Cloudways Acquisition: Key Details, Impact, and What Comes Next

DigitalOcean's acquisition of Cloudways for $350 million marks a significant move in the cloud services industry. This strategic acquisition aims to enhance DigitalOcean's offerings for small to medium-sized businesses (SMBs), simplifying their cloud infrastructure management. The combined entity is expected to serve over 124,000 customers, strengthening DigitalOcean's market position and expanding its serviceable market within global SMBs.

What Is Cloudways?

Cloudways, a managed cloud hosting platform, offers comprehensive solutions for applications like WordPress, Laravel, Magento, WooCommerce, and PHP. Hosting on top cloud providers such as DigitalOcean, Vultr, Linode, AWS, and Google Cloud, Cloudways stands out with features like Cloudflare Enterprise CDN, SafeUpdates, and Malware Protection. Its unique selling points include optimized performance, flexibility with 1-click solutions, 24/7 expert support, and cost-effectiveness, making it a reliable choice for online businesses.

Who Acquired Cloudways?

DigitalOcean is a prominent cloud infrastructure provider tailored for developers, startups, and SMBs. It offers a range of key products, including Droplets (scalable virtual machines), managed Kubernetes, AI/ML tools, and the App Platform for rapid app deployment. Additionally, it provides managed databases and various storage solutions. Known for its simplicity, scalability, and cost-effectiveness, DigitalOcean serves over 600,000 customers and is highly rated for its usability and reliability in the IaaS and SMB hosting sectors.

When Was Cloudways Acquired?

DigitalOcean announced its acquisition of Cloudways on August 23, 2022, and completed the transaction on September 8, 2022. This acquisition occurred during a period when the cloud computing industry was increasingly focusing on enhancing services for small to medium-sized businesses (SMBs). The trend involved simplifying cloud infrastructure and providing more managed services to help SMBs quickly deploy and scale their applications, reflecting a broader industry shift towards user-friendly, scalable solutions.

Why Was Cloudways Acquired?

• Market Expansion: The acquisition of Cloudways significantly broadens DigitalOcean’s serviceable market within global SMBs. It increases options for digital agencies, eCommerce sites, bloggers, freelance developers, and builders hosting on platforms like WordPress, PHP, and Magento. This move is expected to expand DigitalOcean's customer base and market reach, leveraging Cloudways' existing 72,000 customers and 570,000 websites.
• Technology Integration: Cloudways brings a differentiated offering with an open and flexible platform, enhancing DigitalOcean’s technology and tooling. This integration provides enhanced speed, flexibility, and ease of use for customers, particularly in the e-commerce sector. The combined technologies will simplify workflows and help SMBs focus on running and scaling their businesses more effectively.
• Competitive Advantage: The acquisition strengthens DigitalOcean’s position by combining simplicity, community support, and open-source solutions. Both companies share values around simplicity, community, openness, and support, which are vital for differentiation in the marketplace. This strategic move aims to provide a simple, intuitive, and trusted platform, helping SMBs build their businesses and pursue their entrepreneurial dreams.

Acquisition Terms

• Acquisition Price: $350 million
• Payment Method: Cash, with a significant portion to be paid over a 30-month period following the closing
• Key Conditions or Agreements:
  • The acquisition will not impact the fiscal year 2022 operating profit margin and cash flow margin outlook
  • Cloudways is expected to generate more than $52 million in revenue in fiscal 2022
  • The transaction is expected to close in September
  • Cloudways will remain a standalone business unit under the leadership of Aaqib Gadit
  • Cloudways currently relies on DigitalOcean infrastructure to power approximately 50% of its customers
  • The acquisition will increase DigitalOcean’s global employee base by 30%
  • Together, DigitalOcean and Cloudways will serve over 124,000 customers paying over $50 per month

Impact on Cloudways

The acquisition of Cloudways by DigitalOcean has led to significant changes in operations and management. Cloudways will continue to operate as a standalone business unit under the leadership of Aaqib Gadit, ensuring continuity in its operations. However, the integration of Cloudways' team into DigitalOcean will increase the latter's global employee base by 30%, adding expertise in key growth areas. This operational synergy is expected to enhance DigitalOcean's capabilities, particularly in managed cloud hosting and SaaS offerings, simplifying workflows for SMBs and enabling them to scale their businesses more efficiently.

In terms of product offerings and services, the acquisition will broaden DigitalOcean’s capabilities, providing more options for digital agencies, eCommerce sites, bloggers, and freelance developers. Cloudways' customers will continue to enjoy the same level of service, with no immediate changes to their current offerings. The combined entity will serve over 124,000 customers, enhancing their cloud solutions with features like intuitive interfaces, easy server scaling, and world-class support. Employee reactions have been positive, with a shared excitement about the potential to help SMBs grow through enhanced cloud offerings. Customers have also expressed satisfaction, appreciating the continuity and improved services.

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