It's raining money from the clouds as Salesforce.com and IBM this week together spent a total of $4.5 billion to boost their cloud computing services.
The acquisitions were made by each company for very different reasons, but they are united by a common goal of making sure each is a power player in the cloud computing world. Salesforce.com bought email marketing service ExactTarget to build up its treasure trove of business data.
IBM, meanwhile, announced intentions to buy SoftLayer -- a midsize cloud computing provider founded in 2005. Big Blue fills out its cloud services to compete with the likes of market-leading provider Amazon Web Services, and will help to make the cloud in general more palatable to enterprise IT shops.
But the overall takeaway between these two acquisitions -- $2.5 billion for Salesforce.com and $2 billion for IBM -- are the commitments each of these companies are making toward cloud computing. Still think the cloud is just some marketing buzz term? Here are 4.5 billion reasons why it's not.
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IBM fills holes, adjusts to the cloud world
The acquisition of SoftLayer by IBM makes sense on a number of fronts. The company has a fairly robust cloud portfolio already between its SmartCloud Enterprise and SmartCloud Enterprise Plus offerings, both of which are infrastructure as a service (IaaS) public and private cloud options for customers. But, Gartner analyst Lydia Leong says the services have failed to catch on with developer-centric audiences thus far. SoftLayer can help fill that gap.
SoftLayer is known in the industry as being one of the most successful bare-metal clouds, meaning it offers hosted infrastructure with no hypervisor. That appeals to developers and engineers who may be concerned about the performance hit that virtualizing an application can bring for high-performance workloads. SoftLayer also has dedicated and multi-tenant infrastructure offerings as well. "SoftLayer has already had a product that could appeal to the enterprise, but it never quite made it into those markets," Leong says. "IBM brings credibility to SoftLayer services."
Buying SoftLayer conveniently fulfilled another task other than just filling out IBM's own portfolio and providing customers more services from its SmartCloud offering -- it also ensured a competitor would not snatch up SoftLayer. EMC reportedly had been eyeing the company as well, which could have driven up the bid price for the company. Krishnan Subramanian, a blogger at Rishidot Research who tracks the cloud market, says he's surprised by the $2 billion price tag. "They definitely overpaid," he says.
Salesforce.com continues to look beyond CRM
Salesforce.com, meanwhile, made one of the biggest acquisitions in the company's young history when it dropped $2.5 billion to buy ExactTarget on Tuesday. Salesforce.com has built up its business through its software as a service (SaaS) applications, most notably its customer relationship management (CRM) tools. But it's been looking to diversity in recent years. It bought platform as a service (PaaS) vendor Heroku and has developed Force.com, which allows customers to build customized applications associated with CRM, and increasingly other functions, such as employee management and general business process management.
It's also been building up a marketing cloud, with acquisitions like content publishing platform Buddy Media and marketing analytics technology firm Radian6. Salesforce.com has amassed a massive amount of data from its customers, and not just any data but the most important data companies have about interactions with clients and potential customers. The more data it has, the more opportunities it has to provide users with services that integrate all this data together. ExactTarget gives Salesforce.com another treasure trove of data about customer interactions and a platform via email of engaging with those users.
Taking a step back, the real story here with both of these acquisitions is the emphasis these companies are putting on the cloud. "The driving factor is the increasing adoption of public cloud services based on commodity hardware," Subramanian says. Each of these companies recognize the increasing role cloud services could play in their futures.
This story, "IBM and Salesforce.com Spent a Combined $4.5 Billion on Cloud" was originally published by Network World.