Today, IBM announced that it has entered into a definitive agreement to acquire procurement sourcing, supplier lifecycle and contract management advanced technology provider Emptoris.  Financial terms have not been disclosed and the acquisition is expected to be completed in Q1-2012.

Supply Chain Matters considers this announcement to be very significant for the sourcing and procurement technology market because it adds another large and influential player to compete with the existing ERP players for buyer choices in this technology area. This market is about to become much more dynamic.

This announcement comes nearly a week after IBM’s other acquisition related announcement related to DemandTec, a cloud-based provider of pricing and demand optimization software. We had planned to dedicate a commentary just to this acquisition, but IBM has obviously stepped-up the clock speed for end-of-year acquisition announcements related to its Smarter Commerce umbrella.

Supply Chain Matters had the opportunity to attend IBM’s Impact 2011 conference last spring.  In our summary impressions commentary, our takeaway was that IBM is moving quickly and aggressively to make a renewed presence in supply chain related software that will umbrella B2B/B2C commerce and supply chain intelligence capabilities.  We believed at the time that something big was underway, and events to date certainly reinforce that belief.  When we assimilated our 2012 Predictions for Global Supply Chains, we had IBM in mind when coming up with prediction seven, our belief that there would be increased M&A activity within hot supply chain technology areas in the coming year. Obviously, IBM is first out of the gate in that dimension.

The IBM Smarter Commerce umbrella encompasses four broad segments: Buy-Sell-Market-Service processes.  According to this morning’s analyst briefing, Emptoris will augment the Buy segment of the unfolding IBM Smarter Commerce product strategy.  As with similar acquisitions such as that of Sterling Commerce, Emporia’s stand –alone brand will be subsumed by the IBM Smarter Commerce branding of technology and services offerings.  Existing Emptoris headcount will similarly be assimilated, but IBM executives were naturally reluctant to go into any specifics other than praise for Emptoris’s existing team.

The specific implications for the market and for Emporia’s existing customers are many.  The following is our initial observations:

For the market:

• IBM becomes an even more significant player in supply chain related technology, especially for the dimension of integrating customer fulfillment, supply chain networks, sourcing and procurement together in an integrated information stream.
• For the specific sourcing and procurement technology arena, whereas best-of-breed remains a compelling alternative to ERP offerings, IBM has the potential to add a third dimension, multi-entity B2B networks that connect Buy and Fulfill.
• The notion of providing procurement focused customers with both advanced software and complete business process managed services options just got more compelling because IBM now has the potential to bring both elements together as a single vendor. Emptoris has previously had strong relationships with Accenture and other consulting, procurement BPO and systems integrators.  That could change as Emptoris becomes the preferred option for IBM Global Services. For its part, IBM executives were quick to point out that they are comfortable with co-existence with current ERP and global services integrators and that a level of maturity has been reached regarding the reality of customer needs.
• IBM continues to broaden its strong influence on existing IT teams to now encompass Chief Procurement Officers (CPO) and other C-Suite executives that have continued concerns regarding their global supply chain management capabilities. IBM is moving its strong influence into supply chain functional decision makers as well.  IBM was not shy in expressing its goal to make this advanced technology available to broader geographic markets, including China.
• IBM has always demonstrated detailed due-diligence in its acquisition choices, and obviously surveyed the existing landscape of advanced procurement technology providers, including the other big elephant Ariba. The open question is what happens next, since the dynamics of this market have obviously changed.

