IBM has confirmed it will acquire FinOps software vendor Apptio for a fee of $4.6bn. The deal is the latest part of Big Blue’s plan to refocus its business around the hybrid cloud.
Reports of the deal first surfaced over the weekend, today it was confirmed an agreement has been reached with Apptio’s current owner, Vista Equity Partners. The takeover is set to go through before the end of the year, and IBM says Apptio will be acquired with cash in the bank.
“Technology is changing business at a rate and pace we’ve never seen before,” said IBM CEO Arvind Krishna. “To capitalise on these changes, it is essential to optimize investments which drive better business value, and Apptio does just that.
“Apptio’s offerings combined with IBM’s IT automation software and watsonx AI platform, gives clients the most comprehensive approach to optimize and manage all of their technology investments.”
Why IBM wants to pay $5bn for Apptio
Founded in 2007 and headquartered in Washington state, Apptio provides a suite of FinOps tools – cloud apps which enables tech leaders to track and analyse technology spending.
It sells software specifically for managing cloud and hybrid infrastructure spend, as well as a tool for keeping track of development costs when building new digital platforms.
The company was purchased by Vista Equity Partners in 2018 for $1.94bn. At the time it had annual revenue of $188m, and the substantial premium IBM is reportedly set to pay on top of this price would suggest that figure has grown over the past five years, though Apptio does not report revenue since the buyout.
Clients of Apptio include oil company Chevron, EDF Energy and the Bank of Ireland, according to the company’s website. It works with 1,500 clients in total, including more than half of the Fortune 100.
“Our customers are evolving to a complex digital-first, hybrid world where technology investments are distributed and decentralized but all innovation must be aligned with clear business outcomes,” said Sunny Gupta, Apptio co-founder and CEO. “We are so excited to be joining IBM and combining our industry leading offerings with IBM’s global presence and strong portfolio across AIOps, automation and hybrid cloud offerings.”
IBM’s transition to focus on the hybrid cloud
The deal represents the latest move from IBM to boost its credentials in the hybrid cloud market, combining the company’s traditional strengths in on-premises servers with the desire of tech teams to move workloads to the cloud.
“IBM is laser-focused on the $1trn hybrid cloud opportunity,” 2Krishna said back in 2020, when the company announced plans to split, spinning off its legacy IT infrastructure business into a new managed service provider, Kyndryl. It has also closed down its Watson Health division, which provided data and analytics services to healthcare providers.
This has left IBM free to focus its attention on the cloud, as well as other emerging technologies such as artificial intelligence and quantum computing. The company’s latest quarterly results, released in April, showed early signs this strategy may be paying dividends despite the difficult market conditions. It reported first-quarter revenue of $14.3bn, a slight increase on the previous year, with software revenue up 2.6% year-on-year, to $5.9bn.
Krishna, who has been in post for three years, is also on a mission to use technology to cut costs at IBM, and said last month that 7,800 back office roles in the company could be replaced by AI, with automated systems filling vacant administrative roles.
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