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Indian IT major HCL Technologies has announced that it is acquiring a large part of IBM’s software portfoliofor about US$1.8 billion.

With this acquisition, HCL will unlock an addressable market of $50 billion since post this acquisition seven IBM products will be added to portfolio of HCL Technologies. The acquisition transaction is expected to close by mid-2019 subject to regulatory approvals.

IBM products included in this acquisition will be — IBM Appscan, a security-focused application for identifying and managing vulnerabilities in mission-critical applications; IBM BigFix endpoint management and security software; IBM Unica, a cloud-based enterprise marketing automation software; and IBM WebSphere Commerce, an omni-channel commerce platform for B2C and B2B organizations.

Notably, IBM itself has recently acquired Red Hat in a whopping $34-billion deal to accelerate its efforts towards open-source software and technology.

For HCL, the software being acquired is expected to give the company a lift in fast-growing security, marketing and commerce, all of which are strategic to the company, said C Vijayakumar, the company’s president and CEO, in a statement.

“The large-scale deployments of these products provide us with a great opportunity to reach and serve thousands of global enterprises across a wide range of industries and markets,” Vijayakumar said in that statement.

Darren Oberst, corporate vice president and head of the products and platforms business of HCL, told CRN that the acquisition was part of a long-term strategy by his company to diversify its business.

Founded in 1976, by Shiv Nadar and Arjun Malhotra, HCL is an $8 billion, 42 year-old services company with core competencies in both engineering and software outsourcing and IT outsourcing.

Oberst further said, “About three years ago, we started looking at our growth strategy and how to move away from the labor-intensive software business to provide more value to our clients.”

With the acquisition of this software portfolio from IBM, HCL will be able to combine the entrepreneurial capability, speed and performance of a company like HCL with over 100,000 employees worldwide with the software in such a way that will set it apart from its competitors, Oberst said.

“This represents a fundamentally new direction for us,” he said. “We’re moving into working with software with some of the largest companies in the world. We want to create a set of solutions that very few companies in the world can deliver.”

Going forward, HCL Technologies and IBM will continue their long-term relationship where the two sell each other’s technologies, Oberst said.

“It’s a win-win,” he said. “We provide incredible opportunities for the software customers, and IBM focuses on the incredible opportunities for growth in the future.”

The deal, once it closes, is not expected to have a big change in how IBM’s business partners work with the software as it becomes part of HCL Technologies, Oberst said.

“There will be no change in these arrangements until formal deal closure, which is expected to happen by mid-2019,” he said. “Post deal closure, HCL will work with IBM business partners to sign them up as HCL partners. Working with business partners has always been a core part of HCL’s business philosophy.”

For IBM, the divestiture of this part of its software business is a way for the company to better prioritize its investments in more emerging, high-value segments of the IT industry, said John Kelly, IBM senior vice president of cognitive solutions and research, in a statement.

“Over the last four years, we have been prioritizing our investments to develop integrated capabilities in areas such as AI for business, hybrid cloud, cybersecurity, analytics, supply chain and blockchain as well as industry-specific platforms and solutions including health care, industrial IoT and financial services. … We believe the time is right to divest these select collaboration, marketing and commerce software assets, which are increasingly delivered as stand-alone products,” Kelly said in that statement.

Recently in June this year, HCL has acquired H&D International Group, a Germany-based IT and engineering services provider. Prior to this, in April this year, US-based software firm Actian announced that it will be acquired by HCL Technologies for $330 million.

To date, HCL has made 13 acquisitions including acquisition of a SAP firm, Axon Group Plc., in 2008 and part of Volvo’s IT business in 2016.

Source – CRN

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Suman Chaudhary
An engineer by education and writer by profession, Suman keeps tab on startup ecosystem of India and leads the research team of IndiaWeb2 for covering funding deals, merger & acquisition and market reports.

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