The future looks cloudy. IBM, Salesforce and SAP all announced big deals in cloud this week.
IBM announced it would buy Softlayer, a cloud computing company, in a deal estimated to be worth $2 billion. IBM plans to use Softlayer to bolster its cloud services in a growing market.
Salesforce announced it intends to buy ExactTarget, a mass-customization marketing company, for $2.5 billion. Salesforce is a cloud software company providing CRM management. This deal would build on Salesforce’s existing social marketing offerings.
SAP announced it would buy Swiss software developer Hybris for an estimated $1.5 billion, in a move to compete with Salesforce and Oracle.
The IBM, Salesforce and SAP purchases all indicate a trend towards the cloud. There is more and more of a push for new technologies and companies are paying a high price. Salesforce’s shares dipped with the announcement of the ExactTarget purchase, which may indicate a concern it is overpaying.
Traditional valuation is difficult in these cases; there is cloudiness to the crystal ball. What will future technology look like? Will cloud computing – specifically this acquisition – pay off? Which technologies will users adapt? As a buyer you need to balance a company’s current value with its anticipated future worth, which of course is an unknown. This gamble is the price of getting into the market.
Often companies feel competing in a new market space is a game of musical chairs. What do you do when the music stops and you’re left standing without a chair?
Stay Ahead of the Game
If you’re not IBM, Salesforce or SAP, I recommend you ask yourself two questions:
1. If cloud computing is what IBM, Salesforce, SAP and countless others are doing, what is being missed? What alternatives are out there for me that others have not noticed yet?
2. If I can’t get a foothold in cloud technology, what is my plan B? What is my strategy?
Leapfrog over what’s happening right now and think about what the next generation will look like. This type of strategic thinking is especially necessary for fast-paced technology companies. In today’s environment if you don’t move quickly you may not survive. You don’t need to copy your competition or buy a cloud computing division because big name corporations are doing it, but you do need to remain relevant. It’s an opportunity to think strategically, move quickly, and grow your company.