German software giant SAP on Sunday announced that it was acquiring Utah-based cloud unicorn Qualtrics just before its highly anticipated initial public offering (IPO). The $8 billion all-cash deal, slated to close in the first half of 2019, adds to the growing list of blockbuster software deals this year, as leading tech companies strive to stay relevant and ward off new competition from Internet behemoths like Amazon.com Inc. (AMZN) with its burgeoning cloud platform Amazon Web Services and Alphabet Inc.'s (GOOGL) Google Cloud, as well as other smaller rivals.
The surge in M&A activity has positioned legacy players like Salesforce.com Inc. (CRM), Microsoft Corp. (MSFT), International Business Machines Corp. (IBM) and Adobe Inc. (ADBE) more fiercely against one another in key growth markets like the cloud and software niches like customer relationship management (CRM).
Legacy Tech Giants Bet on Cloud, Software to Maintain Leadership
In October, IBM made the third-largest U.S. tech merger ever, and its largest deal to date, with a $34 billion all-cash purchase of open-source software provider Red Hat. The deal is viewed as boosting IBM's position in the hybrid cloud market, wherein traditional companies are transitioning their workloads off bulky on-premises data centers to hosted environments from big cloud providers. Red Hat's version of open-source Linux operating system runs on various cloud platforms, and should provide IBM with a steady stream of revenue as more companies move off-premise.
CRM market pioneer Salesforce bought Mulesoft for $6.5 billion in cash and stock in March, offering its customers the ability to sync data across apps located in different places, including cloud services and on-premise data centers.
Legacy IT provider Microsoft bet on attracting software developers with its $7.5 billion stock acquisition of Github in June. The decision reflects the Redmond, WA-based company's larger strategy to shift its focus away from Windows and consumer products to double down on cloud and online services. Following the failure of its bid for Qualcomm Inc. (QCOM), Broadcom Ltd. (AVGO) in July announced the $18.9 billion purchase of enterprise software provider CA Technologies.
In August, Cisco Systems Inc. (CSCO) took a deeper dive into the next-gen cybersecurity space with a $2.4 billion acquisition of Duo Security. Software company Marketo was scooped by Adobe in September in a deal worth $4.8 billion.