In Part II of our series on the rise of the digital marketing suite we laid the groundwork for who is currently operating in the space today and selling into the CMO suite. The market has grown substantially in just the past 5 years and today calls big players like Oracle, IBM, Microsoft, Adobe and Salesforce the category leaders. For Part III on the landscape we continue to understand “how did all of these players get to where they are today, what are their strengths and weaknesses, and where are they going?“
We will again deviate a bit from the normal buckets here and focus instead on each of these 5 main players and their businesses while coming back to our buckets from time to time.
We have already covered Adobe Systems, Salesforce, and Oracle. Today we will move on to IBM.
History – If Adobe, Salesforce and Oracle predominately bought their way to the CMO in recent years, IBM has taken a much more internal build strategy to access marketing budgets. The company has built 4 products internally and only acquired 3 businesses for a little over $1B. They have spent the least of all of the big players by far and also were the first of them to actually formulate the ideas for a marketing solution starting in 2010. IBM took a similar approach to Oracle in that much of their early M&A around the marketer was to build off of a main product they have offered for over 10 years called WebSphere Commerce.
Starting around 2001 IBM (like Oracle) started out in the eCommerce vertical. Around this time, the company re-vamped their old Net.Commerce product to a re-named IBM WebSphere Commerce and started offering the core product on-premise to CTOs and CMOs mostly to bolt on customer data to the core infrastructure. It was their first foray into the marketing suite and was an internal project from the beginning as a way to capture more share in retail. They took about 9 years to move further and in June 2010 acquired Coremetrics (Undisclosed / Undisclosed) to get into the Analytics space. While the numbers have not been released we add Coremetrics here given the size was likely $100M+ and the company makes up a large portion of the analytics package that IBM offers today. Next in August 2010, the company made it’s second acquisition buying Unica ($447M EV / 4.1x LTM Revs) to get into the Marketing Automation and Campaign Management / Email Marketing space as well as drill further into eCommerce. The product was a great addition on top of WebSphere Commerce and much of the talk around the transaction was drilling further into specific industries (again note the similar approach as Oracle) with Unica as an addition. With 4 of the 6 categories covered by the internal build of WebSphere Commerce and acqusitions of Coremetrics and Unica, IBM began to start talking about the importance of the marketer in late 2010. They were really the earliest to do this, it was just a bit opaque at this point. In 2011 IBM got into the Content Management space by going internal again, renaming their old Aptrix product to IBM Web Content Manager and talking a lot more about the focus of this product towards the marketer. With all of these solutions on board we start to see IBM crystallize their older 2010 thinking. By June 2011 they pull these 5 categories together into what they call “IBM Enterprise Marketing Management.” This remains their core offering today and note that unlike Adobe, Salesforce or Oracle the company does not use “marketing cloud” in name and sales material and instead goes with this term as their equivalent. In May 2012 the company moved further into Analytics by acquiring Tealeaf ($500M EV / 10x LTM Revs) for the most amount and highest comp paid to date. Finally in late 2013 IBM launched their final two internal products, getting into the much needed Social space via a product called IBM Social Media Marketing Solutions and deeper into the Analytics space via a product called the IBM Digital Marketing Network.
Strengths / Weaknesses – The theme of IBM in marketing has primarily been on-premise tools, things built internally, and an intense focus on commerce. As a result they have arguably the best solutions out there for a retail or commerce focused marketer. Coremetrics still outcompetes Site Catalyst and OBI EE in retail and is generally referred to as a strong product in the market. Unica also does extremely well in certain verticals and areas and the core IBM internal products (particularly WebSphere Commerce) do stand up on their own. They have, of all the big 5, the most integrated of product suites and have not historically faced the integration challenges given so much was built internally and on top of existing infrastructure. That said, Coremetrics has trouble outside of retail, Unica is a largely on-premise product and expensive, and the internal products that IBM offers are for lack of a better word aging. In a world where the move to cloud infrastructure is so important IBM is seriously lacking today and continues to lose share as a predominately hardware and consulting vendor of old.
Go Forward – IBM has largely missed out on the cloud revolution in marketing and still views their CMO access points primarily through the lens of their on-premise Smarter Commerce initiatives that they drive. That feels like a difficult spot to be in especially when their core offering of WebSphere Commerce isn’t particularly relevant to old school or next generation commerce marketers who are moving more to the cloud. As a result, we see the story ending one of two ways here for IBM. The company has not historically been very acquisitive so there is the possibility of submitting defeat (in a theoretical sense) in marketing to Adobe, Salesforce and Oracle. They could really try to focus on their commerce segments and keeping those customers for as long as possible. The other approach would be IBM going “cloud shopping” and doing what Adobe, Salesforce, and Oracle did from 2010 until today. They would be behind on the racetrack but the market is still large enough for the taking. The former feels more realistic to us given their approach to date (with all the M&A in recent years they stayed out of the game) but we wouldn’t rule out anything with the current leadership and interest in the space.
That’s it for IBM. Next we will move on to the final company, Microsoft.