{"id":5486,"date":"2023-07-21T22:18:55","date_gmt":"2023-07-21T22:18:55","guid":{"rendered":"https:\/\/www.horsesforsources.com\/?p=5486"},"modified":"2023-07-21T22:57:53","modified_gmt":"2023-07-21T22:57:53","slug":"ibm-apptio_072123","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/ibm-apptio_072123\/","title":{"rendered":"IBM\u2019s acquisition of Apptio can shine if IBM Software and IBM Consulting work together to deliver cost-managed innovation at speed"},"content":{"rendered":"

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There appears to be a strong whiff of Zeitgeist<\/em> in IBM\u2019s intention to acquire Apptio<\/a>. Macro headwinds are putting brakes on budgets. Cloud costs are rising \u2013 so where better to drive value to enterprises than help them manage their technology investments?<\/p>\n

HFS strongly believes these mega-software compilations can only fulfill their potential when combining transformation services with the software. The days of selling expensive software to CIOs without a real business plan to integrate them effectively across the enterprise and then develop and manage them are fast fading.\u00a0 And there is no greater example of this than IBM\u2019s acquisition of Apptio.\u00a0 It looks great on paper, but this investment will come nowhere near achieving its objectives if the platform is not developed to deliver a holistic view of IT spending, with a services alignment to help them achieve this quickly for needy enterprise clients.<\/p>\n

Apptio addresses the first half of the Digital Dichotomy – reducing costs.\u00a0 Now it needs to help enterprises innovate at speed<\/strong><\/p>\n

2021 and 2022 have been dubbed by many as the “Big Hurry” years, where so many enterprises were desperate to transition to their desired cloud states and worried less about some of the cost and transition work it entailed to get there.\u00a0 2023 has turned into a “Digital Dichotomy” where cost pressures<\/em> have become massive for so many enterprise businesses, but they still need to move at real speed<\/em> to benefit from the cloud outcomes that will keep them competitive.<\/p>\n

This is where the core value is for the future of an IBM-led Apptio solution… to manage costs while supporting innovation investments at speed.\u00a0 Operational leaders have to accept that cloud transformation is not a cost-reduction exercise. The benefits lie in cultural change leading to the capture of new sources of value. With that, the value proposition of any spend management tool has to be expanded to enable transformational change. In our this view, this is the context for the Apptio acquisition.<\/p>\n

Additionally, IBM\u2019s growth rates are slowing, and Apptio has reached another plateau in its corporate development as it has struggled to expand its sales reach. By paying a substantial $4.6bn, IBM is looking to create a new software category that, in the words of Rob Thomas, SVP Software and Chief Commercial Officer, \u201cwill give customers a virtual command center to understand their technology spend, their cloud spend, and their labor spend.\u201d An elevator pitch that should echo the thoughts of many leaders in these challenging times. But it has to be filled with proof points, not only compelling narratives.<\/p>\n

Apptio’s progression from IT cost management to FinOps<\/strong><\/p>\n

Let\u2019s rewind. Apptio, founded in 2007, created a new software category Technology Business Management (TBM). The goal was to run IT like a business where you manage cost. Basically, by providing \u00a0CIOs and senior IT operations executives with the necessary tools and insights to optimize IT costs, align IT with business objectives, measure performance, and drive value for the organization as a whole. \u00a0Core IP is based on a “standardized” cost attribution model for shared platforms across infra\/apps\/services, which could be used to run a chargeback model for all IT Services delivered to a line of business entity. At the same time, innovative Apptio did hit a plateau. Its initial focus was on-prem, but a series of acquisitions (e.g., Cloudability) led to extending this approach to cloud-native platforms, predominantly the hyperscalers. Yet, Apptio could never progress beyond<\/em> financial management and strategic planning. For many, Apptio has become a leader in FinOps; nonetheless, it is easy to forget its roots.<\/p>\n

Spend data meets telemetry data which ultimately becomes aligned with AI<\/strong><\/p>\n

Fast forward to what both companies had to say in the announcement. The intent is more significant than either TBM or FinOps, much bigger. IBM intends to bring automation and FinOps together. Put another way; the ambition is to link spend management data with broader operational telemetry data. Not only this, but the acquisition will be a conduit for enabling actions and, ultimately automations, for a multitude of inputs from AIOps, Observability, and beyond.<\/p>\n

This is about expanding the integration of Watson capabilities into the various Cloud Paks. From a product point of view, the plan is to blend Apptio with the capabilities from the newly-launched Watsonx platform<\/a> and acquisitions like Turbonomic, Instana, and MyInvenio. AI is meant to be the glue and the catalyst for an expansive suite of IBM-owned assets. As so often, the proof will be in the pudding.<\/p>\n

IBM describes Watsonx as full technology stack\u201d for training, tuning, and deploying AI models, including foundation and large language models, while ensuring tight data governance controls. With that, Apptio conceivably will be heavily aligned with GenAI. Additionally, the data from IBM\u2019s multiple acquisitions provides a large set of telemetry data to bolster the spend data provided by Apptio.<\/p>\n

