Tag: Technology Expense Management

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The Evolution and Expansion of IT FinOps

At Amalgam Insights, we’ve long championed the Technology Lifecycle Management approach to describe the many areas existing across IT FinOps to reduce costs across hyperscalers, data clouds, Software-as-a-Service, networking, enterprise mobility, and telecom costs. Usage optimization is not enough. Product rationalization is not enough. Contract negotiations are not enough. And when these opportunities are not bridged, additional opportunities fall by the wayside across the IT environment.

Technology Lifecycle Management

One of the most interesting trends of 2024 has been the FinOps Foundation’s initial steps into software management. As cloud FinOps starts entering the already-established worlds of SaaS management and network management, it will be interesting to see both where cloud FinOps’ comfort zone of massive usage and product tradeoffs help the more static worlds of software and telecom as well as where FinOps’ traditional struggles with business taxonomy, detailed sub-user chargebacks, and lack of contract detail start to push against the issues that you, I, and the rest of the IT world have been dealing with for the past 15+ years. Unlike Cloud FinOps, Software FinOps and Telecom FinOps have a long history of multi-user monitoring, usage, and cost management and to avoid cooperating with end-user requests for any type of market-wide billing or usage standardization.

For the past several months, I’ve been working on my SmartList of IT FinOps vendors (thank you to all the vendors and customers for your participation!) with a eye towards looking at vendors focused on bridging gaps between cloud FinOps and the rest of the IT world. Out of the 300+ vendors I look at from an IT expense lifecycle perspective, I’ve narrowed the list down to 15 vendors that I think are really doing something different, which will be our Distinguished Vendors. But I am also starting to find some interesting trends that make these distinguished vendors different from the extremely crowded portfolio of options that IT departments face.

Before getting to those, let’s just define what is not considered differentiated in 2024. Simply ingesting bills is not good enough. Being customer-centric and having attention to detail are considered table stakes if you cannot provide customers that vouch for your approach being quantitatively better than other competitors. Everybody I cover can support tagging. Cross-charging is a standard enterprise ask in RfX activity. Basic dashboards and analytics are standard (and if you haven’t chosen a high-performance analytics solution like Sisense or Sigma or Qrvey, you’re probably behind for supporting real-time changes). And everyone is competing against 2020s-era design standards for SaaS as a standard, especially with the flood of money that has gone into the data and code-centric Third Wave of FinOps.

First, as expected, top vendors are often finding now that they are the second or third solution chosen at the enterprise level. IT buyers have often focused on the “up and to the right” vendor landscape too much in their purchase of FinOps and IT expense management solutions with the assumption that these are commoditized solutions rather than the financial window to the pulse of the digital business. Although every business today likes to talk about how they have “digitally transformed” and are “data-driven,” the truth is that companies have not fully embraced data and digital business until the actual cost of data infrastructure, delivery, and data-related customer activities can be finally categorized and calculated. And without FinOps and IT expense solutions, the comparative data simply isn’t there at the bill of material (BOM) or component level that we take for granted in manufacturing or service level. A digital business lacking formal IT FinOps is like managing a hospital without knowing how many procedures are being done or a discrete manufacturing company not knowing how many parts it uses.

Second, there is a massive effort to utilize and translate tagging efforts into standard business categories. The FinOps insistence on tagging service elements across infrastructure and platform without alignment to larger corporate or IT frameworks is starting to collapse into its own form of technical debt. The combination of poor data quality, inconsistent or idiosyncratic tagging, poor mapping to existing categories, and lack of integration with existing birthright and foundational enterprise applications has led to the need for better metadata definition and mapping. Of course, the goal here is not simply to create a pristine metadata environment (although I do love well defined taxonomies and ontologies!), but to deeply align IT to business so that product, service, and revenue managers know which technologies are vital to their work.

Third, data integrations and a unified data layer are increasingly important across vendors. One of the most salient and welcome aspects of the latest wave of FinOps solutions is the data layer that provides visibility across hyperscalers, data clouds such as Databricks, Snowflake, and Cloudera, as well as observability solutions such as Datadog. From a tactical perspective, this data ingestion helps cloud architects and digital business leaders to track costs. But it also helps set up the FinOps practitioner as a central player in managing the business aspects of digital behavior. The cost of accessing, processing, and utilizing data will only increase with the emergence of AI as a new massive spend area within IT. And although this cost is under the direct supervision of the CTO and CFO right now in many cases, it will all eventually filter down to some level of IT FinOps as the complexity of these ecosystems becomes too immense. Many of today’s top solutions are proactively setting themselves to be this data layer for supporting the future of IT activity.

Fourth, the tradeoffs between defined hyperscalers, defined on-premises services, virtualized services, and containerized services continue to be a challenge and the current answer is often to split each of these categories into a separate management solution. This is not a sustainable approach and Amalgam Insights both expects and encourages market consolidation so that FinOps professionals can see more of their infrastructure and platform investments under the same umbrella.

Fifth, everybody likes to talk about “cloud economics” while ignoring the “economics” part of the puzzle. There is a lot of focus on the mathematical aspects of large scale optimization of usage. And I get it. Techies love working with big problems and algorithmic fixes and finding clever ways to discover null values and aggregating pennies into dollars. This skill set is often what makes technology contributors invaluable both in developing architecture and in root-cause analysis for large enterprise challenges. But it is only a piece of the puzzle when it comes to aligning the financial health of the enterprise with digital and cloud activity. At some point, this optimization needs to be tied to the less exciting tasks of invoice processing, cross-checking billing rates with existing rates and discounts, direct product tradeoffs both within and across hyperscaler providers, comparing contract terms, enforcing contracted KPIs and timeframes, and aligning cloud activity to new accounting rules and tax credits. All of this is part of the microeconomics of cloud. Simply looking at usage optimization makes you a unit-specific beancounter. A true cloud economist needs to understand how the cost of cloud shapes the rest of the business and how it needs to be structured, reinforced, and defined based on all business forces.

Sixth, the cost of IT FinOps is changing rapidly. The first generation of cloud FinOps solutions charged similarly to software management and telecom management vendors where enterprise spend was based on a percentage of spend. But the problem is that these approaches started to outgrow their value for clients that grew their cloud spend to $50 million or $100 million and literally realized they could build their own solution and support it in perpetuity. We have seen solutions like Capital One Slingshot or Netflix’s development of NetflixOSS Ice, now supported by Teevity based on corporate efforts that became commercial products. So, there is a lot of pressure to drive down the cost of IT FinOps back to a flat license rate or user-based pricing once spend gets to an enterprise-tier. This pressure is exacerbated by the vendor sprawl across FinOps. For vendors that are product-based, this will continue to be a trend while companies shifting to a managed services approach will be able to maintain pricing based on the overall maintenance of the FinOps environment across billing, accounting, optimization, procurement, vendor relationships, governance, and IT-business alignment.

Those are some of the big trends I’ve been seeing so far over the last several months. There is a lot of nuance here, which I’m looking forward to digging into as I finalize the FinOps SmartList and get to highlight the Distinguished Vendors: the top 5% of companies that stand out both in their results and their differentiation. Is there anything you think I missed? Or do you want to talk more about either your FinOps product or your current FinOps RfP work? If so, get in touch with me at briefings@amalgaminsights.com.

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Zluri Raises a $20 Million Series B Round: Is it Enough for the Crowded SaaS Management Market?

Companies Mentioned:

Accel, Apptio, Atlassian Ventures, Bain Capital Ventures, Baird Capital, Bessemer Venture Partners, BetterCloud, Blissfully, Calero, Canaan Partners, Cleanshelf, Cloudability, Coupa Ventures, Craft Ventures, e.ventures, Endiya Partners, Entrée Capital, Flybridge Capital Partners, Founder Collective, F-Prime Capital, Global Founders Capital, Greycroft, High Alpha, Intello, IVP, Kalaari Capital, LeanIX, MassMutual Ventures, Menlo Ventures, New Amsterdam Growth Capital, Norwest Venture Partners, Okta Ventures, Productiv, SailPoint, Scopus Capital, Shine, SoftBank, Sound Ventures, Sozo Ventures, Spring Lake Equity Partners, Tangoe, Tiger Global, Tropic, Uncork Capital, Vendr, Vista Equity Partners, Warburg Pincus, Wing Venture Capital, Y Combinator, Zluri, Zylo

Key Stakeholders:
Chief Information Officers, Chief Technology Officers, Chief Financial Officers, Finance and Accounts Payable Directors and Managers, Procurement Directors, Technology Expense Directors and Managers, FinOps Directors and Managers, IT Architects, Vice President/Director/Manager of IT Operations, Product Managers, IT Sourcing Directors and Managers, IT Procurement Directors and Managers, SaaS Expense Managers, Sales Operations Managers, Marketing Operations Managers.

