freshidea - Fotolia
Companies with a hybrid IT strategy in place or on the drawing board should pay attention, as spend analytics vendor Apptio goes private in a whopping $1.9 billion deal.
Apptio, founded in 2007, competes with the likes of Cloudability, CloudCheckr and others in the market for cloud cost management tools. The breadth of competition, as well as private equity's eagerness to shell out such a hefty sum, underscores the relevance of these tools for today's enterprise IT shops. The market has already seen some consolidation in the form of HPE's purchase of Cloud Cruiser and Microsoft's acquisition of Cloudyn, both of which occurred last year.
Complexity is intrinsic to IT, and as projects start to incorporate third-party services, the lack of transparency becomes a weightier problem.
"No company begins such efforts intending to go over budget or spend wastefully," said Charles King, president and principal analyst at Pund-IT.
IT spend management is far from a new practice, but the cloud era has changed the rules. The nature of public cloud services revolves around making it as easy as possible for customers to buy them.
Charles Kinganalyst, Pund-IT
"That's great for the people who need those services, but difficult for their employers to keep track of who is spending how much on what," King said. "Multiply those activities across dozens or scores or hundreds of employees and you can see how cloud spend can easily scale out of sight and control."
Cloud cost management tools, such as those from Apptio, can also help foster more productive communication between IT and line-of-business executives, including CFOs. Ultimately, they hold the purse strings and want clear justification for IT spending, which can be hard to deliver with a fistful of messy, manually updated spreadsheets.
Apptio's software targets the problem from a number of perspectives. It has modules for customers to budget and forecast, and map AWS and Azure spend to fixed IT cost models. They can track vendor contracts and spot overlap and redundancies in a dashboard. Other capabilities include automated chargeback and a benchmark database for customers to compare their costs to industry peers.
Apptio recently increased its focus on public cloud costs with the acquisition of FittedCloud, a startup that uses machine learning to optimize cloud utilization, rather than rely on human interpretation.
While there is a plethora of cloud cost management tools in the market, customers should consider some general guidelines. Pretty much every cloud service provider and platform offers tools to track and manage expenses, but for the most part, these apply to just those platforms, King said. For customers with a multi-cloud strategy, as many have these days, an agnostic third-party product like Apptio can help, he said.
Vista Equity Partners, known for its purchases of Marketo and other prominent cloud software companies, will pay $38 per share for Apptio, a 53% premium to its closing price on Nov. 9. Apptio's board has approved the deal, which is subject to a 30-day "go-shop" period, which means other bidders could come forward. And given the aforementioned consolidation, it's certainly possible one will.
In fact, customers should lobby the company hard to find another buyer, another analyst said.
"Sadly, it's another company about to have its soul ripped out under Vista Equity ownership," said R "Ray" Wang, CEO and founder of Constellation Research. Some companies, such as Marketo and Ping, have done well under the auspices of Vista, thanks to the presence of strong CEOs, but others have suffered from extreme cost-cutting, he said.