Dive Brief:
- IBM plans to acquire multicloud software company HashiCorp for $6.4 billion to shore up its hybrid cloud solution suite, the company announced Wednesday. The transaction awaits shareholder and regulatory approval but is expected to close before the end of the year, IBM said in a statement.
- "Our strategy at its core is about enabling companies to innovate in the cloud, while providing a consistent approach to managing cloud at scale,” Armon Dadgar, HashiCorp co-founder and chief technology officer, said in a Wednesday statement. “The need for effective management and automation is critical with the rise of multicloud and hybrid cloud, which is being accelerated by today's AI revolution.”
- HashiCorp introduced its Infrastructure Cloud platform Monday. The SaaS-based enterprise service integrates the vendor’s Terraform infrastructure lifecycle management and Vault security lifecycle management solutions.
Dive Insight:
IBM built its hybrid cloud business on a foundation of mainframe hardware and software capabilities, forging hyperscaler partnerships as it extended its reach into cloud services and IT consulting.
The company punctuated the pivot with several key acquisitions in line with the HashiCorp move.
IBM added Red Hat’s automation, containerization and IT management services to its portfolio for $34 billion in 2019, bought Apptio for $4.6 billion last year and purchased Advanced's mainframe modernization unit for an undisclosed sum in January.
By midyear, the company expects to close on a deal to purchase the StreamSets data ingestion platform and webMethods API management tool from Software AG, IBM Chairman and CEO Arvind Krishna confirmed Wednesday during the company’s Q1 2024 earnings call.
The HashiCorp acquisition is designed to extend IBM’s hybrid reach as enterprises continue to grapple with mainframe and cloud integrations.
“The acquisition allows us to deliver a more comprehensive hybrid cloud offering to enterprise clients,” SVP and CFO Jim Kavanaugh said during the earnings call. “We see multiple drivers of product synergies within IBM,” he added, pointing to various business units, including Red Hat, consulting and the watsonx multimodel generative AI platform.
While macroeconomic realities crimped revenue growth during the three-month period ending March 31, the company saw software revenue grow 5.5% year over year, driven by larger increases for Red Hat and automation solutions, the quarterly report said.
IBM’s consulting and infrastructure segments were flat for the quarter year over year, but Z systems mainframe and distributed infrastructure revenues were up 4% and 6% respectively, reflecting enterprise investments in IT to support AI adoption.
“We are seeing our infrastructure segment play a larger role as clients leverage their hardware investments in their AI strategies,” Krishna said. “We believe a lot of AI inferencing will happen where the data is for security, efficiency and latency reasons.”
IBM is also counting on HashiCorp’s tooling to clear a path for enterprise AI adoption.
“CIOs and developers are up against dramatic complexity in their tech strategies,” Krishna said in the announcement. “The global excitement surrounding generative AI has exacerbated these challenges.