Why It Matters:
SaaS (Software as a Service) Operations is a hot market where vendors have collectively received over $1 billion in investments. End user organizations are seeking to manage $250 billion in annual spend associated with SaaS subscriptions, which can often be scattered over 1,000 apps in large multi-national enterprises. Even a relatively small 500-person organization can expect to have over 200 apps under management. This combination of vendor sprawl, shadow IT, and governance challenges are quickly forcing businesses to realize that they require SaaS governance across sourcing, spend, access, inventory, and security. With this $20 million Series B round, Zluri enters this fray in earnest in making its automation platform more accessible to the SaaS management market.

Top Takeaway:
Zluri is an Amalgam Insights recommended vendor for automating service orders, managing onboarding and offboarding, monitoring app usage, and managing SaaS spend. It fills multiple core responsibilities within the Amalgam Insights Technology Lifecycle Management relative to SaaS and should be considered by companies seeking to support SaaS environments with over $1 million in total annual spend or with over 100 separate app vendors under management.

Zluri Raises a $20 Million Series B Round

On July 13, 2023, Zluri, a SaaS operations platform, announced a $20 million Series B round headed by Lightspeed with additional participation from existing investors including MassMutual Ventures, Endiya Partners, and Kalaari Capital.

This funding occurs in context of a breadth of investment in managing the operations and procurement of SaaS including the following funding investments and product launches:

  • Feb 2023 – Zylo raises a $5 million round on top of a $31 million Series C round in December 2022.
    Investors include: Baird Capital, Bessemer Venture Partners, Coupa Ventures, High Alpha, Menlo Ventures, Spring Lake Equity Partners,
  • November 2022 – Tangoe announces addition of SaaS management to TangoeOne platform
  • June 2022 – BetterCloud, a SaaS management firm, sells a majority stake to Vista Equity Partners after raising $187 milion over six rounds.
    Previous Investors included: Warburg Pincus, Accel, Bain Capital Ventures, e.ventures, Flybridge Capital Partners, Greycroft, New Amsterdam Growth Capital
  • June 2022 – Vendr raises $150M Series B to support its SaaS buying platform
    Investors include Craft Venturs, SoftBank, Sozo Ventures, F-Prime Capital, Sound Ventures, Tiger Global, Y Combinator
  • April 2022 – Calero (technology expense management vendor managing over $25 billion in tech spend) announces a SaaS expense management solution
  • February 2022 – Vendr acquires Blissfully to add cost management and data offerings.
  • February 2022 – Tropic raises $40M Series B from Insight Partners to improve SaaS procurement, a round that occured four months after a Series A round from Canaan Partners, Founder Collective and Shine
  • February 2022 – Torii raises a $50M Series B round led by Tiger Global
    Investors include Tiger Global, Entree Capital, Global Founders Capital, Scopus Capital, Uncork Capital, and Wing Venture Capital
  • March 2021 – Enterprise Architcture Management company LeanIX acquires Cleanshelf
  • March 2021 – Productiv raises $45M Series C to support SaaS expense management
    Investors include IVP, Accel, Atlassian Ventures, Norwest Venture Partners, Okta Ventures
  • February 2021- SailPoint acquires Intello for $43 million
  • November 2020 – Apptio (IT financial management and Cloud FinOps provider) announced Cloudability SaaS for SaaS discovery and spend management

Suffice it to say that the SaaS management market is both a hot market and one that requires both funding and a high quality offering to be competitive. Top tier venture capital and private equity firms have made one or more investments in this space already. But at the same time, one of the concerns that Zluri does not have to worry about is that this market is an actual market. One of the biggest concerns an analyst typically has about a new market is whether it is real or not and backed by customers, revenue, and market competitors. The SaaS Management market has proven this to be true, both in the quantity and quality of offerings in place.

This said, does Zluri match up with the vendors at large and does it have a competitive niche in this complex market?

About Zluri

Amalgam Insights has spoken with Zluri executives multiple times in the past couple of years as we have explored SaaS management and SaaSOps as a part of our overall Technology Lifecycle Management umbrella. In doing so, we have found so far that key differentiating points include:
• Workflow automation to support app discovery and orders
• Activity-based insight into SaaS usage and spending
• Identity management to audit access and automate onboarding and offboarding

As one of the newer SaaS management solutions that Amalgam Insights covers, founded in 2020 in Bangalore, Zluri has a software solution that currently lacks legacy technical debt issues and is built with a current and modern user interface. Amalgam Insights finds it interesting that Zluri was founded in India, as India has traditionally been an area that has supported much of the help desk, service order, invoice processing, and optimization work associated with telecom expense and cloud FinOps work on behalf of US-owned companies. This company represents a shift in seeing Indian entrepreneurs directly owning the company while also being close to a significant center of the technology lifecycle management value chain. This location also means that Zluri has some cost structure advantages compared to most of its competitors started either in the United States or Israel. And its focus on automating SaaS-related processes and workflows provides a strong foundation towards providing not only the operational support to manage SaaS, but also the lineage and t that are needed to trace how and when specific changes were made to a SaaS account.

Zluri’s offering is compelling enough to win business even as it faces the competition listed above. Amalgam Insights estimates that Zluri currently has around 250 customers and over 200 employees, which is in line with the recent funding round that was announced. However, the capital raised in this Series B round is obviously necessary to gain market share in the 100 – 5,000 employee mid-market where Zluri has succeeded to this point. Even in today’s era of product-led growth, some level of market visibility is needed to support go-to-market solutions, especially in a market where Amalgam Insights has tracked total investment that approaches $1 billion.

Amalgam Insights believes that, though Zluri has a competitive and differentiated product that matches up well with current trends in automation and workflow management that will align well with the current megatrend of Generative AI, its biggest challenge is currently in market visibility where the other companies that Amalgam Insights has mentioned have all made inroads with enterprise buyers, channel partners, consultants, and industry associations relevant to the buying cycle of SaaS.

Recommendations to the IT Expense Community

First, in seeking a SaaS management solution, Amalgam Insights always recommends thinking about the full Technology Lifecycle that goes across sourcing, procurement, expense management, vendor management, resource optimization, compliance, and security. SaaS management and SaaS operations are currently fragmented markets where it is hard to find a single vendor that is strong in all of these areas.

The Amalgam Insights Model for Technology Lifecycle Management

Second, in managing this SaaS lifecycle, look for automation and for skill sets that may fall outside of your organization’s core management or sourcing skills. SaaS can be a complicated and complex spend category, especially as large multi-billion dollar enterprises can expect to manage 1,000 apps at this point across both formal and “Bring Your Own” expensed apps that may hide in a corporate credit card or a phone bill.

Third, expect to see Zluri show up more frequently in your due diligence of SaaS management solutions. Amalgam Insights currently recommends Zluri as a solution to manage SaaS costs, support service orders and onboarding through native workflow automation, and to support application discovery, especially in disaggregated environments. And in our research, we have found that Zluri is a solution that wins deals in the majority of competitive evaluations that Amalgam Insights has seen, which indicates alignment with current customer needs. With this funding round, Zluri now is prepared to compete for its fair share of opportunities in a market that is both deep in competitors and in demand from enterprises seeking to control over $200 billion in annual SaaS spend.

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IBM Plans to Acquire IT Financial Management Leader Apptio: Consequences for the Enterprise IT Market

On June 26, 2023, IBM announced its intention to acquire IT Financial Management vendor Apptio for 4.6 billion dollars. This acquisition is intended to support IBM’s ability to support IT automation and business value documentation. With this acquisition comes the big question: is this acquisition good for IBM and Apptio customers? Who benefits most from this acquisition?

