IBM bets $4.6 billion that cloud bills and IT sprawl will be enduring problems

IBM has announced it will acquire Apptio for $4.6 billion and use it to build “a 'virtual command center' for spend management and optimization" of enterprise IT.

Apptio plays in the field of FinOps – a term that describes financial management of IT operations. FinOps has come into vogue because cloud computing, for all its myriad advantages, makes it harder to control spending on business tech and to retain visibility of assets.

IBM CEO and chair Arvind Krishna touted Apptio as enabling Big Blue to help customers "optimize investments which drive better business value." He added that Apptio's wares will be put to work alongside IBM's existing automation software to provide "spend management and optimization stretching across their entire technology landscape."

Krishna is also keen on Apptio's $450 billion of anonymized IT spend data, which he reckons will unlock "new insights for clients and partners."

The acquisition is plainly a bet on cloud costs and visibility of IT estates that sprawl across hybrid multiclouds representing long-term problems.

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Cloud costs tend to spiral for several reasons: overprovisioing by either renting too much infrastructure or committing to use overpowered resources; lines of business getting into the cloud without IT oversight; storage costs mounting as users simply shove more stuff into clouds than they anticipated, and more. Sometimes even IT departments just forget they run certain workloads.

IT departments have tried to address the issue internally, but have also pushed back on their cloud providers. Microsoft and AWS have acknowledged the problem by creating "optimization" programs promising to help customers to reduce cloud spend.

Plenty of big vendors also claim FinOps expertise – the likes of Splunk, Cloudability, VMware, and Datadog are among the players who believe orgs need a better view of their cloudy resources and expenditure.

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Now IBM's going to join the party and is already enthusing that Apptio means it can "drive significant synergies across several key growth [areas] … including automation, Red Hat, IBM's broader AI portfolio, and IBM Consulting."

Big Blue thinks its systems integrator pals like Accenture, KPMG, Deloitte, and EY will also do well from the acquisition. Vista Equity Partners, which owned Apptio, has patted itself on the back for securing the sale – as well it might, as it acquired the biz in 2018 for $1.94 billion – $2.66 billion less than IBM will pay. Not a bad return at all.

IBM's not offered a timeline for when it will deliver its Apptio-powered command center, but has said it expects the acquisition to close "in the latter half of 2023." The deal will be paid for with cash IBM has to hand. ®