One in four cloud providers will be gone by 2015

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Acquisitions will be leading cause of cloud vendor reduction, says Gartner

By Patrick Thibodeau

December 11, 2013 06:37 AM ET

Computerworld - LAS VEGAS -- Cloud adopters face serious risk in the next two years because of the strong possibility that their provider will be acquired or forced out of business, according to Gartner.

The research firm is predicting a major consolidation in cloud services and estimates that about 25% of the top 100 IT service providers in the infrastructure space won't be around by 2015. "One in four vendors will be gone for whatever reason -- acquisition, bankruptcy," said William Maurer, a Gartner analyst. Most of the time, the changes will come through acquisition.

"There is real risk," said Maurer to a packed room for his presentation at the Gartner Data Center Conference.

"We're in the phase of buyer beware with cloud," said Michael Salvador, who attended the presentation. He is a technical solutions manager at Belden, which makes cable, connectivity and networking products. "You better do your research -- there's no safety net out there," he said.

Concerns about risks may drive some users to large vendors, Salvador said, but smaller providers may offer better prices or some additional guarantee that a large provider may not offer.

There is pressure on providers to cut costs, but Maurer told his audience to be gentle with their vendors.

"You need to make to make sure that your service providers are successful," said Maurer. "Give them a chance to make a reasonable return on their investments, give them a chance to make some money. Don't take all the money off the table, because if you do, you are not going to have a lot of them around."

The standing-room-only audience was already convinced of the risks to cloud, based on their responses to an audience participation question, which recorded answers electronically.

The audience question was asked: "At what level do the risks associated with outsourcing some/all of your data center solutions to one or more of the 'aaS' models (meaning infrastructure-as-a-service, software-as-a-service, platform-as-a-service and others) prevent you from making the decision to move forward? (Select one)"

Nearly 50% saw cloud-based solutions as having "a great deal of risk" while 33% saw "somewhat" risk. Only 12% indicated there was little risk.

Gartner also predicts that the portion of organizations using cloud services will reach 80% by the end of this year.