As an industry analyst who has covered the IT expense management space and first coined the Technology Expense Management and Technology Lifecycle Management terms as evolutions of the IT Asset Management and Telecom Expense Management markets, I’ve been looking at these markets and vendors for the past 15 years. In that time, IBM has gone through a variety of investments in the Technology Lifecycle Management space to manage the assets, projects, and costs associated with IT environments and Apptio has evolved from a nascent startup to a market leader.

When Amalgam Insights is asked “What do you think of IBM’s acquisition of Apptio,” this opinion requires exploring the back story and starting points for consideration as there is much more to this acquisition than simply stating that this is “good” or “bad.” Apptio is a market-leading vendor across IT financial management, SaaS Management, Cloud Cost Management (where Apptio is a current Amalgam Insights Distinguished Vendor), and Project Management. But there is a multi-decade history leading up to this acquisition, including both IBM’s pursuit of Technology Lifecycle Management solutions and Apptio’s long road to becoming a market leader in IT financial management.

Contextualizing the Acquisition

To understand this acquisition in its full context, let’s explore a partial timeline of the IBM, IBM partner, and Apptio journeys to get to this point:

1996 – IBM purchases Tivoli Systems for $743 million (approximately $1.4 billion in 2023 dollars) to substantially enter the IT asset management and monitoring business. Tivoli goes to become a market standard for IT asset management.

2002 – IBM acquires Rational Software for $2.1 billion to support software development and monitoring.

2007 – Apptio is founded as an IT financial management solution to support the planning, budgeting, and forecasting needs of CIOs and CFOs seeking to better understand their holistic IT ecosystem. At the time, it is seen as a niche capability compared to Tivoli’s broad set of functionalities but is still seen as promising enough to attract Andreessen Horowitz’ attention as their first investment back in 2009.

February 2012 – IBM acquires Emptoris, which includes a leading telecom expense management called Rivermine, to support sourcing, inventory management, and supply chain management as part of its Smarter Commerce initiative.

May 2015 – IBM Divests Rivermine operations, selling off the technology expense management business unit to Tangoe. Tangoe uses the customization of the Rivermine platform to support complex IT expense and payment management environments for large enterprises.

November 2015 – IBM acquires Gravitant, a hybrid cloud brokerage solution used to help companies to purchase cloud computing services across cloud environments. Later renamed IBM Cloud Brokerage, this capability was intended to support IBM’s Global Technology Services unit in supporting multi-cloud and complex enterprise hybrid cloud environments. This acquisition logic ended up being accurate in the long run, but was too early considering that the multi-cloud era is really only beginning now in the 2020s.

December 2018 – HCL purchases a variety of IBM software products for $1.8 billion, including Appscan and BigFix. Although these Rational and Tivoli products provided enterprise value for many years, they eventually became outdated and seen as legacy monitoring products.

January 2019 – Apptio is acquired by Vista Equity Partners for $1.94 billion. At the time, I thought this was a bargain even though it was a 53% premium to the trading price at the time. At the time, Apptio had gone through a rapid stock price fall due to some public market overreaction and Vista Equity came in with a strong offering that pleased institutional investors. With investments in IT and financial software companies including Bettercloud, JAMF, Trintech, and Vena, Vista Equity was seen as an experienced buyer capable of providing value to Apptio.

May 2019 – Apptio acquires Cloudability, entering the cloud cost management or Cloud FinOps (Financial Operations) space. With this acquisition, Apptio answered one of my long-time criticisms of the vendor, that it did not directly manage IT spend after holding out on directly managing a trillion dollars of enterprise telecom, network, and mobility spend. This transaction put visibility to $9 billion in multi-cloud spend across the Big 3 providers under Apptio’s supervision while maintaining Apptio’s vendor-neutral approach to IT finances.

December 2020 – IT Asset Management vendor Flexera is acquired by private equity firm Thoma Bravo. Over the next couple of years, Flexera develops a strong relationship with IBM to support IT Asset Management.

December 2020 – IBM acquires Instana to support observability and Application Performance Management. As real-time continuity, remediation, and observability have become increasingly important for monitoring the health of enterprise IT, this acquisition provides a crucial granular perspective for IBM clients.

February 2021 – Apptio acquires Targetprocess to support agile product and portfolio management. The ability to plan and budget projects and products allows Apptio to support IT at a more granular, contingent, and business-contextual level.

June 2021 – IBM acquires Turbonomic, an application resource, network performance, and cloud resource management solution. With this acquisition, IBM enters the FinOps space. In our 2022 Cloud Cost and Optimization SmartList, we listed IBM Turbonomic as a Distinguished Vendor noting that it focused “on application performance” and that the “software learns from organizations’ actions, so recommendations improve over time.”

October 2022 – Flexera One with IBM Observability aggregates cloud spend across multiple clouds. This offering combined with Flexera One’s status as an IBM partner gives IBM customers an option for multi-cloud spend management and the ability to purchase cost optimization based on cloud spend.

June 2023 – We come back to the present day, when IBM has agreed to purchase Apptio. So, now we are seeing a trend where IBM has invested in IT management solutions over the past couple of decades but has struggled to maintain market-leading status in those applications over time for a variety of reasons: market timing, market shifts, strategic positioning.

Concerns and Considerations

What is happening here? The problem isn’t that IBM is targeting bad companies, as IBM has consistently chosen top-tier companies and strong enterprise-grade solutions. This trend continues with Apptio, which has managed over 450 billion dollars in IT spend and provides a statistically significant lens for IT spend trends across a wide variety of vertical trends and geographies. From an acquisition perspective, Apptio makes perfect sense as a market leading solution executing on sales, marketing, and targeted inorganic growth to provide financial visibility and operational automation across global IT departments.

And the problem is not a lack of interest, as IBM has consistently targeted IT sourcing, expense, and performance management solutions with some success. IBM usually knows what it is trying to accomplish in purchasing solutions (with the exception of the missed Rivermine opportunity) and has done a good job of identifying where it needs to go next. As an example, IBM was early, perhaps too early, in pursuing multi-cloud brokerage services but in retrospect there is no doubt that multi-cloud management was the future of IT.

Based on my long market perspective of the Technology Lifecycle Management market, I think IBM has run into two main issues in this market: market size and partnership opportunities.

First, look at market size. This Technology Lifecycle Management market simply has not traditionally been an extremely large multi-billion dollar market on the scale of analytics, mainframes, or services. ITFM and related IT cost management services will always struggle to be much larger than a couple of billion dollars in revenue, as proven by market leaders across IT finance and cost such as Apptio, Tangoe, Calero, Zylo, Cass Information Systems, Flexera, Snow Software, CloudHealth (now VMware Aria), and Spot by NetApp. All of these solutions have grown to the point of managing billions of dollars, but none of these standalone businesses or business units have come close to reaching a billion dollars in annual recurring revenue. This is not an issue, other than that it is traditionally hard for behemoth global enterprises with $100 billion+ in annual revenue expectations to be fully committed to businesses of this size without trying to turn them into “larger” solutions that often lose focus.

A second issue is that IBM has a lot of internal pressure to play nicely with partners. The recent Flexera One partnership announcements are a good example where Flexera has quickly emerged as a strong partner to support IT asset management and multi-cloud cost management challenges and now will have to be rationalized in context of the capabilities that Apptio brings to market once this acquisition is completed. But when IBM has made commitments and plans to build significant services practices around a large partnership, it can be difficult to shift away from those plans no matter how significant the acquisition is. The challenge here is that even if the direct software revenue may pale in comparison to the services wrapped around it, the service revenue is still dependent on the quality of software used to provide services.

And despite any internal concerns about these issues, this is not a deal that Apptio and Vista Equity could refuse. The basic math here of adding $2.66 billion in market value in 4 and a half years, or roughly $600 million per year (minus the cost of acquisitions) is a no-brainer decision. Anyone who did not seriously consider this transaction would be considered negligent.

