The Cloud

A $20 Million Bet on Cloud Services

As the adoption of cloud applications increases, the work of integrating all those services becomes a growing market.
David RosenbaumMarch 6, 2012

Cloud Sherpas, a company that helps businesses deploy Google business applications, and GlobalOne, a Salesforce systems integrator and consultancy, announced today that they would merge under the Cloud Sherpas name.

In effect, the deal creates a cloud-services integrator and consultancy with experience working with two of the cloud world’s largest and most successful cloud and software-as-a-service (SaaS) providers.

David Northington, CEO of GlobalOne, will become CEO of the new combined company, and former Cloud Sherpas CEO Douglas Shepard will become president of Cloud Sherpas’s Google business unit.

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The bet the merged company (funded to the tune of $20 million from Columbia Capital) is making is that the adoption of cloud services has reached a stage where the market will support a native cloud consultancy differentiated from such traditional integrators as Accenture, IBM, and SAP, among others. According to Northington, the business models of those services “are deeply wedded to large outsourcing contracts and software implementations.”

The putative financial benefits of cloud computing — mainly the smaller upfront costs Northington points to and the potential to shrink the total cost of ownership of enterprise IT while reducing implementation times for upgrades and new deployments — have undeniably whet the appetite of CFOs for cloud projects. According to a survey of 631 IT decision makers conducted by Forrester in the last quarter of 2011, 60% of organizations deploying SaaS applications have seen reductions in IT operating costs.

As long as those savings continue to be reported, the cloud will be compelling to CFOs, and service organizations will attempt to bridge the gap between what CFOs know and what they need to know about the cloud.

In the cloud, Northington says, projects are launched more quickly, in iterative steps, and at lower cost, and that change demands a new type of assistance, ideally from a cloud-native integrator. “We don’t have to be conflicted about on-premise versus cloud,” says Northington. “Our models and business plans and revenue structure [are] based on being in the cloud. It’s a very pure point of view.”

Shepard says he sees Cloud Sherpas helping to move the IT conversation from a technical one to “how you fundamentally change how the business operates and how to quantify it. CFOs struggle with IT as a cost center, and how to quantify its efficiencies.” Adds Northington, “Many companies start deploying cloud applications and then realize that they could benefit even more by outsourcing certain aspects of management.”

The adoption of cloud computing seems to be accelerating. According to last month’s PricewaterhouseCoopers’s Digital IQ Survey of nearly 500 U.S. business and technology executives, 30% of PwC’s top performers are already invested in public cloud applications and 87% expect that investment to increase this year.

The intensity of interest in the cloud in general, and the growth of the cloud-services market in particular, is typified by Dell CEO Michael Dell’s statement last month that his company, heretofore almost exclusively associated with hardware, was “not really a PC company anymore. We’re an end-to-end IT solutions company.”

Merger-and-acquisition activity in the cloud space has been intense over the past 12 months. A few of the highlights are Hewlitt-Packard’s 2011 $10 billion acquisition of cloud database–search company Autonomy; SAP’s purchase of SuccessFactors, a cloud-based supplier of recruitment tools; and Oracle’s acquisition last month of Taleo, another SaaS model talent management provider. January saw the merger of outsourceIT, a regional managed-services provider, and GoBeyondIT, a cloud-services provider, aiming to provide an outsourced, or virtual IT department in the cloud for small-to-medium-size businesses.