The cloud space consolidated this week with the merger between NoSQL database companies CouchOne and Membase. The companies didn’t directly compete, but their technologies were broadly synergistic. As Couchbase, the new company has the size, tools and skills to strengthen its position in existing markets while also pursuing new opportunities at the intersection between its strengths. It’s far too early to judge the success of this merger, but on the surface it appears one case in which consolidation may benefit both the new company and its current customers.
At a more abstract level, Gartner’s Lydia Leong examined examples such as Verizon’s $1.4 billion purchase of Terremark, and asked, “[I]s consolidation at this stage of the market good for the progress of the cloud IaaS market?”
She thinks not, arguing (correctly) that some healthy competition in a market is a great way to drive innovation. She’s right, of course, but too many players doing broadly similar things can also lead to diffusion of attention, obfuscation and (perhaps counter-intuitively) a dearth of really competitive pricing. With new entrants (such as HP) continuing to join the cloud-infrastructure space, there are plenty of opportunities for technological innovation from some, while others focus on delivering robust, affordable and increasingly accessible commodity solutions to a growing cohort of enterprise customers.
Consolidation and convergence mean many things in this industry, and impact everything from technical minutiae to broad-brush business decisions. Monopolies are undesirable, but the opposite extreme of an unbounded set of companies may also be unhelpful in a maturing market. Contraction, consolidation and alignment of common interests are signs that the exuberance of an unknown new market is settling as suppliers and their customers discover their places.
To read more about industry attitudes to consolidation, check out my weekly update at GigaOM Pro (subscription required).
Image courtesy of flickr user karindalziel
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