In addition, there are good reasons for Apptio to join a larger organization. There are limits to the organic development that Apptio can pursue across the Technology Lifecycle Management cycle across sourcing, observability, contingent resources and services, continuity planning, and MACH (Microservices, APIs, Cloud-Native, Headless) architecture support compared to what IBM (including Red Hat OpenShift and IBM Consulting) can provide. And IBM is obviously still a core provider when it comes to global IT support with a vested interest in helping global enterprises and highly regulated organizations with their IT planning capabilities.

Recommendations

So, what does this mean for IBM and Apptio customers? This is a nuanced decision where every current client will have specific exceptions associated with the customization of their IT portfolio. But here are some general starting points that we are providing as guidelines to consider this transaction.

For IBM: this is an acquisition where IBM is making a good decision, but success is not guaranteed just because of choosing the right vendor in the right space. There will be additional work needed to rationalize Apptio’s portfolio in light of how Turbonomic goes to market and how the Flexera One  partnership is currently structured, just as a starting point. Amalgam Insights hopes that Apptio will be the umbrella brand for IT oversight in the near future as IBM Rational, IBM Tivoli, and IBM Lotus served as strong brands and focal points. IBM already has a variety of cloud and AIOps capabilities across Turbonomic, Instana, and Red Hat Openshift management tools for Apptio to serve both a FinOps and CloudOps hub as well as a strong go-to-market brand.

There is room for mutual success in this vision, as Flexera One’s ITAM capabilities are outside the scope of Apptio’s core concerns. This does likely mean that Flexera’s cloud cost capabilities will be shelved in favor of Apptio Cloudability and this needs to be a commitment. IBM needs to be a bit more greedy when it comes to supporting its direct software products than it traditionally has been over the last decade in maintaining the best-in-breed capabilities that Apptio is bringing to market, as the talent and vision of the current Apptio team is a significant portion of the value being acquired. IBM can be a challenging environment for software solutions, as every decision is seen through a multitude of lenses with the goal of finding some level of consensus across a variety of conflicting stakeholders. As this balance is sought, Amalgam Insights hopes that IBM focuses on building its direct software business and keeping Apptio’s finance, cost, and project management capabilities at a market-leadership level that will be championed by customers and analysts, even if this comes at the cost of growing partnerships. It can be easy for IBM software solutions to get the short shrift as its direct revenue can sometimes pale in comparison to larger services contracts, but the newest generation of IT to support new data stacks, hybrid cloud, and AI-enabled decisions and generative assets is in its infancy and IBM has acquired both solutions and a product and service team prepared to take this challenge head-on.

For Apptio: The past five years have been a strong validation of the continued opportunities that exist in IT Financial Management across hybrid cloud, software, and project management. There are still massive opportunities in contingent labor and traditional telecom and data center cost management markets as well as the opportunity to get more granular with API, transactional logs, and technological behavior that can be used to align the cost, budget, and health of the IT ecosystem. Amalgam Insights hopes that Apptio is treated similarly to Red Hat as a growth engine for the company and that Apptio has the operational flexibility to continue operating on its current path, but with more ambition matching the scale of IBM’s technology relationships and goals of solving the world’s biggest challenges.

For Apptio customers: You are working with a market leader in some area of IT finance or multi-vendor public cloud management and should hold fast on demands to retain the tech and support structure currently in place. As you move to IBM contractual terms, make sure that Apptio-related service terms, commitments, and responsibilities stay in place. This is an area where Amalgam Insights expects that the Technology Business Council will prove useful as a collective voice of executive demands to drive future Apptio development and evolution. Be aware that there are additional stakeholders at the table when it comes to the future of Apptio and it will be increasingly important for direct Apptio customers to maintain and increase demands in light of the increased complexity that will inevitably become part of the management of Apptio.

For IBM customers: You are likely already an Apptio customer based on Apptio’s current client base: there was a lot of overlap and synergy between the customer bases. But if not, this is a good time to evaluate Apptio as part of the overall IBM relationship as a dedicated solution for finance and cost management. In doing so, get IBM executive commitment regarding core features and functionality that will be strategically important for aligning IT activity to business growth. To deal with the cliches that every company is now a “software company” or a “data-driven company,” companies must have strong financial controls over the technology components that drive corporate change. At the same time, it is important to maintain a best-in-breed approach rather than be locked into an aging ERP-like experience as many companies experienced over the past decade.

These considerations are all a starting point for how to take action as IBM moves towards acquiring Apptio. Amalgam Insights expects there should be little to no concern with the acquisition moving forward as it is both mutually beneficial to all parties and lacks any sort of monopoly or antitrust issue that has slowed down larger acquisitions.

If you are seeking additional guidance to more granular aspects of considering Apptio, Flexera, IBM Turbonomic or other vendors in the IT finance, cloud FinOps, SaaS Management, or other related Technology Lifecycle Management topics, please feel free to contact Amalgam Insights to schedule an inquiry or to schedule briefing time.

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Cloud Cost Management Vendor Profile: IBM Turbonomic

Amalgam Insights continues to present its list of Distinguished Vendors for Cloud Cost and Optimization Management. This matters because analysts assessed nearly 30 providers for this effort; only a third were able to demonstrate genuine differentiators and approaches that satisfied Amalgam Insights’ requirements for achieving Distinguished Vendor status. To that point, we already have posted profiles on SADA, Spot by NetApp, Apptio Cloudability, Yotascale, Kion, and CAST AI . We next discuss IBM Turbonomic.

WHY IBM TURBONOMIC FOR CLOUD COST AND OPTIMIZATION MANAGEMENT

  • Focus on application performance, which leads to savings
  • Platform configuration is automated, saving IT time and effort during deployment
  • Software learns from organizations’ actions, so recommendations improve over time

ABOUT IBM TURBONOMIC

IBM Turbonomic is an Amalgam Insights Distinguished Vendor for Cloud Cost and Optimization Management. Founded in 2009, Turbonomic was acquired by IBM in 2021. IBM Turbonomic now acts as Big Blue’s solution to ensure application performance and governance across cloud environments, including public and private. Turbonomic has two offices in the United States — its headquarters in Boston and a satellite location in Newark, Delaware — as well as one in the UK and another in Canada. IBM does not publicly disclose how many Turbonomic employees it has, nor does it break out Turbonomic annual revenue or provide customer retention rates.

In terms of cloud spend under management, Turbonomic states that it does not track the amount of money its clients spend on cloud computing. Turbonomic serves Fortune 2000 customers across industries including finance, insurance, and healthcare. Turbonomic is typically considered by organizations that have at least 1,000 cloud instances or virtual machines; many support tens of thousands.

IBM TURBONOMIC’S OFFERING

IBM Turbonomic Application Resource Management targets application performance and governance throughout an organization’s cloud environment, which can include public cloud (Amazon Web Services, Microsoft Azure, Google Cloud), private cloud (IBM, VMware), and multi-cloud environments.

The platform optimizes cloud computing, storage, database as a service, reserved instances, and Kubernetes, but does not currently address spot instances). Furthermore, it optimizes and scales based on IOPs (input/output), reservations, and discounts. Overall, IBM Turbonomic aims to ensure spend aligns to applications, preventing cost overruns and keeping applications performing optimally. While Turbonomic mainly serves IT users, Turbonomic recently teamed with Flexera to add a detailed cost-reporting module that appeals to Financial Operations (FinOps) experts.

IBM Turbonomic charges for its cloud application optimization software based on the number of resources under management. Rather than offering individual add-on capabilities, IBM Turbonomic lets clients choose more advanced capabilities by buying different licensing tiers associated with integrations to other software and processes such as IT service management, orchestrators, and application performance management. IBM Turbonomic includes technical support with all tiers. IBM Turbonomic and its third-party channel partners offer professional services as needed.

IBM Turbonomic states that its top differentiator originates from artificial intelligence that matches application demand to underlying infrastructure supply at every layer of the stack continuously in real-time with automatable resourcing decisions. As more organizations use IBM Turbonomic, the automated recommendations provided to all of its customers improve. Cloud administrators gain insight into suggested actions, such as investments to enhance performance and save money.

