Selling Your Cloud Computing Business

When it comes knowing the “how to” of selling any company, there are always processes and procedures you will need to include in the business plan to get your company sold. The high technology sector of business selling can be highly cyclical and is often a matter of being in the right place at the right time.

While we enjoy selling companies that have inherent value in the cash they are throwing off on a regular basis, we also love to catch waves, ride them and sell at the top, especially for those working in industries of high growth and huge potential.

The cloud sector is a current industry with huge potential and a great deal of hype, but fortunately for those who’ve created excellent businesses within this growing field the numbers speak for themselves. After pulling some data from several market research reports, here is some information on the cloud computing M&A and the industry at large:

  • Public cloud expected to rise from 28% to 51% over three years until 2015
  • Public cloud workloads may increase at 50% CAGR until 2015
  • Best positioned for cloud adoption: Accenture, Salesforce.com, Broadcom, EMC, Juniper Networks, Quanta, Rackspace, and VMware. These companies make for great acquirers of smaller, but proven players in the cloud
  • Newer, less developed cloud markets will see higher growth, including IaaS and PaaS markets.
  • 20% CAGR in virtualized servers
  • Current PaaS and IaaS usage is at around %15 of total while the more common SaaS is near 20%
  • Strongest growth is expected in the IaaS market at 54% CAGR until 2015
  • Rackspace’s cloud business is expected to have a 46% CAGR over the same forecasted time frame
  • Industry analyst groups Gartner, IDC and 451 expect a more conservative 25% CAGR over the same time period. MS differences were garnered from surveys of expectation for growth of workload performed in the cloud (29%) and workloads performed overall (16%)
  • Current on and off premise virtualization is expected to grow from its current level of 32% of total to 52% over the next three years
  • A 17% improvement in utilization of virtualized servers is expected to take place over the next three years
  • According to IDC growth of unstructured (undefined) data will account for 89% of the 48% annual data growth rate (example of structured data: databases)
  • Structured data is expected to grow at 58% CAGR and unstructured data is expected to grow at 21% CAGR
  • Large storage shift from scale-up to scale-out SAN and NAS technologies including EMC’s V-Max (SAN), EMC’s Isilon (NAS), and EMC’s Atmos and NetApp’s Bycast (object storage) giving EMC an upper hand in their ability to dominate in unstructured storage
  • MS expects that unstructured data could account for more than 80% of total public and private server capacity by 2014
  • IDC estimates unstructured data storage in the public cloud and content depot environments will account for approximately 95% of capacity by 2014
  • Cisco’s USC platform for data storage is estimated to have margins of about 36%
  • EMC (five year storage market share increases from 21% to 26%) and NetApp (five year storage market share increases from 6.3% to 11%) are expected to grow and continue to take share
  • AT&T is expected to grow inorganically in the IaaS space through M&A
  • 12%, 20%, 15% and 12% surveyed CIOs expect to provision new IaaS workloads with Rackspace,  Amazon, AT&T and Verizon/Terremark respectively
  • However, Rackspace is expected to be the best positioned to compete in the IaaS market and MS expects 40% EBITDA growth through 2012
  • 30% to 35% of total cloud revenues are expected to come from large IT organizations
  • Forrester expects total public cloud to reach $160 billion
  • Deloitte pegs the current SaaS market as 89% of the total market
  • It is expected that PaaS and IaaS have a robust growth rate of up to 50% over the next several years
  • Gartner: IaaS revenue was $969 million in 2008 and is expected to increase to more than $8 billion by 2013 (CAGR of 53.6%)
  • IaaS is expected to be about 31% of the total cloud market

I don’t have to tell you that growth is somewhat eminent here. However, so much of the success in any high tech endeavor is about execution, timing and knowing the right people. Fortunately, we’ve the expertise at all three, especially in the realm of software mergers. Contact us to find out more about selling your cloud-based business.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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