India’s Wipro Buys Small Stake in Denim For App Security Business

San Antonio—An Indian tech company is paying $8.83 million to acquire a 33.3 percent stake in San Antonio-based Denim Group, a cybersecurity software development and consulting firm.

Wipro, a global IT business based in Bangalore, India, that’s traded on public exchanges in both the U.S. and India, was interested in Denim Group in part because of its product ThreadFix, software that is meant to help monitor and fix security vulnerabilities in applications that are still in development.

Denim Group was founded in 2001 by Dan Cornell and Sheridan Chambers as a software development firm, but switched its focus to cybersecurity consulting in 2004 when military and corporate cybersecurity executive John Dickson joined the business. The company released ThreadFix in 2012.

“Through our consulting practice we saw the challenges organizations were facing developing secure software,” Cornell wrote in an e-mail. “We built the ThreadFix platform to help organizations scale their application security programs to deal with both a dangerous threat environment as well as the requirement to deploy secure software faster as they transition to DevOps.”

Broadly, DevOps refers to the tools and services for software development and IT operations. As Cornell noted, the process of developing and deploying apps and websites is getting faster. Companies are updating their applications constantly, sometimes several times a day. These apps and updates are a prime target for hackers, and businesses are realizing they need to put in more safeguards and check for vulnerabilities earlier in the development process. Other deals that signal the growing interest in application security include CA Technologies’ $614 million acquisition of Veracode and Synopsys’s $565 million purchase of Black Duck Software; both deals occurred last year.

Though Denim Group’s overall revenue has declined in recent years, sales in its cybersecurity business improved, according to one of Wipro’s public filings on the Bombay Stock Exchange. Denim Group’s total revenue fell to $11.3 million in 2017 from $13.3 million in 2015. However, its revenue from the application security business—both licensing from ThreadFix and cybersecurity consulting work, according to Cornell— rose to account for all the company’s revenue in 2017 at $11.3 million, up from $8.9 million in 2015, according to the filing.

Denim previously had a custom app development business that accounted for some of its revenue before 2016, the year the company shut down that business, Cornell wrote in the e-mail.

“The revenue from our custom application development practice was at lower margin and for a less differentiated service,” Cornell wrote. “We made the strategic decision to focus our efforts as a management team on the cybersecurity aspects of the business where we felt we could drive the most profitable growth.”

Wipro will have seats on Denim’s board, but Denim’s operations will continue as usual—just with more resources to expand at a faster pace, Cornell wrote.

“We had seen tremendous growth from our ThreadFix platform and wanted to find a partner to work with that could help accelerate that growth who also had a global perspective,” Cornell said in the e-mail.

Wipro is a far larger company: It has about 160,000 employees worldwide, compared with about 60 at Denim Group, according to the BSE filing.

The deal is expected to close this month.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at [email protected] Follow @xconholley

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