Feature
Jaws dropped when IBM announced it was selling its commerce and marketing cloud business to New York City-based investment firm Centerbridge Partners last month.
"Divesting the Watson Marketing and Commerce products to Centerbridge is surprising on the heels of HCL, and it takes a lot to surprise us!" wrote Forrester analysts Joe Stanhope and Rusty Warner.
Why Sell When the Martech Market Is Hot?
Just a few months earlier at IBM Think, Mark Simpson, vice president of commerce and marketing at IBM, gave a compelling presentation about the opportunities and responsibilities of artificial intelligence (AI) in the "experience economy." Simpson told marketers to stop selling themselves, and customers, short by viewing mouse clicks solely through a transactional lens. The experience (and the responsibility) is richer than that, he argued. Put AI into your workflow and you might see something "like a first-time father buying a crib."
For a brand to know they are engaging with a specific individual and to understand not only their wants and needs, but also their feelings can be game changing. At the conference Simpson said that between Watson's AI and the capabilities of IBM's expansive commerce and marketing portfolio, brands could marry emotions with data to attract and engage with customers effectively.
It is the same promise that other large marketing technology providers are making, including Adobe with Sensei, Salesforce with Einstein, Oracle with its AI capabilities and others.
Sounds great, no? Apparently not great enough for IBM to hold onto its Watson Marketing and Commerce business. On the surface the move seems odd: its platform is highly rated by analyst firms like Gartner and Forrester, and the martech market is hot, with 2019's spend expected to be as much as $100 billion, according to a report by marketing intelligence firm WARC. Doesn't IBM with its streak of revenue misses want a piece of that rapidly growing business?
Related Article: How to Simplify and Increase the Complexity of Your Martech Stack at the Same Time
A Sign of Things to Come for Tech Giants?
Some industry onlookers, like Real Story Group's Tony Byrne, suggest IBM and other large martech platform providers have enjoyed their time in the sun and that their products may even represent a risk to customers as opposed to those who use a best-of-breed approach. But others say that IBM, post Red Hat acquisition, is looking to go all in on the cloud and cannot afford the distraction.
Let's go with Byrne's argument for now. "Two decades and much gray hair later, I've come to the conclusion that the very biggest vendors can actually carry the highest risks in terms of product continuity. IBM, Microsoft, Oracle, Adobe, Google, and Salesforce aren't going to fail as companies, but they will kill individual products at the drop of the hat," he wrote in a blog post titled "Beware big vendors if you care about viability.”
In another post he argued that Adobe, Oracle and Salesforce haven't done well integrating their products and stacks, "leading to consistent (if not always loud) customer frustration."
Consider IBM’s marketing portfolio, which includes over 25 products: Watson Campaign Automation, IBM Tealeaf, IBM Campaign, Customer Experience Analytics, Watson Marketing Insights, IBM Journey Designer, Watson Real-Time Personalization, Watson Content Hub, Watson Commerce, IBM Configure, Price, Quote IBM Digital Commerce, IBM WebSphere Commerce, Watson Commerce Insights, IBM Order Management, IBM Store Engagement, Watson Order Optimizer, IBM Call Center, IBM Inventory Visibility, IBM Watson Pay, IBM Payment Gateway, IBM Dynamic Pricing, IBM Price Optimization, IBM Price Management, IBM Markdown Optimization, and Forms Experience. Some of these were built in-house, but others are based on acquisitions, including Aperto AG, bluewolf, Demandtech, ecx.io, Resource/Ammirati, SilverPop, Tealeaf Technology and Unica among others.
The big question for Byrne and others is whether any particular vendor, not just IBM, can put all of these products together and make the synergies between them better than a buyer of individual best of breed components can on their own, especially in a cloud-centered world.
