Why Wipro buying Appirio for $500 mn?

wipro-for-digital-transformationIn the latest services market consolidation, Wipro reaches deeper into the U.S. with Appirio to bolster cloud capabilities, says Cassandra Mooshian, senior analyst at TBR.

On October 20 Wipro announced a definitive agreement to acquire cloud services pure play Appirio for $500 million. The benefits of this pending acquisition are three-fold: First, the company gains the much-needed addition of approximately 1,250 cloud experts to its consulting and application development bench; second, it will experience a significant boost to its annual cloud revenue base of $367 million with the addition of Appirio’s $190 million, both for CY2015 per TBR estimates; third, it will extend its reach further into the proliferating and maturing U.S. cloud market.

Specifically, Appirio provides Wipro with expertise around born-on-the-cloud vendor offerings including Salesforce and Workday, which Wipro needed to alleviate its reliance on legacy software-turned-cloud providers including SAP, Oracle and Microsoft. Following the close of the acquisition, the company will fold its current Salesforce and Workday teams under the Appirio brand, running its SAP, Oracle and Microsoft practices separately.

Along with its cloud consulting and applications expertise, Appirio brings with it the Topcoder Marketplace. Topcoder, which was combined with Appirio’s crowdsourcing community CloudSpokes in 2013, will provide Wipro with access to a large online community of data scientists and software development and design professionals. Crowdsourcing critical functions of Wipro’s solution innovation and development will enable the company to reduce development costs and shorten development times, bringing value-added solutions to market faster.

Industry consolidation runs rampant as SIs fight for skilled resources

This is the latest in a series of systems integrators (SIs) making strategic purchases of specialty, often boutique cloud integration houses with skilled and certified talent. The beginning of this wave of acquisitions and market consolidated started with the noteworthy Cloud Sherpas acquisition by Accenture and just weeks after, IBM’s purchases of Meteorix and Gravitant. Once the two more prominent cloud professional services vendors began to make waves, and they have continued to do so with ongoing acquisitions in this area, others followed suit. Not only does this have significant implications for the acquirers themselves, but also for the acquired firms that struggled to gain scale and compete on price-to-value in the crowding cloud market.

At the early stages of the cloud brokerage and integration market emergence, acquiring skills around Salesforce, Workday and ServiceNow were a focal point for global systems integrators. As such, the market dynamics shifted and as this new talent pool is characteristically loyal to the platforms or solutions they support rather than a specific vendor, the price at which to bring on such talent skyrocketed. Now, though these skills are certainly still desirable, the skillset around which SIs look to gain is broadening to other public cloud solutions as well, namely AWS, Google and even ServiceMax and Marketo, to name a few.

Cassandra Mooshian, senior analyst at TBR
[email protected]

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