IBM Turbonomic Application Resource Management is delivered as software-as-a-service. It works across public, private, containerized, and bare metal cloud environments. IBM Turbonomic’s reference customers include Providence Health, which has 120,000 employees; Litehouse Foods, which makes salad dressing, cheese, and other foods; and apparel maker Carhartt.

COMPETITION AND COMPETITIVE POSITIONING

IBM Turbonomic mainly competes against organizations’ in-house spreadsheets and mix of tools that are specific to the technologies in use. In these cases, IBM Turbonomic finds that organizations are over-provisioning cloud computing resources in the hopes of mitigating risk. Therefore, they are spending too much and only addressing application performance when something goes wrong.

IBM Turbonomic also often faces VMware CloudHealth in its prospective deals.

IBM Turbonomic states that it draws customers because of automation and recommendations that tend to result in the following business outcomes:

  • Reduction of public cloud spend by 30%
  • Increase in team productivity by 35%
  • Improvement of application performance by 20%
  • Increase in speed to market by 40%

IBM TURBONOMIC’S PLANS FOR THE FUTURE

IBM Turbonomic keeps its roadmap private, so details about upcoming enhancements are not public. However, Amalgam Insights believes that IBM Turbonomic will pursue improvements in sustainability reporting and GitOps resizing in the near future, and may soon pursue a deeper relationship with Microsoft Azure, given that three of these areas are of interest to IBM Turbonomic’s current client base.

AMALGAM INSIGHTS RECOMMENDATIONS

Amalgam Insights recommends that organizations with a minimum of 1,000 cloud instances or virtual machines, and residing within the Fortune 2000, consider IBM Turbonomic Application Resource Management.

Because the platform automatically configures during deployment, provides ongoing recommendations for application and cloud-configuration improvement, and continues to learn from users’ actions, organizations can observe how cloud environments are continuously optimized. This allows IT teams to support cloud consumption needs while also ensuring the organization does not overpay or underresource. In addition, FinOps professionals gain the information they need to track and budget digital transformation efforts without burdening their IT counterparts.

Combined, these capabilities are critical to organizations’ goals of delivering stewardship over their cloud environments while maintaining fiscal responsibility that best serves shareholders, investors, and staff.

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Cloud Cost Management Vendor Profile: CAST AI

Cast AI - Amalgam Insights' 2022 Distinguished Vendor for Cloud Cost Management

Managing cloud infrastructure is no easy task, especially when containers such as Kubernetes come into play. In our ongoing effort to help organizations understand what they need to do to make the most of their cloud environments, Amalgam Insights this year briefed with a number of management and optimization vendors. We continue to publish our findings, which include analyst guidance complete with a series of vendor profiles. This installment focuses on CAST AI, a company that takes a different approach to cloud cost and optimization management by homing in on containers. Read on to learn why that is so important and to understand Amalgam Insights’ resulting recommendations for enterprises.

WHY CAST AI FOR COST CLOUD COST AND OPTIMIZATION MANAGEMENT

  • Optimizes Kubernetes containers on a continuous basis
  • Company claims to save users an average of 63% on cloud bills
  • Cost reporting and cluster analysis provided as a free service

ABOUT CAST AI

CAST AI is an Amalgam Insights Distinguished Vendor for Cloud Cost and Optimization Management. Founded in 2019, Miami-headquartered CAST AI employs 60 people in Florida and Lithuania. It raised $10 million in Series A funding in fall of 2021, following its $7.7 million seed round in late 2020. CAST AI does not look for a specific customer size; some of its users have fewer than two dozen virtual machines, while others run thousands. The privately held firm does not disclose annual revenue or how much cloud spend it manages.

CAST AI’S OFFERING

CAST AI automates and optimizes Kubernetes environments on Amazon Web Services (AWS) Elastic Kubernetes Service, kOps running on AWS, Microsoft Azure Kubernetes Service, and Google Cloud Platform Google Kubernetes Service as well as Kubernetes clusters running directly on CAST AI.

Cast AI users — who typically are DevOps (Development Operations) experts — may run cost reporting that includes cluster analysis and recommendations. FinOps (Financial Operations) professionals can take the reporting results and incorporate them into their practices.

The CAST AI engine goes beyond cost reporting to rearrange Kubernetes environments for the most effective outcomes. To do this, CAST AI connects to a specified app, then runs a script that installs agents to collect information about the app. After that, a report pops up that can provide recommendations for reducing the number of Kubernetes machines or changing to a different compute platform with less memory, all to cut down on cost.

If a user accepts CAST AI’s recommendations, he or she can click a button to optimize the environment in real time. This button sets off a continuous optimization function to give orders to Amazon Elastic Kubernetes Service (EKS), Google Kubernetes Engine (GKE), or Azure Kubernetes Service (AKS) to rearrange itself, such as autoscaling in real time and rebalancing clusters. Users set their desired automation and alerting thresholds. CAST AI pings the app every 15 seconds and produces an hourly graph. CAST AI claims its users save an average of 63% on their cloud bills.

Pricing for CAST AI varies. CAST AI does not enforce a minimum spend requirement. Rather, it charges by the number of active, optimized CPUs. That starts at $5 per CPU per month and there are tiered discounts from 1-5,000 CPUs, then 5,001-15,000, and so on. Base subscriptions start at $200 per month and go up to $5,000 per month or more, depending on volume discounts. CAST AI provides cost reporting and cluster analysis for free, with no time limits. Users also can buy cost management as a standalone service.

COMPETITION AND COMPETITIVE POSITIONING

CAST AI competes most frequently against the Ocean platform from Spot by NetApp in competitive deals. For the most part, though, CAST AI “competes” against DevOps professionals trying to reduce cloud costs manually — a difficult and time-consuming effort.

CAST AI finds that it gains customers because of its engine’s ease of use and ability to make changes in real-time. This further frees DevOps experts to focus on innovative projects.

CAST AI goes to market via its website and, in Europe, Asia, and the United States, also through third-party partners.

CAST AI’s reference customers including La Fourche, a French online retailer of organic products, and ecommerce consultancy Snow Commerce.

CAST AI’S PLANS FOR THE FUTURE

CAST AI plans to build an air-gapped version of its engine disconnected from the Internet and fully supported within the customer’s internal environment for private cloud users in vertical markets including government and banking. Because CAST AI collects metadata to optimize Kubernetes environments, CAST AI is working on this capability to support more governed industries and organizations.

AMALGAM INSIGHTS’ RECOMMENDATIONS

Amalgam Insights recommends that organizations with Kubernetes containers try CAST AI’s free trial to understand how the platform might help save money and optimize resources. Although Kubernetes has largely won as the software container of choice in DevOps environments, businesses still have not standardized on strategies to optimize the compute and storage associated with containerized workloads and services. Amalgam Insights believes that Kubernetes optimization should not be a long-term direct responsibility for developers and architects as tools emerge to define the resources that are most appropriate for running containerized applications at any given time.

Organizations worldwide are struggling to control cloud costs, especially as they pursue containerization and cloud refactorization projects associated with digital transformation. Organizations also are cleaning up pandemic-spurred cloud deployments that quickly got out of hand and have proven difficult to keep in line since then. CAST AI’s technology provides an option that DevOps engineers should consider as they seek to tighten and optimize the spend tied to applications containerized in the cloud.

Need More Guidance Now?

Check out Amalgam Insights’ new Vendor SmartList report, Control Your Cloud: Selecting Cloud Cost Management in the Face of Recession, available for purchase. If you want to discuss your Cloud Cost Management challenges, please feel free to schedule time with us.

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Cloud Cost Management Part 4: Why Cloud FinOps Vendors All Sound The Same

Too often, the process of selecting a technology provider — of any kind — unearths more questions than answers. In many instances, vendors’ sales and marketing messages confuse, rather than clarify, because they all sound so similar. This puts IT, procurement, and finance leaders in the frustrating position of trying to identify real differentiators, all while hoping for the best outcomes.

Choosing a cloud computing cost management and optimization vendor offers no exception. As we noted in the third installment in our blog series, most (although not all) of these providers make the same benefits statements to potential customers. So, instead of leaning on hope, Amalgam Insights recommends enterprise buyers use our ongoing guidance to identify important differentiators. We begin by presenting similarities Amalgam Insights has noted in vendor messaging that prove confusing to potential buyers.

