DigitalOcean cloud platform makes a valuable acquisition
Cloud company DigitalOcean Holdings Inc. (DOCN) announced the acquisition of hosting provider Cloudways. For DigitalOcean, this is an expansion in a new direction, and it can bring benefits in the long run. DigitalOcean buys Cloudways for $350 million — an expensive purchase for a company with less than $500 million in annual revenue. In addition, DigitalOcean’s main specialization is comprehensive cloud infrastructure deployment services, mainly for small and medium-sized businesses. The company has additional cloud hosting services and IT infrastructure provisions for startups. Buying Cloudways adds a new direction.
Cloudways has a set of tools for managing cloud hosting. With the help of Cloudways, small businesses can not spend additional resources to monitor the performance of web services manually. Half of Cloudways’ customers already use DigitalOcean hosting, so integrating the acquired company will likely not be a problem. Thus DigitalOcean is moving towards providing more comprehensive services. Adding a cloud IT management solution can accelerate customer growth, which has slowed recently as the company’s business has grown.
In addition, customer retention may improve, which in monetary terms amounted to 112% in the second quarter. Customers are increasing their spending on DigitalOcean solutions, and adding a new set of services can improve this indicator. An additional positive factor of the acquisition may be that it made it when small and medium-sized businesses are looking for ways to reduce IT costs. Against this background, the cloud giants Amazon and Google increased sales of their services by more than 35% in the second quarter of 2022.
