Cloud Acquisitions: The Data and the Reality

Kyndryl, spun off from IBM not so long ago, just announced its intent to acquire Solvinity Group B.V., a Dutch cloud services provider. The press release is full of the usual corporate buzzwords: "modernizing," "innovating," "mission-critical capabilities." But let's cut through the marketing fluff. What does this really mean for Kyndryl, and is it a smart move in the increasingly cutthroat cloud market?

The Solvinity Acquisition: A Closer Look

The official line is that Solvinity will give Kyndryl expanded services in "modernizing, innovating and securing sensitive and complex workloads." Okay, but how? Solvinity specializes in secure managed cloud platforms, particularly private and hybrid sovereign cloud offerings. This suggests Kyndryl is trying to shore up its position in the secure cloud space, especially in Europe, where data sovereignty is a growing concern.

Petra Goude, President of Kyndryl Strategic Markets, says the deal reflects "proactive investment in mission-critical capabilities." Translation: they're trying to stay relevant. Kyndryl's core business has always been managing legacy IT infrastructure (think mainframes and on-premise servers). The world is moving to the cloud, and Kyndryl needs to adapt or die. This acquisition gives them a quicker route to cloud expertise than building it all in-house. But is it enough? The terms of the transaction weren't disclosed, which always makes me a little suspicious. Was it a fire sale? A strategic overpay? Without the numbers, it's hard to judge the true value.

The press release also mentions that the acquisition is subject to "customary closing conditions including regulatory approval and the required consultation with employee representatives." That last bit is important. European labor laws are far more protective than in the US. Integrating Solvinity's workforce could be a challenge, especially if there are redundancies. How will Kyndryl manage that integration without alienating Solvinity's talent, which is arguably the most valuable asset they're acquiring?

The Cloud Landscape: A Shifting Battlefield

Meanwhile, Sam Altman over at OpenAI is hinting at becoming a cloud provider themselves. "We are also looking at ways to more directly sell compute capacity to other companies (and people); we are pretty sure the world is going to need a lot of 'AI cloud', and we are excited to offer this," he posted on X. This is a direct shot at the established giants: Microsoft Azure, Amazon Web Services, and Google Cloud Platform.

Altman's move highlights a key trend: specialization. The general-purpose cloud is becoming increasingly commoditized. The real money is in specialized services, like AI-optimized compute. Kyndryl's acquisition of Solvinity could be seen as a similar move towards specialization, focusing on secure, sovereign cloud solutions. But are they moving fast enough? The cloud security landscape is rapidly evolving, with new threats and technologies emerging constantly. IDC research indicates that organizations experienced an average of nine cloud security incidents in 2024, with 89% reporting a year-over-year increase. Nine incidents! That's not just a statistic; it's a flashing red light. New IDC research highlights a major cloud security shift

IDC also points out that companies are struggling with tool sprawl, using an average of ten cloud security tools. Ten! That’s a management nightmare. The promise of CNAPPs (cloud-native application protection platforms) is to consolidate these tools into a single platform. This is where Kyndryl could potentially add value, by offering a managed CNAPP service based on Solvinity's technology. But again, the execution is everything.

And this is the part of the analysis that I find genuinely puzzling: Kyndryl is primarily known for managing legacy systems. Can they truly pivot to become a leader in cloud-native security? It's like a horse-and-buggy maker trying to compete with Tesla. It's not impossible, but it requires a radical transformation of skills, culture, and mindset.

Grab, the Southeast Asian super-app company, recently pulled back from the cloud, ditching 200 cloudy Mac Minis for physical machines. Their stated reason? To save money – a projected $2.4 million over three years. They found that paying for cloudy Macs in 24-hour blocks was wasteful, given their usage patterns. This highlights a crucial point: the cloud isn't always the cheapest or most efficient solution. Sometimes, owning and managing your own infrastructure still makes sense. Grab's move also improved the performance of their CI/CD pipeline by 20 to 40 percent. So much for the inherent superiority of the cloud. Rideshare giant dumps 200 cloudy Macs, saves $2.4 million

Grab's experience raises a question: is Kyndryl doubling down on a strategy that some companies are already questioning? Are they buying into the cloud hype at precisely the moment when the pendulum is starting to swing back?

The Cloud: Silver Bullet or Sunk Cost Fallacy?

Kyndryl's acquisition of Solvinity is a bet on the future of the cloud, specifically the secure, sovereign cloud. It could be a smart move, allowing them to carve out a niche in a competitive market. Or it could be a desperate attempt to stay relevant, a case of chasing the latest trend without a clear understanding of the underlying economics. Without knowing the financial details of the deal, it's impossible to say for sure. But one thing is clear: Kyndryl needs to execute flawlessly if they want this acquisition to pay off. The cloud landscape is littered with the corpses of companies that failed to adapt.

A High-Stakes Gamble