Dive Brief:
- IBM announced Monday it reached an agreement to acquire Apptio, an IT management software company, from investment firm Vista Equity Partners. The all-cash, $4.6 billion deal is expected to close in the second half of the year, the company said.
- Apptio’s offerings, alongside IBM’s IT automation software and watsonx AI platform, provide enterprise clients "the most comprehensive approach to optimize and manage all of their technology investments," said Arvind Krishna, CEO and chair at IBM, in the announcement.
- News of the acquisition comes as IBM leans further into its hybrid cloud and AI strategy to respond to lagging growth. The company reported 4.5% year-over-year revenue growth in Q1 2023, compared to 11% in the same quarter last year.
Dive Insight:
With macroeconomic indicators still giving mixed signals, customer scrutiny over tech spending brings cost optimization solutions like Apptio's to the forefront. For IBM, the deal also provides upselling opportunities as it pursues a bigger slice of the cloud pie.
IBM trails significantly behind hyperscaler companies in terms of sector market share. Amazon, Microsoft and Google together hold nearly two-thirds of global cloud spending, according to Synergy Research Group. IBM sits alongside a group of 20 other companies that together split about one-quarter of the market.
With Apptio in its portfolio, IBM can gain pathways to new clients, according to Andy Sealock, senior partner, advisory and transformation at West Monroe.
"When you're acquiring an already large supplier that has its own client base, you want to look for the cross-sell, up-sell opportunities everywhere," Sealock said.
As enterprise leaders continue to enable cloud, investing in control mechanisms such as Apptio allows companies to address cloud demand management.
"This just fits right into IBM wanting to serve its clients," said Sealock. "I think they correctly recognize that most of the Fortune 1000 is in a hybrid environment, which is even more complex."
IBM's move to acquire the company was driven by interest in ApptioOne, the company’s flagship product for optimizing IT costs, according to Arun Chandrasekaran, distinguished VP analyst at Gartner.
"Apptio provides a sound methodology and tools to optimize IT spend, including the ability to do accurate forecasts, lower wastage, optimize headcount and other resources as well as provide a comprehensive [total cost of ownership] estimation across cloud and on-premises environments," said Chandrasekaran.
But the acquisition is also beneficial to Apptio, Chandrasekaran said, as the company gains a bigger global reach and more direct access to C-suite decision makers.
