What the biggest tech acquisition reveals: It’s a jungle out there!
Cloud is big, cloud is business and cloud is suddenly everywhere. Four big companies currently dominate the field, but have Dell left it too late to join the party? With Dell buying out EMC, Stoyan Mitov shares his thoughts on the crowded cloud market.
Dell is buying EMC for $67 billion – the biggest tech acquisition ever! After the announcement I started wondering what the reason was and tried to take a look at the bigger technology picture.
It’s a jungle out there. The most innovative companies, with their visionary leaders, are literally killing off the others. It’s so obvious. Dell and EMC are both struggling as they hadn’t adapted to the cloud revolution fast enough. Their revenues are stale and a huge part of their products are no longer relevant to the market. Their customers stopped buying storage or servers from them and are now using cloud services providers.
Not surprisingly, Dell wants to also become this kind of provider. The reason they payed $67 billion for EMC comes in part because they were the storage provider of choice a decade ago – Dell thinks this will help them enter the cloud market quicker. Considering the cloud computing market estimate, Dell aren’t crazy to want to join the ride as the year over year growth is projected at around 20% and will reach $106 billion in 2016.
However, it will be a tough battle for Dell as the market has its leaders already. AWS, Microsoft Azure, Google Cloud and IBM occupy more than 50% of the market share, making them really hard to beat. Moreover, these four grow in a rate higher than the market, meaning that they are eating a fair share of what’s left. Amazon is the undisputed king with more than 70% of year over year growth and $6 billion in revenue. Jeff Bezos envisioned this market 10 years ago and now enjoys its leading position.
Why is this market growing so fast? There are three reasons for this – affordability, convenience and scalability. It’s a lot cheaper for the companies to pay a cloud provider, such as AWS, based on the storage they use then to buy servers on their own and pay all the additional costs to support them.
Furthermore, it’s way more convenient – all the support related to the cloud is handled by the provider. You don’t have to store hardware. Whenever you need more storage, you can just buy it online and its yours within minutes. Before the cloud, you had to make projections months ahead on how many servers you’d need to purchase, on top of making sure you built the datacenter in such a way that it would be big enough for the years ahead.
Considering all the above benefits, there are some disadvantages as well. Due to the market being dominated by four main vendors, companies don’t have a choice but to totally depend on them for their storage. One famous case of a company that doesn’t use any of the big players listed above is Uber. CEO Travis Kalanick chose not to use Microsoft Azure for example, but many smaller providers as he didn’t want to be “locked in” and dependent on a single cloud provider.
In conclusion, hype around the cloud exists for a reason but companies like Amazon, Google and Microsoft must continue to innovate to avoid the destiny of giants such as Dell and EMC. What’s your opinion of Dell’s recent acquisition?