4 Areas of Confusing Messaging Among Cloud Cost Management Vendors

Recall that, in the previous blog, we pointed out continuous optimization and automation/artificial intelligence as the first two examples of similarities shared among cloud cost management vendors. The remainder of this installment covers the four additional issues we have pinpointed as challenges for evaluating Cloud FinOps providers. Keeping these aspects in mind will allow executives and line-of-business heads to spot providers’ true differences more easily rather than reinventing the wheel. This will go a long way toward arming organizations with the knowledge needed to develop a vendor selection process that will help narrow down the ideal choice.

1. Container and Service Management

With the emergence of Kubernetes as a mainstream containerization platform, cloud computing can now be deployed more granularly. This makes cost and resource tracking even harder. When a workload is not attached to a specific resource or service, IT has more difficulty assigning it to a project or cost center. Organizations supporting stateless apps need to figure out how to track cloud usage. To meet this challenge, vendors will toss around the buzzphrase “Kubernetes management.” The tracking of containerized compute can be done proactively, optimizing nodes in expectation of workloads or reactive ways that look at the usage. Get insight from the vendor on how they support consumption below the application layer as “container management” is being used in a variety of ways to describe cost, operations, technology, workflow, and/or infrastructure accounting in various ways.

2. Single View of Multiple and Hybrid Clouds

Another commonality among solutions in our Amalgam Insights’ new report, Control Your Cloud: Selecting Cloud Cost Management in the Face of Recession, is that of the single interface. In this report, we focused on cloud cost management and optimization providers that bring together multiple cloud vendors and hybrid cloud resources (e.g., Amazon Web Services, Microsoft Azure, Google Cloud Platform, niche players, private clouds, on-premises hardware) under one roof. Rather than forcing users to access each cloud provider’s interface separately, third-party vendors’ management platforms deliver insight and reporting into each cloud through one portal. This reflects one of the basic benefits of using an independent cloud cost management and optimization platform. A variety of companies in the cloud cost management marketplace are still specialists in one or two cloud platforms. Make sure that your proposed vendor for cloud costs is aligned with your IT architects’ vision for cloud and data center usage.

3. Reporting and Analytics

Every cost management and optimization platform — cloud or not — contains reporting and analytics. The detail to look for is the depth and granularity of analytics, including the out-of-the-box alignment to IT, DevOps, finance, procurement, and other relevant cost and inventory management departments. Analytics can also be supported by algorithmic and machine learning models that help to predict future demand for resources, or that proactively detect potential opportunities for optimization. However, the presence of analytic and reporting capabilities that provide financial and operational visibility into multiple clouds is not in itself a differentiator within the cloud cost management world.

4. Managed and Professional Services

In addition to software, most cloud cost management and optimization vendors offer some level of professional or managed services, as well as help desk. While none of this is unique, the ways in which the services are delivered could be. Organizations will want to vet variances including the following:

  • Hours of Operation
  • Human vs. automated assistance
  • Dedicated or named account resources
  • Cloud provider certifications

Some organizations will require around-the-clock support availability while others will not. Some will have no issue using chatbots to resolve problems while others will want a human. Some will operate well with general assistance while others will opt for personnel dedicated to their account. Finally, some cloud cost management and optimization vendors may not certify all their staff on the various cloud platforms the organization uses.

Knowledge Is Power

Knowing what makes many cloud cost management vendors the same will equip IT, procurement, finance, inventory, and other leaders to pinpoint meaningful differentiators and therefore choose an ideal fit. Amalgam Insights has done much of the footwork for readers. In that spirit, the next blog will cover the key differentiators that analysts have identified among providers. From there, we will publish a number of vendor profiles. Combined, all this information will support organizations’ quests to most ably manage their cloud computing environments, especially as a global recession threatens to hit.

Need More Guidance Now?

Check out Amalgam Insights’ new Vendor SmartList report, Control Your Cloud: Selecting Cloud Cost Management in the Face of Recession, available for purchase. If you want to discuss your Cloud Cost Management challenges, please feel free to schedule time with us.

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An Important Side Note on FinOps and Cloud Economics

Organizations sometimes describe the job of cloud cost management as a “FinOps” role (an abbreviation of “Financial Operations” or “Financial Cloud Operations”) or as a Cloud Economics position. Amalgam Insights finds that there is confusion about these terms. Here’s why.

The common-sense definition of Financial Operations belongs to the Finance team responsible for financial close, budgeting, planning, treasury, tax, and accounting. Meanwhile, the concept of “economics” typically applies to the ecosystem of the production and consumption of value. In many cases, that goes beyond the scope of a standard “cloud economics” role, which focuses on cloud optimization and cost management.

However, in practice, these terms of FinOps and Cloud Economics are often used interchangeably to refer to managing costs, as well as inventory and governance. This is misleading on a variety of levels. The appropriation of “FinOps” to be cloud-specific is confusing enough, especially since a separate “FinOps” is starting to emerge for financial applications used to assist with planning, budgeting, close, consolidation, treasury management, and other financial tasks requiring some strategy, workflow, or collaboration to complete. The Cloud Economics term is a challenge for a different reason: it is an inaccurate term as economics should refer to the financial and business value associated with cloud deployments, including sales bookings and support costs at the microeconomic level and the environmental impact and ecosystem costs at the macroeconomic level. Economics, finance, and accounting are three separate concepts that the IT department needs to understand.

Amalgam Insights acknowledges that this is a common occurrence and hopes this note provides clarity for the reader who may find herself already acting as a “cloud economist” or “FinOps practitioner” based on activity around managing cloud costs while perhaps not being familiar with this terminology. The biggest concern Amalgam Insights has with these inaccurate terms is that the use of these terms may lead to the trivialization of these roles as FinOps or cloud economists are typecast as “cost analysts” rather than personnel who understand the business repercussions of cloud on the business as a whole. Cost analysts are a cost center while business analysts who understand revenue root causes are often a profit center.

In this light, what can FinOps and cloud economics personnel do to avoid being pigeonholed? Here’s Amalgam Insights’ advice.

1) Talk to the finance team in charge of organizing and managing IT costs. Somebody at the finance team has to either articulate the value of IT or rolls IT up into general and administrative costs or cost of goods sold. Understand how IT is categorized in your organization, as cloud may be miscategorized.

2) Understand the full lifecycle of cloud costs. This includes vendor sourcing, contract negotiations, optimization, service rationalization, and the security and governance concerns associated with technology vendor selection. Do not be stuck within one small section of Technology Lifecycle Management within a complex spend category such as cloud unless you are seeking to be commoditized over the next few years.

Finally, understand the economics associated with cloud. ESG (Environmental, Social, and Governance) is an increasingly important and strategic topic for businesses seeking to improve branding and reduce their risk to any operations that may lead to future concerns. If you want to be associated with economics, understand not just the services and technologies supported but their impacts on the environment and to the service provider. This allows you to be a resource not just for IT, but also for the CFO, Chief Strategy Officer, Chief Procurement Officer, and other strategic vendors.

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Calero-MDSL Acquires Network Control to Support Mid-Market TEM Demand

On August 2, 2022, Calero-MDSL announced the acquisition of Network Control, a telecom expense and managed mobility services vendor based in Waverly, Iowa. This acquisition continues the acquisitive streak of Calero-MDSL and increases its status as the largest telecom expense management solution in terms of spend under management.

Network Control provides telecom expense management and managed mobility services. Founded in 1998 and headquartered in Waverly, Iowa, Network Control was privately held with no outside investment. Network Control is owned by Mark Hearn, a long-time TEM executive who purchased the company in 2011. Amalgam Insights estimates that Network Control has roughly doubled in headcount to approximately 100 employees between the 2011 acquisition and the 2022 purchase by Calero-MDSL.

With this acquisition, Calero-MDSL is making greater strides into the mid-market in acquiring a client base that collectively includes over 200,000 devices and $300 million in spend under management over 75 customers. From a pure spend perspective, Network Control does not represent a substantive addition to Calero-MDSL’s estimated $22 billion under management as the largest TEM in terms of spend under management. However, Network Control brings several important skills to Calero-MDSL that will be vital for the continued growth of the combined company.

