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Cloud computing M&A: The good, the bad and the ugly

VMware, CenturyLink and BMC all made acquisitions to further their cloud computing ambitions this week, but who picked a winner?

Weekly cloud computing update

A merger and acquisition frenzy is roiling the cloud computing market right now, but not all these deals make a whole bunch of sense.

If VMware is serious about cloud-based applications, it's going to need something bigger and better than [SlideRocket].

The good
Telecommunications carrier CenturyLink snapped up hosting and cloud services provider Savvis this week for $2.4 billion. It was an expensive purchase -- CenturyLink is paying 10 to 11 times Savvis's expected earnings for 2011 -- but it's still cheaper than Verizon's deal to buy Terremark. That ended up being more than 30 times Terremark's projected revenue.

Price aside, it's a good fit. Telecommunications companies have already established an important beachhead for selling services: regular billing cycles for services rendered. They can exploit their existing credibility running large-scale network operations and extend current customer support contracts to include new IT services.

Also, size matters when it comes to providing cloud computing services. Buying data centers that come with their own paying customers is cheaper than building a data center from scratch with nobody to chip in. After the deal, CenturyLink said it will have 48 data centers in North America, Europe and Asia, with more than 1.9 million square feet of floor space. If you're a global company looking to use cloud infrastructure services, you don't want a different provider in each geography. The whole "one throat to choke" idea applies to cloud, too.

The bad
VMware acquired SlideRocket this week. Oh dear. VMware CEO Paul Martiz seems to be trying to recreate the Microsoft Office juggernaut of yore, only with online services. Maritz was with Microsoft for 14 years, at various times running the Office and Exchange product lines.

Since joining VMware, he's made several acquisitions: Zimbra, for online email services, Mozy for online desktop backup and now online presentation software company SlideRocket. Think hosted PowerPoint. What's next, hosted Excel-style spreadsheets as a service? Come on!

Moving into new arenas when you've saturated your existing market is unavoidable -- VMware has something like 80% of the server virtualization market -- but cobbling together a bunch of disparate no-name office productivity services to try to take on Microsoft is a complete waste of time. Did anyone at VMware talk to enterprise IT customers about throwing out PowerPoint and switching to SlideRocket? It ain't happening.

If VMware is serious about cloud-based applications, it's going to need something bigger and better than that.

The ugly
BMC Software is acquiring Web application performance monitoring company Coradiant, adding even more software to its bloated Business Service Management platform. Coradiant lets you monitor internal and cloud-based apps for performance problems.

The deal makes sense on the surface, and Coradiant has no doubt built some nice user-friendly software. It counts State Street Bank, Thompson Reuters, GE Healthcare and Hallmark among its customers.

But BMC is not known for its user-friendly software. In fact, some of its products make rival CA look like when it comes to ease of use. And integrating software acquisitions is an ugly process that takes years; by the time it's all over, the functionality is usually outdated. It's a messy job and rarely worth the effort.

Together, those deals make up the good, the bad and the ugly in cloud computing this week.

Jo Maitland is the Senior Executive Editor of Contact her at

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