The real reason why Wipro’s deal to buy Appirio is appropriate
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Last week, an Indian company acquired an Indiana firm. Wipro announced that it was acquiring Appirio, a software integration and technology consulting firm based in Indianapolis. Appirio was established a decade ago to provide technology integration services to clients looking to adopt “public cloud” applications and platforms, and to focus on what many have called the “as-a-service” mode of delivering software and business processes. All that “as-a-service” means is that you have the ability to rent and pay for software features as and when you use them, rather than buy the software itself.
Much is made today over the as-a-service way of acquiring software. According to analyst firms that track spending in the information technology services sector, the sector is seeing a hefty rebound in demand, most of it driven by corporate spending on the adoption of as-a-service technologies. The methods that these analyst firms use are myriad, like feverishly trawling the Internet for public announcements of services deals, and relying on information technology service providers to give them data on deals they have just concluded. In my experience, these data are collated and then extrapolated to the market by a single individual at the firm—and are error prone—but nonetheless, can point to macro shifts in buying patterns.
As a result, Wipro has been hailed as a visionary for acquiring a company that has firmly established itself as a leading provider of as-a-service delivery. It now has the ability to make serious moves in the market and has added an arrow to its quiver which is different than all its other arrows, which mainly represent offshore services for a cheaper price. Last week, Mint carried an analysis of Wipro’s acquisition strategy in comparison to its peers and noted how its acquisitions have allowed it to leapfrog some of its peers in terms of revenue accretion.
Coming back to the as-a-service economy, this sort of rent versus buy decision moves in waves over time. Not so long ago, before India’s mobile phone revolution, the country was dotted with ISD/STD call booths in every corner in a classic example of as-a-service delivery. You didn’t need to own a landline phone when you could simply walk up to a phone booth and in return for a fee, use someone else’s phone for the short duration that you needed to actually make a call. Once it became cheap enough to acquire and use a mobile phone to make calls on one’s own, these booths all but disappeared from the Indian landscape.
So will it be with the as-a-service wave. What analysts forget is that it is largely traditional, old-fashioned and stable technology that is now being delivered as-a-service. Well-established enterprise resource software (software that helps support sales, production operations, logistics, distribution and financial accounting) such as SAP, Oracle and Salesforce are all now increasingly being delivered as-a-service rather than being bought for hefty licensing fees and the systems integration costs that go with such purchases.
The as-a-service economy will not work for new types of software that fundamentally alter the workings of a firm. It simply does not make sense to buy software as-a-service in instances where software or technology is used as a strategic or competitive advantage. Firms building or buying such software in the quest for digital disruption will be looking to keep their competition out, not just use an as-a-service model to rent what can just as easily be rented by their competition. These new types of software will carry new-world data analytics and algorithms that drastically change the way a traditional business operates—and as such are likely to be closely guarded corporate secrets.
Interestingly, these algorithms are only being partially built by companies themselves. In this age of open-source programming, and the ready availability of free programming libraries with a simple click of the cursor, corporations are increasingly turning to the programming community at large in a phenomenon called crowdsourcing to solve knotty problems with respect to data analytics and the composition of software algorithms in order to shore up their own considerable internal efforts at building these. Publicly available platforms are being increasingly used for the requisitioning and delivery of services. Service requests are being filled on Twitter and listening posts are being used on LinkedIn to generate sales leads. Companies are using these platforms to hand out prizes to star programmers from the programming community at large who solve the knottiest of their problems in software coding or algorithmic logic. These problems can be parsed out to a point where it is just the tough mathematical or logical issue that is passed on to the platform to solve; the entire program or the function it is designed to perform need never be divulged.
And it is precisely for this reason that Wipro’s acquisition of Appirio is appropriate. Appirio owns both TopCoder and its competitor, CloudSpokes, together forming the largest platform for crowdsourcing of such problems. Some estimates place this number at about 800,000 programmers all over the globe; others claim that this number is actually in the millions. Whatever the actual number, this platform allows for the brightest computing minds to compete at solving the computing problems of the future. Little wonder then, that at a social event last weekend, Rishad Premji, chief strategy officer of Wipro, exclaimed “TopCoder” when I congratulated him on his new buy and asked him what he thought was the most salient reason why I felt this acquisition represented a watershed event.
Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.