Inside Octo's deal to go deeper into open source

Octo Consulting acquires an open source development firm to align with changes they see in how defense agencies buy software as all markets appear to be shifting in that direction. Just look at IBM-Red Hat.

One of the most visible middle-tier market players, Octo Consulting has quickly pulled the trigger on their first acquisition since private equity firm Arlington Capital Partners first backed them in April.

Reston, Virginia-based Octo announced Tuesday it has acquired software development firm Connexta in a deal both sides see as creating a stronger footing in national security and particularly with open source, just as that type of work is being increasingly mandated across defense agencies.

“We’ve seen a lot of acquisition strategies that are changing and adding open source requirements,” Connexta CEO Andy Goodson told us Thursday. “As recently as five years ago, there were less requirements. In fact, the government agencies were afraid of open source.

“Now they’re starting to realize the benefit of that, they’re starting to see how the commercial sector is embracing it and how that really is the way of the future. Now we are seeing entire programs coming out that are based on open source.”

The commercial sector’s embrace might also be a perfect allegory for what Goodson said is going on in the government and defense market. Just look what IBM did earlier this year, as Octo CEO Mehul Sanghani pointed out in that same phone interview.

“I don’t know if anyone could have predicted about a decade ago that when Red Hat was entering the market, that they would be acquired to the tune of $34 billion by IBM,” Sanghani said. “That speaks to the level of commercial adoption and how mainstream it’s become.

“It also adds relevance and credibility to the fact that you are seeing an increasing number of government customers look to that as they look to unwed themselves from traditional enterprise license agreements as well.”

The military’s push toward an open source future is nothing new and partially dates back to 2009, when the Defense Department launched a website to develop open source software. A more recent move in that direction came from the 2018 National Defense Authorization Act, which included language to add DOD as a federal agency that should prioritize open source software.

“You’re starting to see that in a lot of different organizations… outside of DOD as well,” Goodson added.

Those are the steps on the customer side. For Octo, the addition of Connexta is the latest step in an ongoing push to be an even more formidable, differentiated player in the middle tier with the support of Arlington Capital. Octo’s workforce grows by 130 people to around 700 with offices at its Phoenix headquarters, plus Boston and Denver.

This transaction by Octo is also an example of active dealmaking activity among mid-tier players, of whom nearly “every one is either thinking about buying or selling,” said Bob Kipps, co-founder and managing director of investment bank KippsDeSanto that advised Connexta.

“Almost no one is doing nothing,” Kipps added. “It’s a very active market with a very broad, deep set of buyers.”

Prior to this deal, Octo’s acquisitions were mostly limited to those for contract vehicles like the Navy Seaport-e position it acquired from Aquilent in 2017 or other smaller more tactical plays.

“Private equity is allowing Octo to become a major mid-tier player much faster through adding a lot of additional capital,” Kipps said.

Sanghani cited the Air Force and National Geospatial-Intelligence Agency as examples of mutual customers where Octo and Connexta worked on adjacent programs. Connexta brings to Octo software labs that house the open source development work, plus services in data interoperability, geospatial intelligence and “C4ISR” for defense organizations.

That is just the U.S. geographic footprint, however. Connexta also has contracts to support coalition partners in Europe, Asia and Australia.

Australia is a member of the broader “Five Eyes” intelligence community that also includes the U.S., U.K., Canada and New Zealand. The group of international partners in that list often faces the same technological challenges as U.S. agencies regarding the open source development model, according to Goodson.

The next step for Octo is much like what many mid-tiers have in mind: finding opportunities “to compete and punch above (our) weight class… against the much larger players we have in this market,” as Sanghani said.

That includes seeing how customers are changing the ways they acquire technology services from industry, plus what Sanghani described as “differentiated capabilities” that can be put forward.

“In addition to doubling down and looking at how we can continue to differentiate and compete up relative to capabilities, we also looked at customers that have increasing demand aperture that we’ve already been fortunate enough to serve successfully,” Sanghani added.

NEXT STORY: Fast 50 deadline just days away

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.