Cloud Growth: Should we be Worried?

Image Attribution: Flickr

Looking back at all of the cloud news over the past several years has left countless people awestruck. While there was no doubt that the cloud would play a part in our technological lives, no one could have predicted this type of forward movement. SaaS, IaaS, PaaS, Virtualization, public cloud, private cloud, hybrid cloud – every sector of cloud computing has experienced rapid growth. Generally speaking though, too much extreme movement can potentially have disastrous results. The U.S. and the world saw wild economic growth for several years, in what was known as the bubble years, followed by the culmination of a devastating market crash in 2008. Thus, should we be worried about the overall health of the cloud sector going forward given the incredible success it has seen?
Monopoly: Another Hazard
Cloud companies are getting bought out by the day. Some days we see $50 million purchases, others it is several billions of dollars. While every industry experiences consolidation/mergers at some point or another, the current rate of consolidation in the cloud market likely far surpasses almost any other industry. Technology experts have voiced their concerns about the possibility of a future cloud monopoly by industry big wigs such as AWS, Microsoft and IBM. These conglomerates have bought several smaller players in the past and will likely continue to do so well into the future. While more resources would clearly be made available to enhance cloud environments through these industry heavyweights, it could also severely limit the industry on a whole.
Smaller Mergers & Acquisitions
It was rumored that Microsoft was looking to buy Salesforce (though that rumor was dispelled). While Microsoft is in a different league, there are no shortage of “smaller” companies expanding into the cloud market. HP recently bought ConteXtreme. Even nontraditional cloud companies like Verizon bought AOL primarily for its video strategy and for support for Verizon’s IoT platform. It seems as though there is enough competition and niches for smaller players to consistently capitalize on.
Cloud Niches a Major Factor
One of these niches that has seen explosive growth, with no major players heavily focusing on it, is cloud security. This niche alone has a $3.5 billion revenue target by 2016. BitGlass is just one of hundreds of companies in the cloud security sector. They recently raised $25 million that focuses on one very specific area in a client’s cloud security system.
The Market on a Whole
A potential monopoly may be out of the question in regard to posing a serious threat to the stability and health of the cloud market. But what about looking at the market from a valuation perspective? Some have cited the First Trust ISE Cloud Computing Index Fund (SKYY) which continues to grow at a rapid rate year over year. Will this continue or is this the start of a bubble as well?
Technology Made Easy
Our lives are becoming more and more dependent on technology. Naturally, the cloud has (and will continue to) seen astronomical growth. Even if there is a market consolidation, we are likely decades away from that. There is too much opportunity for the major players to swallow all or most of the smaller market players. Even if the growth slows, it won’t be by much. Additionally, we would be shocked to see any type of decline for the cloud.