Editor’s note: This article has been updated to include Broadcom’s acquisition of CA Technologies.
Enterprise technology saw not one, not two, but nine multibillion dollar acquisitions take place in the last 12 months, running the gamut from a mere $1.7 billion to a whopping $34 billion.
While the premium IBM is paying on Red Hat might raise a few eyebrows, the size of many of these deals is not a total surprise.
Companies are remaining private longer, raising several rounds of hundreds of millions of dollars to fund their growth, thus driving larger valuations, according to Bill Baumel, managing director at the Ohio Innovation Fund, in a statement provided to CIO Dive.
Nevertheless, multibillion dollar deals are still a rarity in the market, aided by larger funds "swinging for the fences with a 'unicorns or bust' mentality," he said.
Many businesses are moving from cloud-first to SaaS-first, and many of these major acquisitions are indicative software's prominence.
This means differentiation in businesses now falls to software development, not operations or cloud. If a business can compete with software, it can win in the market, Steve Burton, VP of Smarketing at Harness, said in an interview with CIO Dive. Companies more focused on infrastructure will become a commodity.
The deals also show a consolidation and shift toward DevOps, according to Burton. Many vendors are still established for the pre-cloud native era, but businesses moving to the cloud, serverless computing and other new architectures need the tools to support this.
That transition in the market will support more big acquisitions in the coming year.
Another common theme across the mega deals has been developer-driven companies, said Burton, as empowered developers automate and control the business.
But one has to take the lens below the billion dollar mark to really understand what's going on in the enterprise.
The $100 million-plus to $1 billion acquisitions remain the "bread and butter" for VCs, according to Baumel.
And a lot of strategies are best measured through the acquisitions of various point solutions brought on to augment a larger portfolio, according to Burton. Cisco, for example, is transitioning to a larger software and subscriptions focus and has relied on acquisitions to diversify its portfolio.
In chronological order, here are the multibillion-dollar deals that took place this year:
In a nod to the importance of the API economy, Salesforce kicked off the big deals of 2018 with the purchase of the integration software company. The company's software filled a hole in Salesforce's platform capabilities, making it easier for customers to create and maintain connections.
MuleSoft recently partnered with enterprise container platform Docker to help customers moving to the cloud, boosting agility and portability and facilitating the connection of legacy applications into hybrid environments.
The first of Adobe's two major commerce acquisitions, the Magento purchase added the Magento Commerce Cloud to the Adobe Experience Cloud, providing a single platform for B2B and B2C customers.
Magento completed the integration in June, bringing analytics and personalization from the Adobe cloud to the commerce platform.
Microsoft shook the tech world this summer with the announcement it would acquire one of the largest developer community's in the world. Microsoft has picked up on the rise of developers and open source in the enterprise.
The acquisition will offer Microsoft more control over the platform's direction and development community, but it still has some ingratiating to do with developers wary of the company's past practices.
Following an attempt to acquire fellow semiconductor company Qualcomm, in July Broadcom purchased CA Technologies for $18.9 billion in cash. CA Technologies specializes in IT management software and solutions, offerings that will work in concert with Broadcom's existing line of semiconductors and infrastructure software.
With the deal completed in November, Broadcom is making "substantial changes" to CA Technologies' business model. "Gone are the days of trying to land new products with new customers," said Hock Tan, president and CEO of Broadcom, on a Q4 earnings call. "We are focusing all our attention on renewing existing products with existing mainframe-centric customers, customers that represent virtually all of the world's largest enterprises and largest spenders on IT."
Tan said the "renewed and expanded" business model will cost substantially less than the "legacy land-at-all-cost model."
The August announcement marked Cisco's biggest acquisition since AppDynamics in early 2017. The tech company broke into the multifactor authentication market with Duo Security, looking to extend access control multicloud environments, improve endpoint protection and simplify cloud security policies.
The deal was more about access to Duo's customers than its core functionality, and Cisco paid a "pretty high premium" for its capabilities, according to Merritt Maxim, principal analyst at Forrester.
Adobe purchased the B2B marketing engagement cloud platform in September and completed the acquisition in late October. The deal combines Adobe Experience Cloud's offerings with Marketo's marketing technology to help link marketing engagement and revenue growth.
The acquisition of one of the top marketing products poisitions Adobe well for the digital commerce and B2B marketing space.
IBM led the acquisitions show in style with a whopping price tag for the open source cloud software provider, making a power play for the hybrid cloud market. Red Hat will "remain Switzerland," and the acquisition won't affect deals with major cloud providers, according to Paul Cormier, executive vice president and president of products and technologies at Red Hat.
Like Microsoft and GitHub, IBM will have to tread very carefully around the culture of Red Hat, a leader in the open source space.
The software giant purchased Qualtrics, in cash, to optimize its experience management data with operational data to scale for global reach. At the time of purchase, Qualtrics boasted customers such as Microsoft, HP Inc. and General Electric.
Using data to drive meaningful insight is key to a business' competitive advantage, and SAP made a push for experience management data with the Utah tech darling.
The purchase of the software company is expected to close early next year, taking Apptio private once again. The company is credited with coining the term "technology business management" and founded the TBM Council in 2012.
TBM software helps businesses keep track of infrastructure and track costs. The purchase by the investment firm demonstrates the value management systems for hybrid and multicloud environments within an organization's portfolio.