For Existing Emptoris customers:

• According to IBM, both companies remain independent until this transaction formally closes, expected in the first quarter of 2012. Emptoris technology will then come under the umbrella of IBM Smarter Commerce division.
• The acquisition by IBM will obviously bring the potential for bigger pockets and for added resources in product development, enhancement and services. Look for more emphasis on industry-specific requirements in the sourcing and procurement of both direct and indirect materials and services. The transition period however could be a bit rocky as Emptoris is assimilated into a very large organization.  For its part, IBM has shown a rather positive track record to date in assimilation, going as far as to appoint a dedicated IBM Integration Executive as a firewall to internal in-fighting or perceived overlaps. However, Emptoris has had its own share of recent acquisitions and the integration effort may well be a bit more complex.
• Look for some senior executive changes of existing Emptoris management.  Obviously, the current era of the private equity stewardship, leadership and funding by Marlin Equity Partners will come to an end, with perhaps a lucrative financial reward. IBM will have to make subsequent decisions in providing a management structure that can now rely on broader executive leadership. In the analyst briefing, IBM did demonstrate a keen awareness to Emporia’s current stellar reputation for high touch customer service and more than likely will not want to mess that up.
• IBM has acknowledged that current Emptoris contractual terms and conditions will be honored. Over time, these agreements will fall under those of IBM and its sales teams, and Emptoris products will be listed within the IBM product catalog.
• Finally, Emptoris customers stand to gain, over time, broader choices in needs to tie supply chain cost saving mandates to other supply chain process dimensions, and to enhance advanced analytical capabilities. IBM Industry Solutions General Manager Craig Hayman was quick to point out his vision and belief that: “we want to embed analytics into the fabric of business processes”.

At first take, this announcement has potential positive connotations for existing Emptoris customers and prospects, and rather dynamic ones concerning the existing advanced procurement technology market.

Supply Chain Matters will provide added commentary as further information and additional conversations become forthcoming.

Bob Ferrari

©2011 The Ferrari Consulting and Research Group LLC and Supply Chain Matters.  All rights reserved.

This posting will address our final Supply Chain Matters summary impressions from the recently held IBM Impact 2011 conference.  Readers can view any of our update commentaries that occurred during the conference at the following web links:

Commentary One- Initial impressions of the conference.

Commentary Two- Highlights of the Smarter Commerce mini-tent session.

Commentary Three- Highlights of Target Stores implementation of online commerce platform in eight weeks.

Commentary Four- Product strategy implications in Smarter Commerce offerings.

Commentary Five- Joint interview with Infosys Ltd. senior executives on supply chain executive top-of-mind topics related to cloud computing and other business processes.

We attended Impact 2011 with mixed anticipation.  IBM is a fairly large, globally based technology provider and conferences of this kind, especially with over 8000 attendees, can tend to be overwhelming with not a lot of clarity in product direction and strategy.  Having previously attended the Sterling Commerce annual customer conference (Sterling has since been acquired by IBM), we were not sure of what to expect in the area of support for B2B/B2C commerce, order fulfillment and other supply chain business analytics and intelligence process needs, other than the fact that IBM has been conducting multiple acquisitions related to these areas.  We were pleasantly surprised by the level of product assimilation that has occurred thus far, as well as the longer-term direction.

We also attended Impact 2011 under the sponsorship of the Infosys Ltd. SCM practice, which has a long history as an implementation partner of Sterling applications.  Under the IBM umbrella, Infosys can possibly be viewed as a competitor for integration services.  During all of one-on-one interview sessions with IBM executives, that did not appear to be an issue and we were provided an openness of information.

Much of the IBM acquisition activity is now being assembled under the Smarter Commerce umbrella of products and services. The highlight of this activity came on the afternoon of day one in a session titled Smarter Commerce Mini Main Tent, which attracted by our unofficial count, over 500 attendees.  The session outlined IBM’s intentions to direct Smarter Commerce around Buy-Market-Sell-Service process support with on-premise and cloud type software and support offerings. (For more detailed overview, please review our Commentary Two posting).  Today, the focus of smarter Commerce lies in Retail, CP and Distribution industry support, but IBM will surely provide specialized support for additional industry sectors.

Another important observation is that even IBM has come to acknowledge that customers, while valuing the broad vision and overall support capabilities of enterprise-class technology providers, demand that deployments be provided in smaller, more manageable increments.  It was rather interesting to observe IBM Services, similar to an SAP or an Oracle, announce and speak to bundled value accelerators offerings designed to get customers up and running in a quicker manner with more manageable portions of technology with each phased increment.

