IBM to buy Apptio for $4.6B to help companies optimize IT spend

IBM is acquiring software provider Apptio for $4.6 billion to help enterprises optimize their IT expenditure, particularly cloud costs, as they try to navigate uncertain macroeconomic conditions.

Apptio specializes in what has been called technology business management (TBM), or more recently, financial operations (also known as finops) software, designed to allow diverse teams in a business manage IT costs. IBM said it will combine Apptio’s capabilities with the performance optimization and observability capabilities from recent acquisitions such as Turbonomic and Instana, in order to give enterprises a complete business management platform.

IBM will also augment its recently announced Watsonx platform with anonymized financial operations  data from  Apptio.

Apptio, which has over 1,500 enterprise customers, also integrates with technology from AWS, Microsoft Azure, Salesforce, Google Cloud, Oracle, Salesforce and SAP.

The company has three main offerings —ApptioOne, Apptio Cloudability, and Apptio TargetProcess.  While ApptioOne can be used by enterprises to manage hybrid cloud, Apptio Cloudability can be used to monitor public cloud spending and expenditure optimization.

Apptio Cloudability can also help connect multicloud and SaaS infrastructure with cloud financial management best practices to maximize the value of clients’ cloud strategy, IBM said. Apptio Targetprocess offers investment planning capabilities to align development resources to business outcomes and track value delivery for projects or products, it added.

The acquisition, which IBM said will be completed with available cash on hand, is expected to close in the second half of 2023. IBM is acquiring the company from Vista Equity Partners, which purchased it in 2019 for $1.94 billion.

Cloud providers offer expense tracking tools

IBM’s acquisition of Apptio can be seen as a move to keep pace with rivals such as AWS, Microsoft and Google Cloud, as all of them have billing management systems designed to help customers manage cloud costs.

“Cloud cost management and optimization is the biggest pain point of enterprises. Many enterprises have not realized the cost benefit of moving to cloud and that is leading to slowdown in growth rates of cloud deployments,” said Pareekh Jain, lead analyst at Pareekh Consulting.

“At the same time, IBM is banking on cloud software for its growth. Big Blue’s strategy has been of mega acquisition of market leaders to become a dominant player in cloud software tools to compete against cloud hyperscalers,” Jain added, giving the example of IBM’s $34 billion Red Hat acquisition.

IBM also acquired Instana in November 2020, to target the application performance monitoring market from a hybrid cloud standpoint. Instana, according to Jain, was not a market leader and the acquisition of Apptio will help IBM augment is observability capabilities.

Other acquisitions by IBM will also stand to benefit from Apptio’s capabilities, according to Forrester analyst Tracy Woo.

“If IBM plans to integrate Apptio’s Cloudability with Turbonomic and Nordcloud’s multicloud consultancy it will have an end-to-end solution that could be the killer FinOps solution for enterprises,” Woo said.

Apptio expected to continue offering standalone systems

Apptio still may continue to offer standalone offerings, according to Amalgam Insights’ lead analyst Hyoun Park.

“Although IBM has products in the same spaces that Apptio covers, most of the latter’s offerings are complementary to IBM. This is why I would expect to see Apptio offerings remain as standalone products for the near future,” Park said, adding that existing customers would want to continue using them.

The acquisition might also see Apptio become a preferred choice for enterprises, especially VMware customers who may be fearful or concerned about the status of the Broadcom acquisition, according to Woo. Apptio competes with VMware’s Aria cloud management offering. Other rival offerings include the likes of Spot by NetApp, Flexera, Snow Software, and Cast AI.

While IBM will gain from Apptio’s capabilities and deeper financial visibility into its enterprise clients — which include half of the Fortune 100 companies — Apptio will also stand to gain from the deal by latching onto IBM’s enterprise reach, analysts said.

Big Blue’s acquisition spree

IBM has been on an acquisition spree since Arvind Krishna took the helm of the company as CEO in 2020. Its consulting business alone has acquired 13 companies to boost its offerings in the last few years.

Recently, IBM acquired SaaS-based PrestoDB provider Ahana in April and, in December last year, purchased Octo to boost its US government business.