Consulting firm M&A intelligence on cloud-based consulting

Cloud intelligence cropped

In the last decade cloud computing has become one of the world’s leading transformational technologies. It’s assisted businesses in reducing the total cost of ownership, easing scalability and boosting profitability, amongst other benefits. And in recent years, it has helped consumer technology boom.

Our research shows that cloud-based consulting deals have increased consistently from 2010, with this trend expected to continue in 2015. Within this activity, the sub-sectors of cloud consulting, including software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS) are expected to show similar M&A growth levels as cloud-based consulting. Furthermore, as ‘cloud’ is effectively a delivery mechanism for technology services, areas such as data analytics and cyber security are increasingly being delivered through cloud technologies.

Since 2010 the UK has seen a 67 per cent increase in year-on-year cloud-based consulting mergers and acquisitions*. The USA and Canada have also seen an increase in cloud-based consulting deals, especially the North American market, as it is larger, more established and tends to be a global leader in technology adoption. The chart below highlights the speed of cloud consulting M&A activity in North America and the UK.

year on year consulting

*Compound percentage increase from FY10 to FY14

A key reason for M&A activity in this space includes larger IT firms needing to keep pace with changes in the IT industry. This involves acquiring new skills around cloud-based services and determining how to make these work with traditional in-house or datacentre based IT systems. Furthermore, the acquisition of intellectual property continues to be a key driver of M&As. Cloud-based technologies that can be licensed to consulting/advisory clients provide easily scalable, ongoing revenues off the back of consulting engagements.

Our market data of M&A activity in this space from 2006 is highly illustrative of how the acquisition of cloud consulting firms is taking place across a wide spectrum of industries. In amongst the traditional acquirers such as technology firms, IT and research consultancies and private equity firms, some purchases have come from healthcare, telecom, publishing and industrial firms.

As the interest in the industry continues to grow, it remains to be seen where the future M&A activity is going to be focused in the cloud computing industry. Currently consultancies offering cloud-based software, cyber security and cloud infrastructure solutions are showing the greatest demand. Certainly SaaS, PaaS and IaaS have garnered a lot of interest in the market.

Cloud has been a major driver of innovation across the industry in recent years and this is expected to continue for some time. Cloud technology has helped drive the success of some of the largest firms on the planet, including Apple and Amazon, so it is very possible that this could create large deals for brilliant cloud businesses.

While still in relative infancy, large global IT consulting and other advisory businesses are starting to seriously focus on cloud. This opens up consolidation opportunities for advisory businesses in this space and we expect to see many more consulting deals involving these technologies as it becomes more mainstream in the IT industry.

If you would like a copy of our cloud-based consulting report please contact us at info@equiteq.com.

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