Cloud market consolidation likely to have adverse impact, finds report

The latest report from market watcher Forrester has outlined how consolidation of the cloud software and infrastructure could spell bad news for other service providers.

As more service providers pop up and the market for public cloud services expands, competition in most segments is starting to fall, the report says. Starting from here, Forrester analysed cloud platforms and apps to find out how the market is consolidating to inform CIOs at businesses that use these services.

Among Forrester’s conclusions is the fact that consolidation among cloud service providers will have a detrimental effect on SaaS subscribers over and beyond IaaS users.

The public cloud infrastructure and SaaS markets are described in firm’s latest The Coming Consolidation of Cloud report as oligopolies, where a handful of providers are responsible for generating more than 70 per cent of the sectors’ overall revenues.

Consolodation of these industries – as has already been seen through recent acquisitions by Amazon Web Services, Microsoft’s Azure, Salesforce and their peers – would harm cloud subscribers over off-site infrastructure users.

The report’s authors explain that cloud service users are more susceptible to locking themselves to one supplier for a suite of services and could see the few services they rely on starved of profits by suppliers seeking to maintain profits.

“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,” said the report.

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

The report also draws out positives, however, for the implications for the pricing of SaaS services through new market entrants and of IaaS through an ongoing price war among service providers.