Updated at 5pm ET on January 12 to include details of Johnson Controls’ acquisition of edge AI tech company Foghorn Systems
Auto technology company Aptiv is bolstering its software expertise by paying the private equity arm of asset management giant TPG $4.3 billion in cash for Wind River, whose software helps businesses shift computing power out of big data centers and bring it closer to where it’s needed.
This shift toward what’s known as “edge computing” in tech industry jargon is critical for industries such as transportation. By eliminating the need to ship information to and from distant data centers, edge computing reduces time lags in data processing and milliseconds especially matter for things such as autonomous vehicles, which need to react instantaneously to data they’re generating and receiving. Edge computing is also useful for things such as over-the-air software updates, which are becoming increasingly common in all kinds of cars.
“We’re more confident than ever that the software-defined vehicle will become one of the most important devices on the intelligent edge,” said Kevin Clark, the CEO of $43 billion market cap Aptiv during a webinar yesterday that followed the deal’s announcement.
Wind River’s expertise extends beyond the automotive world. The company, which is headquartered in the San Francisco Bay Area, serves several other industries, including aerospace, defense and healthcare. It has 1,700 customers who use its software on a total of over 2 billion devices, helping it generate approximately $400 million in revenue last year.
The deal, which is expected to close by the middle of the year, was welcomed by executives at TPG Capital. which purchased Wind River in 2018 for an undisclosed sum, and by Kevin Dallas, Wind River’s CEO. In a press release announcing the deal, Dallas said the combination of the two businesses would help Wind River “realize our vision of the new machine economy.”
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Outpacing the cloud
That economy is going to rely heavily on the software that companies such as Dallas’ provide and on businesses developing the associated hardware. Research firm International Data Corp. (IDC) forecasts that worldwide spending on edge computing will rise by almost 15% this year, hitting $176 billion, and will reach $274 billion by 2025.
“The shift to IT resources at the edge is driving many new partnerships and acquisitions—and will continue to [do so] through 2022,” said Jennifer Cooke, IDC’s research director for edge strategies.
As if to prove Cooke right, on January 12 Johnson Controls, which makes sensors and other products for smart buildings, announced the acquisition of Foghorn Systems, a provider of AI-infused edge technology, for an undisclosed sum. According to data from Crunchbase, Foghorn had raised a total of $72.5 million in venture funding.
Other deals are likely to be driven by large tech companies such as IBM, Intel and Amazon, who also have their eye on a sector that’s poised to grow faster than the overall cloud computing market in the next few years, as more and more businesses turn to the technology to gain a competitive edge over their rivals.