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Ben Thompson of Stratechery asked the same question in an unrelated article about Microsoft: "Once you remove the burden of support and maintenance — that's handled by the service provider — it suddenly doesn't necessarily make sense to buy from only one vendor simply because they (software applications) are integrated. There is more freedom to evaluate a particular product on different characteristics, like, say, how easy it is to use, or how well it supports mobile."
There's also the question as to whether the awesomeness of each individual product that IBM, or any other vendor in any category acquires, gets muted as it becomes part of a larger whole. This is a question Centerbridge will now have to answer.
IBM is far from the only big vendor that has built its martech capabilities through acquisitions:
- Adobe has acquired Auditude, Behance, Day Software, Demdex, Efficient Frontier Technology, Magento, Marketo, Neolane, Omniture, Satellite TMS, TubeMogul and Tumri.
- Oracle has acquired AddThis, Art Technology Group (now Oracle Commerce), BigMachines, BlueKai, Compendium, DataLogix, Dyn, Endeca, FatWire, Maxymiser, Moat, Opower, Responsys, RightNow, Vitrue and more.
- Salesforce has acquired Buddy Media, CoTweet (via ExactTarget), DemandWare, ExactTarget, MuleSoft, Pardot (via ExactTaget), Radian6, RelateIQ, and SteelBrick among many others.
SAP is also in the mix, but more on that later this week.
Byrne and many others have said the claims to AI and machine learning capabilities by IBM and its competitors are more aspirational than reality at present, and also called IBM's systems of engagement complex. "This at a time when enterprises need to invest lower in the stack for true omnichannel customer experience," according to Byrne.
Related Article: Martech Realities: Integration, Build vs. Buy Decisions
... Or a Business Decision and Nothing More?
Gerry Murray, research director at IDC marketing and sales technology, sees it a bit differently. While it may appear that IBM and other large vendors are pitching a single (their own) solution as a catch-all, “First of all, there is no all-in-one martech solution for enterprises. The future is not about consolidated applications. It is about shared services among them for data, workflow, collaboration, analytics, AI, etc. and extending these services throughout the enterprise,” he told CMSWire. Moreover, he doesn't believe IBM's sale of its commerce and marketing portfolio had much to do with a larger trend.
"I don't think the sale was about marketing technology per se. IBM is focusing on its cloud platform strategy and go to market, which is focused on selling to IT. IBM is divesting businesses that do not fit that restructuring. But the future of the martech businesses under Centerbridge will be interesting to watch. It's unlikely there will be an exit on the scale of Marketo," Murray added.
Scott Mager, a principal at Deloitte Digital, told CMSWire that IBM fell short, not because of the quality of its offering but because it is a software and not a SaaS shop. "The complexity of implementing, operating and running this in-house is high. On top of that, IBM kept all of the solution's branding separate, where Adobe and Salesforce changed to the single brand. They [IBM] confused the market," he said.
Moreover, Mager does not believe that the best days for all-in-one, or mostly all-in-one, solutions are behind us. In fact, he told CMSWire that both Oracle and SAP have “maturing and differentiated platforms” winning customer interest. “As the CMO/CIO partnership increases and thinking shifts from marketing platforms to front-office platforms, we will see more of these solutions,” he noted.
As importantly, according to Dion Hinchcliffe, vice president and principal analyst, Constellation Research, vendors like SAP will be marrying the front end and back end which though “it’s not sexy,” is the way it should be done. The reasoning is pretty simple: By bringing operational data to customer experience data, enterprises will have a view of what is actually happening across the entire customer journey, including with orders, across product creation and delivery, invoicing and so on. Add in even more experiential data, not only from customers but also from employees, product and brand teams and you’ll get valuable insight that even the most ambitious point vendors will have a difficult time delivering, even in the era of services.
“Enterprises will be differentiating on end-to-end experience over the next three years,” Mager told CMSWire. “Marketing and marketing platforms as a silo are no longer the right way to think about it.”
So does IBM’s sale of its marketing and commerce portfolio signal a larger trend? It depends on who is answering the question.