First, Network Control has shown the ability to consistently win new business in the mid-market enterprise and is known for its retention. In Amalgam Insights’ CIO Guide for Wireless Expense Management, Network Control was listed as one of Amalgam Insights’ Distinguished Vendors based on its 98%+ retention rate for customers, with the majority of account losses over time coming from merger and acquisition activity or from the cessation of business activities. Mid-market enterprises between $1 million and $20 million in annual telecom spend is an increasingly competitive space for the large TEM vendors that are reaching the practical limits of saturation among the Global 2000 where they have traditionally focused. As TEM has become an established business practice over the past 15-20 years, TEM vendors have been able to polish both their software platforms and managed services capabilities and now are better positioned to provide these capabilities downmarket to support the next $200 billion in global mid-market telecom and technology spend that has traditionally been almost a greenfield market.

In addition, Network Control brings strong managed services capabilities for managed mobility, with approximately 100 employees trained in supporting a managed mobility services organization across operations, logistics, sales, and other business functions which will be valuable to Calero-MDSL in bolstering existing managed mobility capabilities. Network Control is known for its flexibility and client-centric focus in bringing new services to clients as well as for the quality of customer service provided.

Network Control also has a sustained record of winning deals against the likes of Tangoe and Sakon, which happen to be two of Calero-MDSL’s largest rivals in the TEM space. In our CIO Guide, we saw that Network Control ran into competitive deals in approximately 80% of their sales, which was indicative both of the relatively educated nature of potential customers and Network Control’s ability to win against larger vendors.

What to Expect?

First, for mid-market businesses between $100 million and $5 billion in annual revenue, expect increased attention from TEM companies seeking your business to manage your telecom spend. They are seeking environments that have been manually managed or managed with spreadsheets and fall under the IT Rule of 30, which states that any unmanaged IT spend category averages 30% in duplication and waste. This will also be a shift for TEM and MMS vendors that have traditionally sold into the mid-market and found that their biggest competition was against the status quo. As this market starts to shift towards what is being called the “mid-market” or the “mid-enterprise,” expect to see more competitive deals. Calero-MDSL has acquired a company that has a history of winning mid-market business against Calero-MDSL’s biggest rivals based on understanding mid-market pain points and service needs. By adding marketing and sales muscle to Network Control’s operational capabilities, Calero-MDSL has an opportunity to support the mid-market in an unprecedented way.

Second, this acquisition looks like it could kick off a second wave of TEM consolidation. In the early 2010s, there was a massive wave of consolidation in the TEM market driven by venture capital-backed vendors seeking exits or running out of funding. In the 2020s, the situation is slightly different as the firms that have remained to this day tend to be privately owned and profitable companies that have established both best practices and processes to support loyal customer bases. We have started to see the acquisition of these private firms with the acquisitions of Vision Wireless and Wireless Analytics by Motus and with this acquisition, but there are at least a half dozen additional firms with strong mid-market experience that would be strong candidates for a similar acquisition or rollup. However, the big caveat here is that any acquisition of these companies needs to be coupled with a strong customer service culture as the mid-market TEMs Amalgam Insights covers frequently average 98% retention or higher with over 100% wallet share; this is a demanding market where technology, services, and client management must be aligned.

Third, this acquisition shows that the cost of acquiring talent is still significant in the TEM world. Calero-MDSL would have needed an extra year to find the volume of high-level talent that they are getting at one time with the acquisition of Network Control. The ability to find personnel with experience in managing the spend and procurement of millions of dollars in annual technology spend is still relatively rare. This skill will become increasingly necessary in the recessionary times that we are currently facing. Companies cannot simply eliminate technology, so they will need to financially reconcile their environments both with in-house and third-party resources. Network Control has proven its ability to maintain a high level of service by maintaining a high staff-to-client ratio, a practice that Amalgam Insights recommends keeping as the relative cost of labor is smaller than the cost of finding a new customer.

Fourth, it is safe to assume that Network Control was purchased for its talent, capabilities, and client base rather than its software platform. Although Network Control’s TEMNet is a functional platform, the amount of investment that Calero-MDSL has put into its platform ensures that customers will eventually be migrated to this platform. As long as this migration is handled carefully, this should not be a challenge. Calero-MDSL has prior experience in migrating clients from previous acquisitions A&B Groep and Comview, among others.

Overall, Amalgam Insights believes that this acquisition will be accretive to Calero-MDSL both in providing greater capacity to support managed mobility services and to learn the demands of mid-market clients from an experienced team. This acquisition also will eventually provide Network Control clients with access to the Calero-MDSL platform, which has been built to support global environments and now also includes Unified Communications as a Service and Software as a Services support. Amalgam Insights believes this acquisition demonstrates Calero-MDSL’s continued commitment to expanding its market share and providing telecom and technology expense savings to a wider clientele of organizations.

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Market Alert: Vendr Raises $150 Million B Round to Help Enterprises Purchase SaaS More Efficiently

On June 16, 2022, Vendr, a SaaS (Software-as-a-Service purchasing platform) announced a $150 million Series B round co-led by prior investor Craft Ventures and novel investor SoftBank Vision Fund 2 and joined by Sozo Ventures, F-Prime Capital, Sound Ventures, Tiger Global, and Y Combinator. The company states that this funding will drive platform enhancements.

Why this funding announcement matters

To fully contextualize this announcement, Amalgam Insights will dig into the context of the macroeconomic issues driving the importance of this announcement, the tactical importance of a SaaS purchasing solution in the Technology Lifecycle Management (TLM), and the nature of the investment compared to other historical funding announcements in the TLM space.

Macro Trends for Corporate Spend Reduction

First, this announcement comes at a time when the United States is facing inflation that approaches double-digits. The current 8.6% inflation rate in this country threatens to devour the average 8.19% net margin that publicly traded companies (excluding financial services) currently achieve. In addition, we are facing a global recessionary trend driven by COVID, supply chain issues, geopolitical strife including the occupation of Ukraine, strained Sino-US relations, inconsistent oil and gas policies, and an excess of money supply created over the past several years. In the face of these global challenges, it is prudent for companies to seek to reduce discretionary costs where it is possible and to shift those costs to strategic growth areas. Traditionally, recessions have been a time when strong companies invest in their core so that they can execute when the economy picks up again.

SaaS as a Strategic and Expanding Complex Spend Category

In this context, SaaS is a massive, but complex, opportunity to cut costs. Amalgam Insights estimates that the SaaS market has grown 25% per year in each of the last two years. Multiple studies show that enterprises that have reached the billion-dollar annual revenue threshold average over 300 apps directly purchased by the organization and over 900 apps running over their networks, either on in-office networks or on employee devices. The hundreds of apps here obviously equate to hundreds, possibly thousands, of accounts and bills that can be consolidated, negotiated, and potentially rationalized to concentrate spend on strategic vendors and gain purchasing power. It is not uncommon to find large enterprises using 20 or more different project management solutions, just to look at one SaaS subcategory.

This rationalization is vital if enterprises are to take the IT Rule of 30 seriously. Amalgam Insights states that the IT Rule of 30 is that any unmanaged IT category averages a 30% opportunity to cut costs. But that 30% requires following the Technology Lifecycle to fully uncover opportunities to cut costs.

Technology Lifecycle Management

The majority of companies that Amalgam Insights speaks to in the IT expense role limit their diligence in IT spend to the right side of this lifecycle including timely bill payment, possibly cross-charging to relevant business entities and cost centers, and right-sizing expenses by finding duplicate or over-provisioned accounts. While this is necessary to execute on the IT Rule of 30, it is not sufficient. In the SaaS space, Amalgam Insights believes there is conservatively a $24 billion spend reduction opportunity globally based on improved SaaS purchasing and negotiations. At the micro level, this equates to a 2 million dollars for the average billion-dollar+ enterprise, with results varying widely based on SaaS adoption (as SaaS only makes up 30% of overall enterprise software spend globally), company size, and level of internal software contract knowledge.

