IBM Bolsters Fed Business with Octo Buy
December 14, 2022 Alex Woodie
IBM is buying Octo, a Reston, Virginia-based provider of IT solutions to the Federal government. The acquisition, which was announced last week, is expected to close before the end of the year and should bring IBM expertise and manpower to help federal agencies modernize their operations in specific areas, including data science, AI, big data, security, and the cloud.
Octo was founded in 2006 by Mehul Sanghani to provide IT solutions to federal agencies. Over the years, the company has won some prestigious contracts. In March 2020 it signed a $50 million deal provide the United States Patent and Trademark Office (USPTO) with an assortment of AI technologies, such as natural language processing (NLP) and robotic process automation. It also has worked with the National Cancer Institute (NCI)’s Center for Biomedical Informatics and Information Technology (CBIIT) to bolster its “cloud first” initiative on AWS and GCP.
Octo helped implement a data fabric for the Department of Defense, via its Defense Intelligence Digital Transformation implementation. The company says the data fabric today brokers more than 900 data resources, which is available via a data catalog. And earlier this year the company announced a five-year contract worth up to $203 million to harness resources from its “oLabs” innovation hub to provide technology to the Federal Communications Commission (FCC).
Octo says it invested more than $10 million in the expansion of its oLabs, a 14,000 square-foot facility that, it claims, offers more than 15 petaflops of AI compute along with 2 petabytes of FlashBlade storage. FlashBlade, of course, is the flash storage offering from Pure Storage.
IBM, which cited oLabs in its announcement, said the addition of Octo’s 1,500 employees will bolster IBM Consulting, which currently employs 4,200 workers.
“Federal government agencies face significant challenges including technology skills shortages, rebuilding of U.S. domestic supply chains, and more demand for citizen services,” IBM says. To address these challenges, IBM says, agencies need a partner to help them modernize their IT systems using emerging technologies and applications, which can optimize costs, improve operational efficiencies, and enhance security.
In addition to IT services, Octo has developed several products for governmental agencies. That includes OctoCX, a suite of data and AI products designed for use in the field; CDF, or Common Data Fabric; Hatteras, a machine learning operations (MLOps) solution used by “warfighters” to prevent model decay; ShiftUp, an open source development platform; Jinsoku, an information retrieval network that uses AI; and Veloce, a low-code, no-code implementation framework.
IBM is acquiring Octo from Arlington Capital Partners, which acquired a majority interest in Octo in 2019. In late 2020, Arlington combined Octo with Sevatec, another IT consulting company targeting the federal government.
The total annual revenues of Octo and Sevatec at that time was $300 million, according to Washington Business Journal. After more acquisitions, Octo was bringing in $500 million in revenue, the publication says.
It’s unclear if Octo has any IBM-specific skills, let alone IBM i skills. The mainframe is used extensively in the Internal Revenue Service, and the IBM i platform has historically had a footprint in federal agencies, too.
According to the All400s list of midrange users, the IBM i platform has been used by various U.S. departments over the years, including the Army, Agriculture, Defense, Health and Human Services, Housing and Urban Development, Justice, Labor, Interior, Treasury, Commerce, and Revenue.
Octo was the eighth acquisition of the year for IBM, which has acquired more than 25 companies since Arvind Krishna became CEO in April 2020. The acquisition is subject to customary closing conditions and is expected to close this month. Terms were not disclosed.