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Multiple acquisitions and rumors of a non-public fairness takeover amongst IT distributors this week are seemingly the beginnings of a surge in enterprise expertise M&A this 12 months, in response to analysts.
Hewlett-Packard Enterprise disclosed Tuesday that it intends to acquire Juniper Networks for $14 billion. On Thursday, Bloomberg reported that PagerDuty is in talks a couple of potential sale with a potential takeover by non-public fairness (PE) corporations looming, whereas CI/CD vendor Harness mentioned it had acquired Armory for an undisclosed quantity. Armory has provided a steady deployment product primarily based on open supply Spinnaker.
Further enterprise expertise M&A might be spurred by a proliferation of specialised software program instruments and a need to consolidate them amongst patrons, mentioned Carlos Casanova, an analyst at Forrester Research.
Katie Norton
“High-performance IT organizations must continuously improve business results through technology, and adding complexity does the opposite,” Casanova mentioned. “There is still a considerable amount of [vendor] consolidation that will happen and needs to happen.”
IDC already noticed elevated consolidation amongst DevOps distributors through the second half of 2023, mentioned analyst Katie Norton.
“There is a preference for platforms, in both DevOps and DevSecOps,” Norton mentioned. “The pattern of platform engineering could make [specialized] instruments [acquisition] targets.”
Technology M&A slumped in 2022 and particularly 2023 following a peak in 2021, in response to a November 2023 report by Gartner. Now, components equivalent to a lower in enterprise capital funding and the generative AI increase will contribute to an uptick in offers in 2024, albeit with fewer mega-deals equivalent to VMware’s $69 billion acquisition by Broadcom, Gartner predicted.
Private fairness poised to pounce
Bloomberg’s report about PagerDuty is unconfirmed, however non-public fairness corporations are primed to proceed enterprise expertise M&A offers just like final 12 months’s buyouts of New Relic and Sumo Logic, mentioned Stephen Elliot, an analyst at IDC.
“PE firms have a boatload of money waiting to be used,” Elliot mentioned. “The question is, will PE do larger deals — or roll up separate companies into large companies?”
Torsten Volk
PagerDuty’s monetary troubles, together with taking over $350 million in debt when it has but to succeed in profitability, make it a possible goal for consolidation, in response to Torsten Volk, an analyst at Enterprise Management Associates.
“A company like PagerDuty is a prime acquisition target for PE, as they are solidly growing, yet have no clear path to profitability,” he mentioned. “This situation became more urgent when they took on more debt last year and have to generate profit to pay that back.”
One PagerDuty person additionally mentioned a non-public fairness deal appears seemingly for the seller.
“While [PagerDuty has] an awesome network and platform, I think they struggle to find meaningful value-added services to put on top of it that existing customers can easily budget [for and] implement,” mentioned Andy Domeier, senior director of expertise at SPS Commerce, a Minneapolis-based communications community for provide chain and logistics companies. “I wouldn’t be surprised if it was Francisco Partners, who [also] nabbed Sumo Logic … that would make a lot of sense in their portfolio.”
However, a managed service supplier may additionally discover PagerDuty a worthwhile purchase, particularly given the way it expanded its AIOps characteristic set within the final 18 months, Casanova mentioned.
“[PagerDuty’s] expansive integration library and open APIs could fit very nicely into existing [MSP] portfolios that are lacking the PagerDuty strengths; normalizing event data, enriching it with remediation-specific data and powering automation workflows,” he mentioned.
A PagerDuty PE deal would include each excellent news and unhealthy information for IT professionals. The excellent news is that acquisitions carry sources of funding that would assist acquainted instruments stay supported, Elliot mentioned.
“Some PE firms such as Francisco Partners, TPG, Thoma Bravo, Vista Equity, Insight Partners, KKR and JMI are very good with software-centric deals,” Elliot mentioned. “It usually helps provide a higher level of focus on customer segments, product execution and sales and partner investments.”
The draw back is that as smaller specialist distributors are absorbed into bigger organizations, it might probably sluggish innovation, Volk mentioned.
“For a company with a wide product portfolio like PagerDuty, this can mean focusing on a smaller set of competitive products,” Volk mentioned. “For customers of products that are ‘out of focus,’ this can mean less R&D, less development of new capabilities and, in some cases, the sunset of their favorite product.”
Harness seen ordering takeout with Armory purchase
The Harness CI/CD platform already provides among the options Spinnaker is understood for, together with quick software program deployment and rollback help. Harness additionally has its personal open supply GitOps venture for steady deployment with Gitness, although it isn’t seen as a serious participant in open supply in contrast with CNCF’s Argo CD, in response to Volk.
“I doubt the integration will be easy, but Spinnaker has a lot of fans in the large-enterprise arena, and owning the open source project is great PR,” he mentioned. “The DevOps community likes things to be open source.”
Given the product overlap, and the truth that each Harness and Armory had beforehand positioned themselves as aggressive to one another, the deal could also be geared extra towards buyer acquisition and taking out a rival than including contemporary options to Harness, mentioned IDC’s Norton.
“Before the [comparative] webpage disappeared, Armory emphasized that they believed they were more declarative, and Harness was more imperative,” Norton mentioned. “I am sure there are either engineering staff and technology of Armory’s that will be integrated into Harness and the platform, but my take is that this was not the main driver behind the acquisition.”
A Harness press launch concerning the deal emphasized that “Armory customers will experience a seamless transition as key Armory engineering and customer support roles are joining Harness to continue supporting existing implementations.”
Another Spinnaker vendor, OpsMx, dangled its personal incentives for Armory clients within the wake of the Harness deal, together with reductions, trade-in credit and help providers. It additionally raised the specter of being “locked into proprietary solutions from Harness,” in response to a press release.
Beth Pariseau, senior information author at TechTarget, is an award-winning veteran of IT journalism. She could be reached at [email protected] or on Twitter @PariseauTT.
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