Many Cloud Computing Providers on the Way Out

Melissa Busch| Midsizeinsider

The flexibility and customizability of the cloud has been a dream for many businesses, including midsize firms. Unfortunately, the clouds that some businesses have adopted may not be around for long.

A Fond Farewell

Research firm Gartner predicts that one in four of the top 100 cloud computing providers will be gone by 2015, either through acquisition or as a result of being forced out of business. According to an article at InfoWorld, research shows that acquisitions will account for most of the closures.

Experts from Gartner are encouraging companies to do their homework before selecting a cloud provider. A company may be inclined to choose a larger provider, but smaller vendors may offer more guarantees and the best deals.

When Gartner recently discussed the issue with industry professionals, many of them were already well aware of the risks associated with cloud computing. When they were asked whether the risks associated with infrastructure-as-a-service, software-as-a-service or platform-as-a-service models prevented them from moving forward with the cloud, 50 percent saw the cloud-based solutions as carrying a great deal of risk. Only 12 percent saw the solutions as having a small amount of risk, and 33 percent deemed them as “somewhat” of a risk. Nevertheless, the research firm predicts that the number of businesses using the cloud will reach 80 percent by next year.

Good, Healthy Competition

Whenever a market becomes more mainstream, there are more mergers and acquisitions because companies want to get a piece of the action. Significant changes in the market, such as the 25 percent reduction predicted here, may have great financial and workflow consequences for businesses, especially midsize companies and smaller. Less competition in the cloud computing market will likely mean fewer choices of service prices. That can be a hardship for organizations that depend on the cloud for cost savings.

The biggest challenge, however, may be for those businesses that happen to work with providers that shut down. Trusting data to a third party is never a action taken lightly. In general, the issue with clouds and outsourcing is security and privacy. The more information that is distributed to third parties, the more people that have seen or controlled companies’ data. That is a risk that companies are willing to take when they decide to work with the cloud.

However, if the Gartner research is correct and a number of providers close their doors, it will mean that businesses that opt to look for another cloud are giving yet another party control of their data. That may leave many companies feeling uneasy. After building a relationship with one provider and gaining a sense from that vendor that their data is secure, companies may not be that eager to change providers. Unfortunately, smaller firms may end up feeling rushed to partner with a new vendor because the services that they were getting from the cloud cannot be performed by their limited IT staff.

In addition, news of potential consolidations and bankruptcies may force companies that were on the fence about the cloud to step back and wait it out to see what happens next. Those already working with a cloud computing provider may be best served by speaking with their vendors about the future and starting to work on contingency plans.


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