IBM sells software for once

by Scott Denne

Amid the growing perception that technology is disrupting a wide range of industries, it’s worth noting that the software business itself is one of those industries. And perhaps no company is responding to that shift as dramatically as IBM. With a record acquisition recently announced, Big Blue has now made a record divestiture, shedding several software assets in a $1.8bn sale to HCL Technologies.

Throughout its history, IBM has frequently turned to a combination of acquisitions and divestitures to reorient its business. Those earlier sales, however, were almost entirely in services and hardware, while this deal marks its largest software divestment to date. In today’s transaction, Big Blue is selling software units that specialize in security (Appscan and BigFix), marketing (Unica, Commerce and Portal) and collaboration (Domino, Notes and Connections). All received scant attention from IBM in recent years and none reside in the areas that the company considers to be its strategic priorities, such as artificial intelligence (AI), blockchain and cloud computing.

It was that latter trend that sparked the recent $33.4bn purchase of Red Hat, setting an all-time record for the largest software deal. Having lost to Amazon and Microsoft in the first phase of the shift toward cloud computing, IBM sees another opportunity as the market shifts to hybrid- and multi-cloud environments. Today’s divestitures did nothing to aid the company in pursuit of that market.

Others have taken a similar tack, sensing that changes are coming to their sectors. In 451 Research’s VoTE: Digital Pulse survey, 47% of respondents among B2B software and IT tech vendors told us that digital technology would be highly disruptive to their organization’s market. Nuance Communications, for example, recently shed its document imaging business in a $400m sale as it focuses its resources on a raft of new challengers in the AI and voice recognition space. According to 451 Research’s M&A KnowledgeBase, public companies around the globe have divested a collective $6.5bn in software assets so far this year, the second-highest annual total in the current decade.

Posted in M&A