Cloud market consolidation ‘presents risks and benefits’

Cloud market consolidation presents risks and benefits [Image: Just_Super via iStock]

Forrester has published a new report into cloud market consolidation, which has revealed that it will be both a good and bad prospect for companies.

It has suggested that market consolidation can present greater risks and fewer rewards for cloud software subscribers than those making use of off-premise infrastructures. The researchers explained that the former is more susceptible to supplier lock-in, which then presents the risk of the services they rely on suffering from under-investment by suppliers focused on profits.

The report said: “At some point, cloud suppliers like Salesforce will become so large that, like IBM today, they can’t grow faster than the overall technology market. When that happens, investors will expect these suppliers to deliver profits.

“That’s when suppliers with dominant market shares will quietly crease to compete on price and reduce their investments.”

However, the report did not say that consolidation is all bad, suggesting that the software as a service (SaaS) delivery model makes it easier for new entrants to enter the market. This could result in the older players reconsidering their approach to securing enterprise IT spend.

Forrester said that “incumbent suppliers” shouldn’t be complacent or raise their prices too high, as they run the risk of a new SaaS supplier “with a better value proposition” taking customers away. This is why leading SaaS suppliers tend to avoid complacency.

Discussing the infrastructure as a service (IaaS) model, the Forrester report said that market consolidation brings more benefits. The researchers highlighted the ongoing price war between Amazon Web Services (AWS), Google, IBM and Microsoft as an example of one area where it is beneficial for cloud users.

The research also found that supplier lock-in is less of a problem for IaaS users, pointing out that the major providers now support a wider range of development environments.