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The rise of FinOps already fueled multiple acquisitions, including IBM’s plan to acquire Apptio for a whopping $4.6 billion, but I bet there’s more to come. And there’s another trend I’m sure we’re not done hearing about: parametric insurance. — Anna
The ongoing rise of FinOps
When cloud optimization startup ProsperOps raised a $72 million funding round last February, my colleague Kyle Wiggers argued that consolidation in this space wasn’t necessarily over.
Sure, several cloud optimization companies had been nabbed by incumbents over the years, from Cloudyn’s acquisition by Microsoft in 2017 to CloudHealth Technologies’ purchase by VMware in 2018. But more could still follow, Kyle argued, citing Intel’s 2022 $650 million purchase of Granulate as evidence.
He was right: In a busy week for M&A news, IBM announced its intent to buy Apptio from its current private equity owner for $4.6 billion in cash. In 2019, Apptio itself had acquired Cloudability, a cloud spending management vendor. Reporting on IBM’s announcement, Ingrid Lunden noted that Apptio’s activities fall into a broader category.
“The more general name for that area of IT is “FinOps” — short for financial and operational IT management and optimization. Apptio’s products today cover a few different areas. ApptioOne is focused on spend management and planning within hybrid cloud environments. Apptio Cloudability is focused specifically on managing spend around public cloud deployments. Apptio Targetprocess, meanwhile, helps model bigger projects to figure out which resources might need to be allocated and to help project manage those efforts.”
IBM acquires Apptio from Vista for $4.6B in cash to double down on hybrid cloud services
Both “FinOps” and “hybrid cloud” are key terms here, and they feed each other.
For startups, how many clouds to use may be the wrong question to ask. But for enterprise customers such as Apptio’s and IBM’s, a hybrid cloud approach is becoming the norm — with a combination of private and public cloud(s).
With this approach, choosing what data to store where is a decision that needs to involve multiple stakeholders, both on the technical and on the financial side. Hence the rise of FinOps, whose name is a portmanteau of DevOps and finance.
Of course, current market conditions have created tailwinds for FinOps. “As budgets tighten, FinOps can help company leaders gain more control over their cloud costs and show investors a path to profitability,” Team8 co-founder Liran Grinberg wrote in a guest post.
However, I don’t expect FinOps to go out of the spotlight anytime soon, even once budgets loosen up again. If Apptio’s impressive price tag isn’t proof enough, there’s also the fact that the discipline is becoming more standardized with the launch of FOCUS, which stands for “FinOps Open Cost and Usage Specification.”
As its name suggests, the goal of FOCUS is to create “a common billing data format for all cloud billing.” Establishing a new standard is never easy, but odds are on FOCUS’ side: It is a project of the FinOps Foundation, which is part of the Linux Foundation, and its contributors already include companies like Accenture, Google, Microsoft, VMware and Walmart.
More consistent data from cloud vendors will make FinOps less difficult, which should further boost its adoption. In other words, we are not done talking about its rise, and further consolidation in the space is still not out of the cards.
The ongoing rise of parametric insurance
Puerto Rican startup Raincoat raised a $6.5 million seed extension round for its parametric insurance solution against climate-related disasters, Axios reported. The company was born in the aftermath of Hurricane Maria, which led to major insurance battles.
Unlike traditional insurance, parametric insurance doesn’t require customers to fill out a claim or prove the damage they suffered; they simply receive a pre-agreed payout after a trigger event.
This approach is a good fit for weather-related events; natural disasters can be monitored independently, and unlocking payouts quickly is key. But more importantly, it expands the number of people who can be insured.
“In Puerto Rico, for example, there’s a lot of people that purchase some of the products that we’ve developed because they’re completely excluded from any traditional insurance whatsoever,” Raincoat CEO Jonathan González told Axios.
What’s true of weather insurance also applies to other types of risks, which is why I expect parametric insurance to become more and more common. For instance, if you want earthquake coverage on your homeowners insurance, OMERS Ventures principal and insurtech expert David Wechsler told TechCrunch+, “Adding an earthquake parametric product ensures a rapid, no-questions-asked payout in a time of need.”
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