Putting The Investment in Perspective

Amalgam Insights understands the scale of this business opportunity. Even so, this $150 million B round represents a massive round in the Technology Lifecycle Management space. Consider other large funding rounds in this space including:

Zylo’s 2019 $22.5 million B Round for SaaS Management

BetterCloud’s 2020 $75 million F Round for SaaS Management

Productiv’s 2021 $45 million C Round for SaaS Management

Beamy’s 2022 $9 million A Round for European SaaS Management

Torii’s 2022 $50 million B Round for SaaS Management

and looking further across the Technology Management spectrum

Cloudability’s 2016 $24 million B Round for IaaS Management (later acquired by Apptio)

CloudCheckr’s 2017 $50 million A Round for IaaS Management (later acquired by NetApp)

CloudHealth’s 2017 $46 million D Round for IaaS Management (later acquired by VMware)

MOBI’s 2015 $35 million investment round for Managed Mobility (later acquired by Tangoe)

I hasten to add here that more is not always better. But this range of funding rounds is meant to show the amount of investment that typically goes into solutions designed to manage technology expenses, inventory, and sourcing. At first glance, Vendr’s funding round may seem like just another funding announcement in the billions and trillions of dollars involved in the tech sector to those who do not cover this space closely. But as someone who has covered telecom, cloud, and SaaS expense management closely for the last 14 years, this round stands out as a massive investment in this space.

In addition, the investors involved in this round are top-tier including Craft Ventures, where founder and ex-Paypal founder David Sacks has been a proponent of Vendr, and the combination of Tiger Global and Softbank, which may be the two most aggressive funds on the planet in terms of placing big bets on the future. The quality of both smart money and aggressive money in this investment during a quasi-recessionary period speaks to the opportunity that exists here.

What to expect from this round?

The official word from Vendr so far is that this funding round is about data and platform. Vendr acquired SaaS cost and usage monitoring firm Blissfully in February 2022 to bring sourcing and expense management together and support the full lifecycle for SaaS. Amalgam Insights expects that some of these funds will be spent to better integrate Blissfully into Vendr’s operations. In addition, the contract information that Vendr has represents a massive data and analytics opportunity, but this will likely require some investment into non-standard document management, database, machine learning, and data science technologies to integrate documents, tactics, terms, and results. Whether this investment takes the form of a multi-modal database, graph database, sentiment analysis, custom modeling, process mining, process automation, or other technologies is yet to be seen, but the opportunity to gain visibility to the full SaaS lifecycle and optimize agreements continuously is massive not only from a cost perspective, but also a digital transformation perspective. The data, alone, represents an immediate opportunity to either productize the benchmarks or to provide guidance to clients with ongoing opportunities to align SaaS usage and acquisition trends with other key operational, revenue, and employee performance trends.

This part is editorializing, but Vendr has the opportunity to dig deeper into tech-driven process improvement compared to current automation platforms that focus on documenting and driving process, but have to abstract the technologies used to support the process. In the short term, Vendr has enough work to do in creating the first SaaS Lifecycle Management company that brings buying, expense, and operations management together. But with this level of funding, Vendr has the opportunity to go even further in aligning SaaS to business value not only from a cost-basis perspective, but from a top-line revenue contribution perspective. Needless to say, Amalgam Insights looks forward to seeing Vendr deliver on its vision for managing and supporting SaaS management at scale and to tracking the investments Vendr makes in its people, products, and data ecosystem.

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Upcoming Amalgam Insights Report Alert: “Control Your Cloud”

The Big Takeaway: Cloud computing spending has reached new heights. Organizations need guidance to avoid wasting money. The “Control Your Cloud” SmartList will provide guidance for enterprises struggling to manage cloud costs.

Amalgam Insights forecasts that global spending on public cloud computing — including infrastructure and software — will total more than $350 billion in 2022. Driven by the ongoing COVID-19 pandemic and concurrent digital transformation projects, organizations will continue to invest in the cloud, to the tune of more than 20% this year. And the greater the investment made in cloud, the more room for waste. 

Savvy stakeholders, especially those who already pay attention to expenses in other technology categories (mobility, telecom, Software as a Service), know that uncontrolled cloud computing will significantly reduce any return on investment. Just as with wireless or networking or other strategic IT spend categories, department heads must come together to craft a strategic approach to overseeing cloud computing deployments and expenses. The stakes are too high.

Consider the wider perspective: Between 2020 and 2021, spending on public infrastructure as a service (IaaS) and platform as a service (PaaS) soared 37%. In numbers, that totals a $60 billion increase. 

Kelly Teal, Senior Research Analyst, Amalgam Insights

COVID-19, of course, served as the impetus for much of that growth. Anecdotally, cloud computing vendors have reported that the demand they expected to serve around 2030 hit a decade earlier because of the pandemic. As governments worldwide mandated lockdowns, organizations had to rush to support work-from-home setups for employees. Cloud computing delivered many of the capabilities businesses needed; IT teams scrambled, often cobbling together solutions that met staff needs but were not cost-effective. Leaders spent much of 2021 trying to rectify those issues, yet more cleanup remains to be done. Contractual obligations, employee preferences, and heavy lifting associated with a technology shift all can slow the process. 

At the same time, organizations face new challenges in 2022. Inflation rose by 7% by the end of 2021, just in the United States, according to the Consumer Price Index. Everyone is paying more for the same products and services, and wages are not keeping pace. Revenue may not make up for the gap, either. This leaves executives and line-of-business leaders more aware of spending than perhaps ever. Cloud computing represents a major area ripe for attention. 

Cloud computing also accelerates the ability to bring new ideas to market and execute on business opportunities. At a time when the attention and relationship economies require deeper and more data-driven understanding of customers, cloud computing allows access to the analytics, machine learning, and relevant connections that achieve that. Organizations need to translate new ideas into fully-fledged business units without investing millions of dollars in upfront cost on computing assets.

However, IT should not act alone when it comes to deciding how to manage cloud computing expenses just for the sake of getting the job done in a convenient way. Cloud computing, just like its wireless and telecom counterparts, impacts the entire organization. Therefore, the finance, IT, revenue, security, and governance departments all must be involved, on some level, in overseeing cloud computing investments. For example, executives in charge of budgeting need to understand cloud computing costs; IT must select and manage platforms and assign and monitor users and consumption; software development and IT architects need to tag and track resources as cloud services are spun up and down; and data experts have to ensure that the organization’s information within the various cloud resources stays in line with laws such as Europe’s General Data Protection Regulation (GDPR). 

Cloud computing is complicated. Executives across the organization need a deeper understanding of the intricacies so they can work together to spend wisely while ensuring no critical aspect goes overlooked. Amalgam Insights is stepping in to guide organizations through these considerations with our upcoming Vendor SmartList, “Control Your Cloud: Why Organizations Need Cloud Cost Management Capabilities in 2022.” 

Executives seeking to control cloud expenses need to read this report because it will provide expert analysis on the key cloud cost containment challenges of 2022 and the differentiated approaches to reduce and optimize cloud costs. The report also will features vendor profiles that cut through the hype and show why each vendor is different in a sector where marketing messages all seem to focus on the same starting points of reducing cost, providing financial visibility, and improving cross-departmental collaboration. This last issue emphasizes an important point: The profiles do not rank the providers that brief with Amalgam Insights. Rather, Amalgam Insights explores what makes each vendor different and offers guidance on why that vendor is currently chosen in a crowded marketplace. This level of detail gives organizations the knowledge to pinpoint which vendor(s) might best meet their needs for cloud computing cost management. 

The following stakeholders all will need to read and act on the report: Chief Technology Officers, Chief Information Officers, Chief Financial Officers, “Shadow IT” managers in sales and marketing, DevOps Directors and Managers, IT Architects, Vice President/Director/Manager of IT Operations, Product Managers, IT Sourcing Directors and Managers, IT Procurement Directors and Managers, IT Service Providers and Resellers. Each of these roles is crucial to achieving cloud computing success throughout the organization.

“Control Your Cloud: Why Organizations Need Cloud Cost Management Capabilities in 2022” will publish in the second quarter of 2022.