As with many IBM conferences, there was multiple messaging directed at what’s on the mind of senior executives (your boss) and why you should care.  In our view, IBM would be better served in also messaging on how supply chains, and supply chain professionals can be better helped with IBM technology.

As noted in our commentaries, IBM has moved quickly and aggressively to make a renewed presence in software and Smarter Commerce will umbrella B2B/B2C commerce and supply chain intelligence capabilities.  Something big is underway and the stakes are high for existing enterprise software and best-of-breed vendors  Customers will still demand choice and independence in these areas, and IBM will need to move carefully in assuring that customers will have options in technology, database and integration partner services selection.  Then again, having the IBM name behind all of these various capabilities does provide certain comfort for customers.

Moving forward, IBM will need more industry focused offerings and additional acquisitions will follow. Smarter Commerce and supply chain analytical capabilities may well deserve their own dedicated customer conference.

Bottom-line, supply chain professionals should keep an eye toward IBM as being a significant new force in the multi-channel commerce and supply chain analytics area.  The competitive landscape is about to get much more interesting in electronic commerce, customer intelligence and social related technologies.

Bob Ferrari

I came to Impact 2011 from my previous following of Sterling Commerce and Infosys Technologies. Thus, as a supply chain blogger, I did not anticipate that an IBM technology conference would have such applicability to the long-term implications of supply chain and multi-channel commerce management.  My have events changed in such a short period of time.

In anticipating what I could expect at this conference, candidly my  expectation was that there might have been an outside mention of Sterling Commerce capabilities and its associated application integration components, let alone capabilities of ILOG in business rules, supply chain optimization and design.  To my pleasant surprise, all of these various standalone vendor technologies were mentioned by select customers in the context of a combined set of current and planned future capabilities.

A mere 15 months ago, IBM’s notion of smarter commerce did not exist. In a short period of time, by enterprise technology vendor norms, $14 billion has been invested in acquisitions of business analytics technologies.  Add to that $2.5 billion in end-to-end value chain, order fulfillment and other supply chain related applications and IBM now has the potential to make a definitive statement and presence in the B2B and B2C commerce domain. There are distinct advantages for being a cash rich, global player in enterprise IT and services, especially with the IBM name and reputation.

Five capability areas have been defined thus far:

• Advanced analytics
• Cross-channel commerce
• Cloud computing
• Supply chain planning and execution
• Social business

At today’s news conference focused on smarter commerce, as well as executive interviews, I probed for the declaration of a definitive roadmap that defines the end-state of where IBM is headed in this area.  The answer, as expected, was somewhat coy, which, in our view, reflects on the fact that this is still a work-in-process.  Existing customers, whether Sterling Commerce, ILOG, Coremetrics, Cognos, Unica and perhaps others to come, will seek and demand elements of strategic direction and business strategy.  Our sense is that the game plan is still evolving and there may well be some further acquisitions in the coming months.

IBM has moved quickly and aggressively to make its statement of capabilities in this evolving area and competitors such clearly take notice.  Something big is underway and the stakes are high for existing enterprise software and best-of-breed vendors  Customers will still demand choice and independence in these areas, and IBM will need to move carefully in assuring that customers will have options in technology, database and integration partner selection.  Then again, having the IBM name behind all of these various capabilities does provide certain comfort for customers.

Clearly missing is articulation of industry-specific capabilities, but the elements are already forming in areas such as retail.  Broader user messaging that blends the needs of supply chain operational, planning, as well as IT process needs is underway but needs more refining.

Bottom-line, supply chain professionals should keep an eye toward IBM as being a significant new force in the multi-channel commerce and supply chain analytics area.  The competitive landscape is about to get much more interesting in electronic commerce, customer intelligence and social related technologies.

Bob Ferrari

One of the promoted highlights of this afternoon’s conference agenda was a session on Smarter Commerce with the theme of the new intelligent customer as king. If there were ever an indication of which topics were most top-of-mind among attendees, it had to be this one.  My very unofficial visual estimate noted in excess of 500 attendees for this particular session with many standees in the back of the room. Multi-channel commerce and operational capabilities apparently are on the mind of IBM’s customers.