Take Turbonomic, which helps customers overcome silos in IT Operations as it brought together applications resource management and network performance management. To progress toward cloud-native operations, organizations must develop the ability to convert insights from logs, metrics, traces, and dependency maps into actions across the enterprise. For most organizations, the progress has stopped at insights. And those insights are often confined within siloes rather than providing an enterprise-wide view. The North Star is the ambition to run operations across the boundaries of IT and business.\u00a0 Apptio never progressed beyond providing insights, while IBM needs to demonstrate the proof points for integrating its disparate capabilities as well as progress from insight to action and, ultimately, automation.<\/p>\n

IBM Software must work with IBM Consulting transformation more effectively<\/strong><\/p>\n

So how can the worlds of telemetry and spend data come together? IBM\u2019s AI assets are meant to improve Apptio\u2019s already decent ability to ingest and classify data, detect anomalies in data or operations, and create recommendations. It is here where the integration of those disparate data assets is meant to happen. In essence, if successful, the ability to act on – and ultimately automate – all those insights is pretty much the operational Holy Grail.<\/p>\n

Just for transparency getting expansive spend management and FinOps capabilities in itself will be a solid asset for IBM. However, any new and bolder proposition aiming at the bigger transformation price must move beyond technology and include stakeholders and change management. The ambition could be a broader business assurance where spend data, operational insights, and governance get tied to business objectives.\u00a0 In our view, this provides a significant alignment opportunity with IBM Consulting<\/a> as it seeks to differentiate itself from the likes of Accenture Operations and Genpact.\u00a0 Having a deep services alignment with Watsonx and Apptio will bridge together the ability to manage the cost and value of both cloud transformation and AI investments – provided it gets it right with its global talent base of technical and process domain specialists.<\/p>\n

Apptio must prove to be more than just FinOps<\/strong><\/p>\n

Foremost the value proposition must be broader than the narrow cost focus of FinOps. As Kareem Yusuf, SVP Product Management and Growth at IBM Software, explained: \u201cFinOps is just one use case of the overall proposition. We probably might need a new terminology to capture the value proposition\u201d. In our view, this should not just be about a new terminology but a new way to manage transformations enabled by cloud. As clients progress toward becoming cloud-native, IT and business operations must move together. Clients want end-to-end process insights and the efficiency to react to any incidents. Whether we need to create a new moniker to capture those capabilities is debatable. What IBM is proposing is as bold as it is complex. We look forward to seeing the first proof points…<\/p>\n

Bottom line: The contours of a new value proposition for managing transformation are bold, but as always, the proof will be in the pudding<\/h2>\n

Net-net, it is a good deal for both IBM and Apptio. IBM didn\u2019t have much spend data; therefore, there is little overlap in terms of products. The ambition is bold. But the Holy Grail of operations is having an operational single pane of glass that includes automation and AI. If IBM can integrate all those acquisitions and get all that telemetry data out of its often highly specific domains, it can achieve strong differentiation in the market. Conversely, Apptio had hit a sales plateau as it struggled to scale its sales reach. Getting $4.6bn for hitting a plateau is too good an opportunity to turn down.<\/p>\n

The rationale behind the deal is built on aspirations. It must be because $4.6bn is no peanuts. We have heard the sales pitch, but now we need to see concrete outcomes. But we have heard many claims from IBM over the years. Top of my mind is the claim that IBM is winning big AMS deals because they allegedly had linked RPA with AIOps. However, we still must see the proof points. IBM\u2019s Apptio bet is to drive a new value proposition of an end-to-end operational single pane of glass linking technology performance and spend data. If successful, such a proposition will create high demand in today\u2019s challenging macro headwinds.<\/p>\n","protected":false},"excerpt":{"rendered":"

There appears to be a strong whiff of Zeitgeist in IBM\u2019s intention to acquire Apptio. Macro headwinds are putting brakes…<\/p>\n","protected":false},"author":9,"featured_media":5490,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47,867,959,937,48,51,1073,1057,81,938,832],"tags":[968,132,1076,143,151,982,183,193,1015,223,230,267,268,324,1074,1063,366,1077,425,1075,549,619,778,1051],"ppma_author":[39,19],"yoast_head":"\nIBM\u2019s acquisition of Apptio can shine if IBM Software and IBM Consulting work together to deliver cost-managed innovation at speed - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.horsesforsources.com\/ibm-apptio_072123\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"IBM\u2019s acquisition of Apptio can shine if IBM Software and IBM Consulting work together to deliver cost-managed innovation at speed - Horses for Sources | No Boundaries\" \/>\n<meta property=\"og:description\" content=\"There appears to be a strong whiff of Zeitgeist in IBM\u2019s intention to acquire Apptio. 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