There was recently big news in the IT Financial Management (ITFM) and Technology Business Management (TBM) market, with the leader Apptio acquiring the number two software provider Digital Fuel. Software company acquisitions are commonplace nowadays and prevalent throughout the industry. More often than not, it’s a case of the big fish eating the little fish as they look to reduce the competitive landscape.
In this still-emerging market, with a very limited pool of providers, this consolidation has created a rather large splash, where the full effects are uncertain, and impact to clients still unknown. Existing customers and those considering an ITFM initiative rightly have questions. Here are some answers.
1 – Less or more choice of ITFM vendors?
Apptio is now the largest provider extant, increasing its market share to well over half of the total installed base. While this may seem huge at first glance, we need to put it into perspective. As a customer, your choice may be restricted for a short while, particularly if you’re a large North American enterprise, the specialist arena of Apptio and, particularly, Digital Fuel. If you’re a mid-sized organization, the provider pool is not affected by this acquisition.
However, Gartner estimates this nascent market will grow at a rate of 17% year over year, which means there’ll be room for plenty more fish in the very near future, each delivering value to their own client base. We’ll soon be seeing new entrants, or existing players expanding their geographical reach, providing more to choose from, both in terms of capabilities and services.
And this is where the biggest impact may be felt.
As Gartner’s Market Guide for ITFM points out, introducing ITFM presents “unique and complex data integration and aggregation, cost model and allocation challenges”. The effective adoption of an ITFM program hinges on three key pillars for success:
- Good preparation prior to implementation
- Well-supported implementation
- Investing in and committing to ITFM processes and resources once implemented
To quote Gartner: “Given the complex nature of an ITFM initiative, service provider organizations with strong methodologies and best practices can help speed the time to value for clients”.
2 – Will new entrants to ITFM offer services for success?
Currently, most players offer ITFM tools that they help implement. This usually includes training of your resources and ongoing technical support. The most recent entrant to the market is Oracle, offering ITFM as part of its ERP suite, with the usual implementation and support. It would be safe to assume that a majority of new entrants will offer these same services ubiquitous in the software industry. The question is: Will they be enough for your particular circumstances?
Most vendors offer additional professional services that can help with architecting the solution you’ll need, and preparing for implementation. There’s also a growing cohort of consulting firm vendors that fill this space, either with their own software or a third-party offering.
However, once these service providers have helped you get your initiative going, your team will be on their own climbing the learning curve. Managed Services vendors, either through the use of their own software or via a third party solution, can help you succeed in driving adoption of ITFM within your organization by demonstrating immediate results.
3 – Will there be more consolidation in the ITFM market?
To reiterate, software company acquisitions are commonplace and markets always have a tendency to consolidate over time. In the future, we can expect to see further gobbling up of smaller fish by bigger fish. We understand that, if you’re asking this question, you’re trying to assess your risk, so let’s address that point.
If you’re an existing ITFM customer, you could find yourself forced to change technology down the line as a result of market consolidation. Given that Gartner has found “implementation of an ITFM solution can cost 1.5 to 2.5 times more than the first year’s license/subscription fees (based on levels of customization)”, we’d understand that you might not want to go through the whole complex implementation process again with a new vendor.
If you’re starting your ITFM journey, we understand you’d hesitate to introduce technology that may well disappear with further industry consolidation. But how long can you afford to delay? As Gartner says, “To be competitive and to become strategic to the business, CIOs must ‘run IT like a business’ and provide the business with meaningful insights into the costs of delivering services that satisfy the organization’s technology requirements”.
As the software industry has proven time and again, Managed Services are a solution that reduces risk, provides greater ROI, is delivered more expeditiously, and is more cost-effective. Partnering with a service provider who is committed to your success gives you greater control over the outcome of your initiative than purchasing software which depends on many other factors to solve your problems.
If you’re affected by this acquisition and want to explore alternative solutions which lower risk, or if you’re starting your ITFM journey and want to increase your chances of adoption within your organization, take a closer look at our cloud-hosted, fully managed ITFM solution.
Source: Gartner Market Guide for ITFM – Sept 2017
Author | Robert J. Bracco
As the Director IT Financial Management, Technology and Telephony at Upland Software, Bob holds 20+ years of progressive data experience from accounting to financial planning, corporate allocations and analysis serving various industries (financial services, insurance, information technology, and consulting). He is passionate about the importance of data cleanliness, and has written multiple white papers on the subject. Connect with Bob on LinkedIn.