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Accenture's agreement Tuesday to acquire cloud consulting services firm Cloud Sherpas could indicate the shape of things to come as the IT services industry's largest players look to keep pace with the expanding cloud economy.
That's the view of industry executives who see the $30 billion company's plans to purchase Cloud Sherpas as a sign of the times. Cloud Sherpas, based in Atlanta, provides Accenture with access to a pool of cloud expertise -- more than 1,100 Cloud Sherpas professionals are expected to join Accenture when the deal closes -- and talent within specific cloud domains: Google, Salesforce and ServiceNow. Accenture did not disclose terms of the acquisition, noting that the transaction is subject to customary closing conditions.
"The acquisition of independent cloud brokers/consultancies by larger, branded, IT services providers is definitely on the rise," said Ali Zaidi, research manager, IT Consulting and System Integration Services at IDC.
Zaidi pointed out that Accenture just last year acquired ClientHouse, a CRM specialist in Germany. ClientHouse provides Salesforce implementation services. Accenture isn't alone among top-tier systems integrators (SIs) in the market for cloud consultants and implementers. In August, CSC inked an agreement to acquire Fruition Partners, which focuses on ServiceNow consulting in the service management space. That deal is expected to close this fall.
Those deals could foreshadow more transactions in the cloud consulting services space.
"I've been expecting these cloud companies to be acquired for a while and the Accenture acquisition of Cloud Sherpas will drive other major SIs to follow their example," said Jeff Kaplan, managing director of THINKstrategies Inc.
"The cloud services ecosystem will be worth approximately $135 billion by 2017," added Chris Barbin, CEO of Appirio, a cloud consulting firm. "To compete, traditional industry players not prepared for the rise of the cloud app economy will need to acquire smaller specialized SIs."
Zaidi said the Cloud Sherpas acquisition underscores the importance of cloud business among the industry's biggest players.
"Cloud-based revenues for the major IT services vendors still represent a small portion of their overall consulting revenues," he explained. "However, with the rapid adoption and interest in cloud by the buyers, the IT services vendors are beginning to realize that cloud is here to stay and will be one of the key growth engines for their growth in the future."
Until now, cloud-based revenue for most IT services providers has been organic, but the cloud's growth is compelling vendors to pursue acquisitions to more rapidly scale their operations.
The high demand and growth opportunity, Zaidi said, will force companies to go the inorganic route to "fortify their offerings and resources" to meet the demand.
"Therefore, activity around acquisitions should increase in the cloud consultancy space," he added.
Kaplan said the pending deal is an attempt by Accenture to accelerate its transformation from a business model that depends on long/costly engagements to one that provides more agility. Accenture is moving toward a business model that will enable it to "deliver quicker, more economical projects that customers increasingly demand," Kaplan said. He noted that projects of that type have been the core of Cloud Sherpas' business success.
Industry watchers said the acquisition will strengthen Accenture's cloud consulting services on platforms such as Google and Salesforce. For Keith Block, vice chairman and president of Salesforce, the combination of Accenture and Cloud Sherpas "is exciting for our ecosystem" and highlights how the Salesforce platform helps partners innovate and deliver transformation for customers, he said in a prepared statement.
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