Dive Brief:

• IBM’s recent acquisition of software startup Kubecost is the latest signal that it’s vying for a dominant position in the fast-growing FinOps market, which is dedicated to helping companies manage out-of-control cloud costs, according to analysts.
• The transaction follows IBM’s $4.6 billion acquisition of Apptio, another FinOps services provider, in 2023. With Kubecost, IBM is “showcasing its commitment to the growth of FinOps, both by setting the pace for innovation, as well as strategically bringing leading technologies together,” Ajay Patel, general manager of Apptio and IBM Automation, said last week in a blog post announcing the deal. The financial terms weren’t disclosed.
• “This is a really good play for IBM, which currently is offering the most complete solution” in the FinOps market, Tracy Woo, a principal analyst at research firm Forrester, said in an interview. “But they’re also really expensive [as a FinOps software vendor], and they just acquired this other company. So, will that make them even more expensive?”

Dive Insight:

Gartner projects that global end-user spending on public cloud services will reach $675.4 billion this year, up from $561 billion in 2023, with much of that growth driven by generative AI and application modernization.

The average annual cloud spend for companies is $44 million, according to a survey unveiled earlier this year by the FinOps Foundation, a trade group. Some companies reported spending up to $1 billion or more.

“The practice of FinOps sits at the juncture of finance and technology, so it’s easy to see how difficult macroeconomic conditions, and the introduction of new technologies, render this role more critical for businesses than ever before,” said a report on the findings. “Gaining organizational adoption and executive support of FinOps are key ingredients to their success.”

FinOps, a combination of “finance” and “DevOps,” is a practice that has grown rapidly in recent years, according to the foundation. It includes an emphasis on collaboration among IT and finance teams, as well as data-driven decision making.

“This is a super-hot area right now,” Woo said.

San Francisco, California-based Kubecost operates in a particularly high-demand segment of the FinOps market, according to Jevin Jensen, research vice president for Intelligent CloudOps at research firm IDC.

The Kubecost platform, “combined with IBM’s CloudAbility, provides a broad set of capabilities for enterprises looking to maximize their cloud investment,” Jensen said via email. Cloudability, which offers cloud spend management visibility and optimization capabilities, was among the FinOps offerings that IBM gained as part of its acquisition of Apptio last year.

Kubecost is a cost monitoring and management tool for IT teams using “Kubernetes” software to manage applications in the cloud. Monitoring Kubernetes costs is a complex challenge for DevOps teams, particularly when organizations use multiple cloud environments and providers, according to a blog post published by Kubecost in May.

“With distributed systems and shared resources, tracking costs becomes a daunting task,” the post said. “Organizations must implement a robust cost management strategy for Kubernetes to accurately manage, forecast, and optimize costs.”

Despite these challenges, Kubernetes usage is rapidly growing, with 84% of organizations deploying or evaluating the technology today, according to Patel’s blog post.

“Kubecost delivers real-time cost visibility and insights needed to not only understand infrastructure spend, but intelligently reduce spend and avoid over-provisioning within Kubernetes environments,” he wrote. “With direct integrations into the Kubernetes and cloud billing APIs [application programming interfaces], FinOps teams can get a comprehensive view of their workloads to optimize cloud spend and prevent resource-based outages.” 

Still, the acquisition raises questions, including whether the deal will increase “an already high price tag” for IBM’s FinOps suite, Woo said in a Thursday blog post.

There are also questions surrounding “IBM’s ability to integrate the separate products in its CCMO [cloud cost management and optimization] portfolio,” she said. “If IBM can seamlessly integrate its multiple acquisitions into one solution, it could be the market de facto FinOps solution. But many questions remain on whether that is a realistic possibility.”

IBM didn’t immediately respond to a request for comment on whether it’s planning to hike any of its FinOps pricing as a result of the deal.