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Top 5 Cloud Acquisitions of 2011

With the rush to the cloud, it's no surprise that some of the largest IT vendors shelled out big bucks to gain ground in 2011.

Many players were slow to acknowledge that the cloud is for real, or they have legacy platforms that are not easy to transform. Consequently, some pioneers in cloud computing are now becoming parts of established vendors such as Verizon, Oracle and SAP. Meanwhile, leading cloud pioneer Salesforce.com continues to fill in gaps that exist in its offerings.

With the new year upon us, we can expect to see more big cloud computing acquisitions in 2012. Here's a look at the most noteworthy cloud acquisitions of 2011:

Verizon-Terremark
Earlier this year, Verizon Communications announced it would pay $1.4 billion to acquire Terremark Worldwide, one of the largest independent providers of managed hosting and cloud services for large enterprises and government agencies.

The move gave Verizon instant credibility as a provider of enterprise cloud services. Verizon President and CEO Lowell McAdam told investors when the deal was announced that it made more sense to acquire a leading provider of cloud infrastructure services than building out datacenters throughout the world.

"This is a classic make-buy decision," he said.  "By the time you build datacenters and then outfit them and build the employee capability and all of the software applications that ride in these datacenters, it takes time, and to be honest, that is not our core competency."

At the time of the deal, Miami-based Terremark operated 13 datacenters throughout the world. Now Terremark is a subsidiary of Verizon, led by Nelson Fonseca, who was named president of the new unit on Dec. 16.  Fonseca was previously Terremark's chief operating officer.

CenturyLink-Savvis
Verizon wasn't the only communications provider to jump onto the cloud bandwagon in 2011. Shortly after that deal was announced, Time Warner Cable said it would acquire NaviSite for $230 million. But both would prove paltry to CenturyLink's bid to acquire Savvis for $2.5 billion.

After the deal was completed, CenturyLink combined Savvis with its managed hosting business. That business unit is led by Savvis CEO Jim Ousley. CenturyLink in 2011 became the third largest communications provider with its $12.2 billion acquisition of Denver-based Qwest Communications.

By acquiring Savvis, CenturyLink said it now operates 48 datacenters throughout North America, Europe and Asia, with nearly 2 million square feet of floor space. With its domestic 207,000-mile fiber network and 190,000-mile international access network, CenturyLink is looking to offer combined collocation, network access, managed hosting and cloud services to both large enterprises and government agencies, as well as small and medium businesses.

Salesforce.com-Radian6
Relative to the other deals in this roundup, Salesforce.com's acquisition of Radian6 was the smallest. Nonetheless, it defined the cloud-based CRM giant's emphasis in 2011: enterprise social networking.

Salesforce.com acquired Radian6 for $326 million. The Radian6 Engagement Console allows customers to discover what is being said about them on a variety of social networks, including Facebook and Twitter, as well as on blogs. This sophisticated search engine is important for organizations that are concerned about their reputations. Radian6 customers include Dell, General Electric, Kodak, Molson Coors, PepsiCo and United Parcel Service.

Marc Benioff, Salesforce.com's outspoken CEO, spent much of 2011 emphasizing his belief that enterprises need to embrace social networking to interact with each other as well with as customers, suppliers and partners. "We were born cloud in 1999 but we've been reborn social" was his oft-quoted sound byte in 2011.

As Salesforce.com continues to bolster its Chatter service, look for the company and others to continue their emphasis on enterprise social networking in 2012.

Oracle-RightNow
The success and growth of Salesforce.com's cloud-based applications have been a thorn in the side of Oracle CEO Larry Ellison. The tension has been hard to ignore as Ellison and Benioff have taken the gloves off in a number of public rants over the years, which came to a head this fall.

Ellison put his money where his mouth is, though, with Oracle's recent deal to acquire Salesforce.com rival RightNow Technologies for $1.5 billion. RightNow covers the customer service niche. RightNow's cloud-based Customer Service Cloud product is used by 2,000 organizations, according to the company.

RightNow competes with Salesforce.com's Service Cloud, as both companies go after the call center, by helping organizations use the Internet and social networks to modernize how they provide customer service.

The deal is the latest sign that Oracle is looking to step up its emphasis on cloud computing. In October, the company launched the Oracle Public Cloud, a Platform as a Service (PaaS) that runs Oracle apps, middleware (including its Fusion Applications) and database platforms.

SAP-SuccessFactors
SAP may have a huge base of customers that use its ERP and line of business applications, but the company has struggled to embrace the cloud. Its core cloud initiative, Business ByDesign, has been slow out of the gate.

Looking to address one growing segment, human capital management, SAP in early December said it has agreed to acquire SuccessFactors for $3.4 billion. SuccessFactors is a leading provider of cloud-based human capital (a.k.a. human resources) management solutions.

While complementing its own premises-based HR software and providing a more robust move to the cloud, SAP sees the deal as having broader implications. SuccessFactors Founder and CEO Lars Dalgaard will lead SAP's overall cloud strategy. "Now is the time to take this game to the next level," he told analysts on a call announcing the deal.

Indeed, SAP needs to take its cloud game to the next level. It will be interesting to see if Dalgaard sticks around and is able to make that happen.

Posted by Jeffrey Schwartz on 12/20/2011 at 1:14 PM


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