Wipro to buy cloud services firm Appirio for $500 million

Wipro’s latest acquisition, US-based cloud services firm Appirio, counts Facebook among its clients and has revenue of around $200 million


Since CEO Abidali Neemuchwala joined the company in April last year, Wipro has spent $1.13 billion on four acquisitions, including Appirio. Photo: Mint
Since CEO Abidali Neemuchwala joined the company in April last year, Wipro has spent $1.13 billion on four acquisitions, including Appirio. Photo: Mint

Bengaluru: Wipro Ltd will spend $500 million to buy Appirio Inc., an Indianapolis, US-based cloud services firm, underlining the aggressive acquisition-based strategy India’s third largest software services firm has scripted for its transformation.

Appirio helps companies move applications to hosted servers offered by Amazon, Google and Salesforce.com.

The privately held company, founded in 2006, has raised more than $110 million from investors including Sequoia Capital and General Atlantic, and counts Facebook, Home Depot and IBM as its clients. It is estimated to have revenue of more than $200 million.

Wipro chief executive officer Abidali Z. Neemuchwala said it is important for companies to transform the way they engage with customers and employees by “leveraging the power of the cloud”.

Since Neemuchwala joined the company in April last year, Wipro has spent $1.13 billion to buy four companies, including Appirio.

Wipro spent $95 million in July 2015 to buy Denmark-based design firm Designit, with a revenue of $30 million, to give a boost to its newly created business division, Wipro Digital.

In December, it paid $78 million to buy Cellent, a German technology company with over $90 million in revenue, that implements and maintains SAP software for clients in automobile and manufacturing segments.

In February, Wipro paid $460 million to buy HealthPlan Services, a Florida, US-based technology firm that brings over $220 million in business by offering solutions to health insurance firms.

Wipro also tried buying Viteos Group but later called off the buyout, citing inordinate delays in the completion of the acquisition.

The Times of India first reported the Appirio deal.

Wipro’s decision to buy Appirio mirrors the approach followed by its larger peers Accenture Plc. and International Business Machines Corp. (IBM). Accenture bought Salesforce partner, Cloud Sherpas in September last year while IBM bought Salesforce partner Bluewolf Group in April this year.

“This deal is about giving Wipro the capabilities to scale out IT services in the cloud world. What it gains are some strong methodologies in delivering in the cloud, and significant partnerships such as Workday, Salesforce, Amazon, and Google,” said Ray Wang, founder of Constellation Research, a technology research and advisory firm.

“More importantly, Wipro can take those methodologies and scale out to adjust for building revenue in the cloud. Every vendor is trying to figure out how to scale out cloud services and make money. Appirio and it’s chief competitor Blue Wolf have been the pioneers in this field.”

Cloud computing poses a threat to companies such as Tata Consultancy Services Ltd and Wipro, whose customers have started to use hosted servers.

This means system integrators no longer just lose business in buying hardware and writing software needed for large data centres but even lose out in revenue which comes from maintaining the applications which move to hosted servers. The applications which moved to the hosted servers offered by Amazon and Microsoft use artificial intelligence and automation platform technologies which can be managed by significantly fewer engineers. The traditional approach of Indian technology vendors is to deploy thousands of engineers to manage these applications.

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