IBM sells seven software assets to HCL for $1.8 bn

Largest ever acquisition by an Indian tech firm

Indian software firm HCL is to purchase a number of assets from IBM for a total of $1.8 bn.

If completed, the acquisition will be the largest ever by an Indian technology company, according to analyst Refinitiv.

The deal includes the following seven software products: Appscan application scanning software; BigFix device management; Unica for marketing automation; the Commerce (on-premises) omni-channel ecommerce solution; on-premises digital experience software Portal; Notes and Domino the email and development platforms; and Connections collaboration software.

HCL already has a partnership with IBM and some analylsts have questioned the wisdom of the deal.

"I don't think it will help HCL on a long term basis ... this deal is a negative from HCL's standpoint," said Sudheer Guntupalli, of Ambit Capital, as reported by Reuters.

"They already have IT partnerships for five of the seven products in the deal. So there would hardly be any incremental benefits on a qualitative basis," he added.

However, HCL insisted the acquisition fitted into its long-term strategy.

"We continue to see great opportunities in the market to enhance our Mode-3 (products and platforms) offerings," said C. Vijayakumar, president and CEO of HCL Technologies in a statement. "The products that we are acquiring are in large growing market areas like security, marketing and commerce which are strategic segments for HCL. Many of these products are well regarded by clients and positioned in the top quadrant by industry analysts."

For IBM, the sale marks a continued divestment in legacy and on-premises based applications as it focuses on cloud, AI, IoT, blockchain and analytics, as well as sector-specific platforms and solutions.

"We believe the time is right to divest these select collaboration, marketing and commerce software assets, which are increasingly delivered as standalone products. At the same time, we believe these products are a strong strategic fit for HCL, and that HCL is well positioned to drive innovation and growth for their customers," said John Kelly, IBM senior vice president, cognitive solutions.

HCL shares fell 7.7 per cent on news of the deal.

In a related announcement, FStech reports that Barclays bank has selected HCL to lead its investment in AI and automated digital workplace systems for 80,000 employees worldwide, with 460 Barclays employees in its operations centre in Lithuania transfered to HCL, and the remaining employees offered redundancy.