IBM’s $4.6B Apptio Purchase Places Bigger Stake in FinOps

IBM on Tuesday took a larger slice of the FinOps space with its $4.6 billion purchase of hybrid cloud and IT management software firm Apptio.

IBM says the acquisition will advance its IT automation capabilities and let enterprise leaders deliver more business value through accelerated digital transformation. Apptio offers software for management and visibility of technology spending across hybrid and multi-cloud environments, labor, and associated resources.

Daniel Newman, chief analyst at Futurum Research, tells InformationWeek that IBM’s purchase fits with its strategy to enhance its hybrid cloud and AI focus. “Apptio provides IBM’s global distribution channel with expanded tools to enable CFO/CIO to manage cloud and IT spend, while also dealing with challenging labor unit economics that revolve around complex digital transformation,” he says.

Newman’s assessment aligns with IBM’s stated goals.

“Technology is changing business at a rate and pace we’ve never seen before,” IBM Chairman and CEO Arvind Krishna said in a prepared statement. “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.”

IBM says its current FinOps offerings, including Turbonomic, Instanda and AIOps, combined with Apptio’s ApptioOne, Cloudability, and Targetprocess, will provide a comprehensive FinOps resource for enterprise use. Apptio already partners with Amazon Web Services, Microsoft Azure, Google Cloud, Salesforce, ServiceNow, Oracle, and SAP.

“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,” Sunny Gupta, Apptio co-founder and CEO, said in a press release.

Part of a Larger Cloud Strategy

IBM has been spinning off and divesting other lines of business, including Kyndryl Holdings Inc. and Watson Health, while shifting resources to hybrid cloud and artificial intelligence. The company acquired software provider in 2019 acquired Turbonomic Inc. for $1.5 billion and Red Hat Inc. for $34 billion. Analysts say this latest acquisition fits with that overall move into hybrid could.

“I like this deal for IBM as it aligns well to its hybrid strategy and will play well in its global service and consulting businesses as companies seek to optimize cloud and labor spend while rapidly investing in technology projects like analytics, AI, and cloud,” Futurum’s Newman says.

Tracy Woo, senior analyst at research firm Forrester, says Apptio’s solutions combined with IBM’s Turbonomic and Nordcloud offerings will give tough competition to FinOps players - like VMware's Aria Cost. “If IBM closes on an Apptio acquisition, it will be well positions to dominate the FinOps space,” she wrote in a blog post. “If integrated well, a combined Apptio, Turbonomic, and Nordcloud offering could be seen as the enterprise FinOps solution.”

The move comes five years after Vista Equity Partners Management LLC bought Apptio for $1.9 billion.

“We are committed to building resilient enterprise software companies, which has proven to be highly attractive to strategic and financial buyers, a well as public markets,” Robert F. Smith, founder and chairman of Vista Equity Partners, said in a statement. He said the investment firm looks forward “to seeing Apptio further evolve with IBM.”

Apptio will be acquired with available cash on hand, IBM says. The transaction will be subject to regulatory approvals and closing conditions and is expected to close in the latter half of 2023.

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