-- High switching costs reduce customer churn and render into stable revenue and market viable for investment
LONDON, June 3, 2015 /PRNewswire/ -- The investment climate and financial operations of the infrastructure as a service (IaaS) industry in Europe have been fairly subdued in comparison to firms in the United States. Nevertheless, as enterprises gain confidence in these solutions and mega trends such as smart cities, big data and the Internet of Things (IoT) gather pace, the IaaS industry will evolve into a worthwhile investment domain.
New analysis from Frost & Sullivan, Investment Analysis of the European Infrastructure as a Service (IaaS) Industry (https://www.frost.com/mab3), reveals that pure-play financial companies account for a major portion of investments. Strategic investments by corporate arms in early stage firms are negligible.
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"The promise of stable recurring revenues lures investments into the IaaS industry in Europe," said Frost & Sullivan Industry Analyst Renganathan Krishnamurthy. "High switching costs ensure that clients do not change their vendors frequently, resulting in predictable cash flows. This enables existing participants to strengthen profits."
While growth in big data, social media and the IoT is increasing the strategic importance of data centres, macro-economic conditions are still too weak to drive large-scale revenues in this industry. Additionally, the data centre industry and some segments in the value chain involve relatively bigger investments, unlike new age industries such as social media and mobile applications start-ups. Given the opportunity for smaller investments in other industries (and thus lower risk), the capital available for data centres is limited.
Further, the steep capital required makes it unviable for a single venture capitalist (VC) to support a start-up. To overcome this challenge, VCs in Europe are tying up with each other to boost funds.
"Start-ups must design innovative positioning strategies to counter the advantage existing participants will gain from economies of scale," urged Krishnamurthy. "Apart from technology, firms looking to improve their returns must also acquire certifications and prove compliant in order to attract customers from regulation-intensive industries such as finance and healthcare in Europe."
Investment Analysis of the European Infrastructure as a Service (IaaS) Industry is part of the Business and Financial Services (http://www.financialservices.frost.com) subscription. Frost & Sullivan's related studies include: Investment Analysis of the US IaaS Industry, Funding Patterns in the Telecommunication Services Industry in Latin America, Asia-Pacific, Sub-Saharan Africa and Arab States, Financial Analysis and Market Sizing of the Event Management Software Market, and Mergers and Acquisitions in the Internet Software and Services Industry. All studies included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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Investment Analysis of the European Infrastructure as a Service (IaaS) Industry
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