On April 4, IBM announced an agreement to sell its portfolio of marketing and commerce software to private investment company Centerbridge Partners. The size of the deal, which is expected to close by mid-2019, was not disclosed.
Mark Simpson, vice president of offering management and strategy for the IBM marketing platform and commerce offerings, will lead the new entity as CEO. The new company’s name, as well as how many and which employees will transfer along with Simpson, are yet to be determined.
The scope of the agreement includes:
- Campaign Automation
- Marketing Assistant
- Media Optimizer
- Customer Experience Analytics
- Content Hub
- Real-Time Personalization
- Personalized Search
- Universal Behavior Exchange
- Intelligent Bidder
- Price & Promotion Optimization
- Payments Gateway
Constellation’s View
This announcement comes close on the heels of IBM’s agreement in December 2018 to sell a portfolio of software to HCL for $1.8 billion. It’s clear IBM is actively packaging up discrete capabilities and offerings that it can sell to interested buyers. In our view, this is as much about replenishing the coffers as it is refocusing the main business. Given how hot all things “customer experience” are there days, this particular deal makes sense all around.
Pros:
Because of both its engineering heritage and its size and scale, IBM doesn’t really have a strong brand association with customer experience and marketing tools. This new entity has the opportunity to build a much stronger market presence and reputation around customer experience.
Pulling together this set of marketing and commerce capabilities—some of which are underpinned by IBM Watson’s AI—makes it much easier to manage as a coherent, integrated portfolio. It also helps clarify for customers how these pieces might fit together. Under the terms of the deal, core Watson capabilities and APIs are not in scope (they'll be subject to a partnership agreement) but AI tools developed specifically for marketing products will transfer to the new company.
The combination of products and know-how give the new entity an opportunity to build a better analytics presence that connects strong analytics capabilities to feedback loops that make that output actionable for employees.
For customers, there’s likely to be more, and more focused, investment in helping solve the big problems companies have with building great customer experiences. A single entity that’s wholly focused on tools and technologies to support customer experience doesn’t have to compete with all the rest of IBM for investment dollars.
Cons:
According to what’s been announced so far, this new entity will focus on serving CMOs and marketing organizations. This runs counter to what most enterprise customers want and what most other major competitors in this market are moving toward: connecting marketing technologies with the rest of enterprise IT. Rump IBM has strong ties to the enterprise IT department. The new entity won’t.
It’s unclear what proportion of the new entity’s capabilities will be selling products (including SaaS services) vs. consulting, implementation, and other services. We see a clear trend toward a greater and greater embedding of best practices within products and tools. Nevertheless, the ability to support enterprises in building customer experiences is critical to helping customers succeed. It’s certainly part of what sets IBM apart from other competitors.
Bottom Line
This deal makes sense for IBM and for the new, as-yet unnamed entity that will become a stand-alone company. Its prospects are good, but challenges remain. This is a competitive, rapidly changing market in which critical mass plays a major role in success.
The growing priority for enterprises is to support customer journeys across all parts of the customer lifecycle. It’s about breaking down departmental silos and creating a holistic, enterprise-wide view of customers. Whether and when this new entity figures that out remains to be seen.
For customers, there’s substantial up side. If nothing else, the new company will have a clear focus and investment strategy. And there’s nothing like clarity of purpose to ensure good follow-through.
