Soon there may be no business software-as-a-service companies left to buy. The big boys of the technology industry are buying “enterprise cloud” groups up as fast as venture capitalists can crank them out. Those that remain are priced for scarcity. Consider this handful: NetSuite (budgeting), Workday (human resources), SolarWinds (network management), Splunk (data analysis), ExactTarget and Responsys (both marketing). As of yesterday they had a total market capitalisation of $20bn – on trailing revenues of $1.1bn, operating losses of $80m and free cash flow of $220m.

A bubble? Not so fast. The move from traditional software (licensed and run on local hardware) to cloud software (sold by subscription and running on third-party hardware) is for real – it brings down the cost of ownership. Smaller companies like it, and some of those will grow into big companies that will not want to pay up for licences or servers. So the little cloud players are going fast and near-term profitability can wait. Yesterday, IBM spent a reported $2bn on privately held cloud infrastructure company SoftLayer, and the biggest of the cloud companies, Salesforce, bought ExactTarget for a $2.5bn, a 53 per cent premium. Salesforce does not expect ExactTarget to break even for a couple of years.

One might spare a thought for the valuations of the buyers, though. IBM has spent $11bn, or a fifth of operating cash flow, on acquisitions over the past three years. Nonetheless, it has struggled to meet revenue and profit expectations in recent quarters. That might be acceptable in a company selling at 12 times forward earnings. Salesforce, on the other hand, sells for 80 times earnings, and, even before the big ExactTarget deal, had set a pattern of spending most of its cash flow on acquisitions. If Salesforce is a roll-up play, it should be much cheaper.