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IBM acquisition spree targets hybrid cloud consulting market

Acquiring five providers specializing in cloud-based consulting and managed services since November, IBM wants to make it easier for users to move workloads across multiple clouds.

IBM has acquired five companies in a span of just three months to build up its hybrid cloud consulting business -- some of which specialize in providing managed cloud services to IBM competitors.

The latest acquisition is Taos, a 30-year old IT vendor now focused on providing cloud-based professional and managed services. The company helps large IT organizations in the financial services, healthcare, retail and transportation markets migrate data center workloads to multiple clouds. It has partnerships with a number of IBM competitors, including AWS, Google Cloud and Microsoft Azure. The company also offers users a range of platform engineering and hybrid cloud managed services.

Earlier this month, IBM purchased 7Summits, an independent consultancy specializing in Salesforce and hybrid cloud services. IBM officials at the time of the acquisition said they expect the Milwaukee-based company to play a role in helping corporate users with a variety of digital transformation projects, including hybrid cloud and AI technologies. 7Summits will become part of IBM's Global Business Services unit.

IBM recently said it intends to "significantly" expand its hiring, training and certifications over the next three years to ensure the growth of its Salesforce-related businesses, including Tableau, Mulesoft and Vlocity.

In late December, IBM bought Nordcloud, a Finland-based provider of public cloud services with offices spread across 10 European countries. It, too, specializes in helping larger IT shops complete their digital transformation projects. Like 7Summits and Taos, Nordcloud is a certified partner certified to work on AWS, Google Cloud Platform and Microsoft Azure. The deal is also expected to close at the end of this year's first quarter.

Fernando Herrera, Nordcloud's chairman, said in a statement the primary value of the deal is the complimentary approach IBM takes with its hybrid cloud strategy relative to Nordcloud's in helping users "migrate, manage and generally modernize" their hybrid cloud implementations.

Also in December, IBM acquired Expertus Technologies, which IBM believes can strengthen its portfolio to be a more competitive cloud-based digital payments provider.

In November, IBM acquired TruQua, an SAP partner focused on finance and analytics offerings that help companies shift from on-premises systems to cloud capabilities including cash flow, budgeting and consolidation.

David Sun, director of corporate business development for IBM's services group, believes the strength the recent acquisitions offer is not just their technical offerings, but the human touch they provide across their respective geographic locations.

"I'm one who believes in technology that is prevalent across the globe," Sun said. "But when it comes to services, it's all very local. You still have to consider the local languages and know about all the different compliance regulations for each country. This is what is guiding our strategy in this market over the long term."

Enterprise Strategy Group, a research firm, recently reported that public cloud infrastructure adoption has nearly doubled in five years, from 42% or organizations using IaaS in 2017 to 78% reporting use in 2021. Nearly half of organizations told ESG they have a cloud-first strategy.

Both IDC and Gartner project the cloud managed and professional services market to surpass $200 billion by 2024, analysts see the acquisitions as a step in the right direction. The deals also make sense for IBM given its major competitors are pursuing similar strategies and most data centers demand support of clouds from multiple vendors, analysts said.

"These acquisitions make it clear what IBM's goals are for the support of hybrid clouds," said Judith Hurwitz, president of Hurwitz & Associates, an IT consulting, market research and analyst firm. "They want to plant a variety of cloud services on top of any major cloud platform their corporate users have. These acquisitions are meant to give them the added expertise to support the transport of workloads across multiple clouds."

While seeking strategic acquisitions as a way to strengthen its cloud services is a necessary one, it is hardly a new approach for IBM. Big Blue has aggressively acquired smaller services companies in the past as a way to extend the reach of its internal services organizations that can offer vertical market expertise in multiple geographic locations.

[IBM wants] to plant a variety of cloud services on top of any major cloud platform their corporate users have. These acquisitions are meant to give them added expertise to support the transport of workloads across multiple clouds.
Judith HurwitzPresident, Hurwitz & Associates

"Acquiring expertise in AWS and Microsoft [Azure] makes it easier to get IBM Cloud users' over to multiple clouds," said Frank Dzubeck, president of Communications Network Architects, Inc. "Sam Palmisano [former IBM chairman] did it years ago when they bought PricewaterhouseCoopers and jump-started that business with warm bodies around the globe. It's a sensible approach."

All five acquisitions will be part of IBM's Global Business Services unit and will play a key role in contributing to IBM CEO Arvind Krishna's long-term strategy of creating cognitive cloud-enabled services infused with AI and hybrid cloud technologies, Sun said.

It could also create more synergy between IBM's Global Business Unit and NewCo, the temporary name given to the company to be created when IBM spins off the managed infrastructure portion of its Global Technology Services business sometime later this year. NewCo will offer hosting, project services, infrastructure modernization and multi-cloud management and migrations.

"We believe the two units can continue to grow in conjunction with each other," Sun said. "We're still going to look for ways for them to support each other. A lot of clients are still going to be relying on infrastructure services, so from a collaboration standpoint we're always going to have that in place."

 None of the acquisition prices were disclosed as of press time.

Enterprise Strategy Group (ESG) is a division of TechTarget.

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