire the right firm. I include Google in that list of software majors, though they may be suffering acquisition indigestion after buying 20 companies in the last 12 months; the last transaction, ITA Software, was announced in July and is not yet closed.
Curiously, the most obvious cloud acquisition candidates will require very deep pockets indeed. Salesforce.com is currently trading at 75 times its forward earnings, and SuccessFactors is trading at over 1,000 times forward earnings (for context, Oracle trades at 14 times and SAP at 17 times forward earnings). But general M&A activities are now booming as well. Regent Partners International, just reported for Europe that:
"The most outstanding feature of the H1 2010 technology acquisitions has been the substantial increase in deals in the Software sector (up 41% on a year ago) ... [including] Internet Software (up 83%). The larger software companies, many of whom are holding substantial amounts of cash, are seeking to fill out their product portfolios by acquiring smaller software developers that may have strong product offerings but weak sales and marketing capabilities."
So, I suggest that CEOs and CMOs of technology companies should take a leaf out of Nimsoft’s and Day’s books and work hard at adding cloud to their messaging and positioning. They will be invited to the altar, if that’s their wish, much quicker. What do you think?
Always keeping you informed! Peter
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