For many years now, I’ve been talking about how I love strategic plays that allow tech vendors to operate effectively in a hybrid multi-cloud environment, because it means they can make money no matter where the workload sits or which network is used. We’ve seen this time and again from Cisco, HPE and other big players who want to serve customers across a range of needs in any kind of IT deployment.
Today we’re seeing it from IBM with its $4.6 billion acquisition of FinOps provider Apptio. I like this move for IBM, where Apptio will slot in next to Turbonomic, Instana, AIOps and other well-established offerings to provide customers with better visibility into what they’re spending on IT in hybrid multi-cloud environments. (If you want to see how serious IBM has been about its multi-cloud strategy going back several years, check out this analysis of the Turbonomic acquisition and other moves that I wrote in 2021.)
Deal rationale: Know what you’re spending on IT
When I talked with Rob Thomas, IBM’s chief commercial officer yesterday, he laid out the end-user rationale for this deal succinctly: “If you’re a CEO, a CFO or a CIO, you’re trying to figure out ‘How do I manage all this complexity? Ultimately, how do I get visibility into what I’m spending?’”
In Thomas’s view, “There’s nothing that even compares to what Apptio can bring in terms of what I would call a virtual command center to look at my technology spend, cloud spend, labor spend. So it’s really . . . total cost of ownership, finally brought to the automation and data era.”
Thomas believes that IBM will have success with Apptio through direct software sales as well as via IBM Consulting, where Apptio can be deployed as a piece of bigger, top-down digital transformation projects. This addresses one of the few limiting factors on Apptio’s success as a freestanding company: although it now has 1,500+ clients, including more than half of the Fortune 100, the company’s sales operation is fairly small.
As Apptio COO Ajay Patel put it to me, “We [at Apptio] don’t have a product problem and we don’t have a market problem—we have a reach problem.” A lack of reach will be a thing of the past once IBM and its big network of channel partners come into play.
The AI angle of the Apptio purchase
On top of all that, the sky’s the limit for FinOps insights once IBM is able to feed Apptio’s anonymized IT spend data—$450 billion worth of it—into the watsonx platform. It’s early yet, but Patel thinks AI might (1) improve Apptio’s (already excellent) ability to ingest and classify data, (2) detect anomalies in data or operations and (3) create recommendations, for example about the top areas where a CTO could proactively reduce IT spend.
The first of those would further improve ease of use and accuracy, while the second would definitely expand insights for customers. But the third one could be a runaway hit for the combined company.
Operational insights driving planning, spending and optimization
Apptio is already great at aggregating data from multiple sources onto a common data platform, and it’s great at showing everyone from the C-suite to DevOps teams on the front lines where IT dollars are going and how effective those dollars are. As part of IBM, we should see even more ability for it to get granular with questions like “What is it really costing me to serve a customer?” or “What’s this product SKU costing me?” or to go big with questions like “What market should I get into next?”
Thomas said that in the current economic climate the customers he deals with are focused on “getting fit—thinking about how they optimize investments.” The Apptio transaction, which should close later this year, increases IBM’s already significant ability to help customers do exactly that, and do it across any part of today’s hybrid multi-cloud environments. That’s how companies will get the most out of their IT investments—and how IBM will make the most of its investment in Apptio.