Scottish-based hosting company Iomart has snapped up rival hosting company Titan in a move designed to bolster its expertise in the virtualisation space.

The cash-only deal means that Iomart has brought on board a company with the ability to help it make further inroads into the cloud computing space. Iomart already offers several cloud options and sees it as a growing area.

According to figures released earlier this year by analyst firm ITCandor, the cloud computing market in the UK is set to grow to £119bn by 2013, so Iomart has a big target to aim for.

Iomart's director of marketing, Phil Worms said that deal fitted in well with Iomart's intention of becoming the market leader in the cloud computing space. "We operate at the 'complex hosting level' – in other words every customer that we acquire usually has bespoke requirements and demands a level of expertise/service that is consistent with the management of mission critical platforms, particularly in the cloud arena. The acquisition of Titan offered us a highly experienced and skilled team of 20, particularly in the areas of virtualisation and networks, and an impressive client base – approximately 85 percent of revenues are derived from its managed hosting operations. We believe that there are excellent opportunities for synergy and cost reduction moving forward, thus enhancing earnings further."

Lee Christie MD of Titan Internet stated: "We believe today's announcement will bring enormous benefits to both our employees and customers alike. We are delighted to be joining the iomart Group at such an exciting time in the evolution of hosting services. We will benefit from the economies of scale, product innovation and financial support that the Group gives us, and we are confident we will be able to accelerate our growth and revenues as a result.

There's certainly an interesting challenge ahead. The IT Cantor survey suggests that UK hosting companies will struggle against multinational competitors. "Without a doubt consolidation in the market place is inevitable, and we have already seen plenty of M&A action in the space over the past 12 months," said Worms. He pointed that there were two reasons for this. "Many smaller providers will hit 'glass ceilings' as they struggle to grow and expand to keep pace with rapidly changing business and technology models, and because the customer is becoming far more diligent when selecting a supplier, particularly around long term financial stability,"

The real challenge facing cloud providers is in the quality of their service, he said. "We should not forget that moving or migrating to the cloud from a traditional IT infrastructure model is not easy. Our strategy is simple. We have a highly experienced and innovative technology team and we are currently using all the flavours of virtualisation technologies to develop 'private clouds' for mission critical applications which we provide under our 100 percent uptime guarantee. Using our multiple data centres we can provide an enviable level of resilience and backup/disaster recovery, all of which gives us a head start in this embryonic marketplace."