IBM’s recently announced acquisition of federal government consulting firm Octo has (at least) three significant implications:
- It establishes one of the largest providers of digital transformation services to the government, with 4,200 employees focused on this vertical industry
- It gives the company a major market in which to build out its “deep cloud” concept for digital transformation success
- It furthers CEO Arvind Krishna’s focus on growing the business in part through acquisitions and expanding the reach of the consulting business.
Who Is Octo and What Do They Bring To IBM?
Reston, Va.-based Octo is an IT modernization and digital transformation services provider exclusively serving the U.S. federal government, including defense, health, and civilian agencies. Its 1,500 employees will join IBM Consulting’s U.S. public and federal market organization, bringing the organization to 4,200 total people.
Octo helps agencies address skills shortages and demand for new citizen services by helping them affect IT modernization by leveraging emerging technologies and applications, optimizing costs and operational efficiencies, and improving security. The convergence of hybrid cloud and AI technologies — two core focus areas for IBM — will enable the government to deliver rapid improvements and adapt to unprecedented challenges, IBM said in announcing the deal.
IBM said the addition of Octo will enable the consulting business to help federal agencies “transform faster and better serve citizens” through the latter’s track record in enabling rapid IT modernization and citizen engagement, as well as certifications in the technologies most used across the federal government.
The company touts its expertise in working with agencies in technology areas including AI, cloud infrastructure, cybersecurity, data, and DevSecOps. Octo’s reference accounts include:
How Deep Cloud Plays In
Earlier this year, IBM introduced, through research published by its Institute for Business Value, a concept called “Deep Cloud,” which aims to overcome some of the shortcomings of many digital transformation projects. Key characteristics of Deep Cloud, which appear even more core to IBM customers’ initiatives in light of this deal, include:
- Directing investment and strategic transformation at core business functions that impact the customer — what it calls “value streams”
- Applying strict financial measurement — specifically cost/income ratio — that ensures the tech investment meets rigorous financial objectives
- Use of the right technology “toolkit” that includes hybrid cloud, security, networking, and other elements
- Identifying an internal champion with authority and accountability to ensure the forecasted outcomes come to pass
Acceleration Economy analysis aligns closely with several of the premises of the Deep Cloud concept. We have applauded IBM for its thought leadership, and for putting a stake in the ground, to push for greater digital transformation outcomes.
Most observers would agree, I think, that federal government agencies don’t come to mind quickly when it comes to customer-centric orientation, rigorous financial measurement, and use of leading-edge tech toolkits. So IBM’s acquisition of Octo could give its consulting business a major boost in driving Deep Cloud principles forward with federal agencies.
IBM’s Focus on Consulting, Acquisitions
The deal for Octo, expected to close in the fourth quarter, will be the company’s eighth acquisition this year, and the fourth targeting IBM Consulting. In total, the company has acquired more than 25 companies since Krishna became CEO in April 2020. Other IBM Consulting acquisitions include:
- Dialexa: developer of digital products for clients
- Neudesic: offering diverse technology services across 12 vertical industries
- Taos: emerging technology consulting and managed services in Cloud and DevOps
Under Krishna, the company has pivoted in terms of how it determines the value it’s uniquely qualified to deliver to customers, using the cloud to leverage its expertise without competing with hyperscalers, while placing a strong emphasis on its consulting opportunity.
Terms of IBM’s deal to acquire Octo were not disclosed.
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