Craig Hayman, General Manager of IBM Software Industry Solutions kicked off this session by setting the stage for the new empowered and connected customer who is driving new paradigms at every phase of the commerce cycle. Mike Rodin, Senior Vice President of IBM Software Solution Group noted the billions of dollars of recent acquisitions targeted to enhance the company’s smarter commerce portfolio of technology and services.  That portfolio now includes:

On the Buy side: ILOG, Sterling Commerce

In Market support: Utica, Core Metrics, WebSphere Commerce

On the Sell side: Sterling Commerce, ILOG, WebSphere Commerce

On the Service side: Sterling Commerce, Utica

Predictive analytics: SPSS, Cognos

Data Warehousing: Natezza

Three customer panelists each noted how rapid changes in customer fulfillment and supply chain business models have driven changed requirements and an outside-in focus on the customer as the epicenter of commerce.  These requirements include accelerating use of mobile technologies.

Frank Kern, Senior Vice President of IBM Global Business Services provided an insightful observation regarding today’s unprecedented level of supply chain complexity and business change.  Businesses cannot manage their way out of this complexity, as had been the case in the past.  The new skill and process requirement is creative leadership which translates to how quickly a business knows about a situation, and how quickly and timely that business responds.  A further message should resonate specifically with supply chain management and supporting IT professionals. In this era of the ‘new normal’ of business, creative leadership translates to assessing what are the best possibilities vs. what is our biggest problem.  As the after-effects of the devastating earthquake that occurred in Japan continue to permeate through global supply chains, this tenet of creative leadership is already beginning to show among certain impacted industries.

After this afternoon’s session on smarter commerce, this author came away with an analogy of a puzzle of different shapes and contours.  In solving a puzzle, one assembles all of the required pieces and then begins to fit the pieces in-place.  In the view of Supply Chain Matters, IBM is assembling the pieces of smarter commerce, supply chain and predictive analytics capabilities.  In the messages of this conference, IBM is now transitioning into packaged technology and service offerings that it believes will assist customers in transitioning to smarter commerce in a cost effective and timely manner. The seriousness of the commitment and focus is reflected in the executive presence at this conference.

During the remainder of the conference, we hope to focus on the customer view of these Smarter Commerce capabilities.

Bob Ferrari

This week Supply Chain Matters is attending the IBM Impact 2011 conference in Las Vegas along with 8000+ other attendees.  This IBM customer conference was designed to focus on IBM’s middleware and integration technologies which include WebSphere, Cloud and SmarterCommerce offerings. Our attendance is by invitation of Infosys Technologies, one of the Gold sponsors of this conference event.

We begin our first commentary with some general observations.  We were pleasantly surprised to see the large number of attendees at this conference, which IBM indicated was 31 percent higher than last year’s conference.  This is perhaps an indication that corporate attention and consequent IT budgets are beginning to loosen-up and that planning for a new phase of technology investments may well be on the rise.

This morning’s conference kickoff opened with a live band, complete with multiple moving stages, along with the comedy of Larry Miller.  I must admit that it has been quite a few years since I’ve witnessed a technology conference opening with such flair. Kudos to IBM for bringing back panache and embedded entertainment to a conference.

The kickoff speakers set the tone for an appropriate theme of optimizing for growth and business delivery results.  One important key piece of data noted IBM’s recent CEO key business issues survey which found that nearly 80 percent of CEO’s expect business complexity to increase, but only half feel that their business is prepared to deal with this challenge.  This so-termed ‘complexity gap’ is what IBM feels will motivate a more rapid pace of business transformation.  This same finding was also emphasized in the Smarter Commerce session held this afternoon, which will be touched upon in our second commentary.

A number of new product announcements were made, among them being:

IBM Business Process Manager, a new unified Business Process Management (BPM) platform that provides customers visibility into key business operations.

IBM webSphere Application Server (WAS) 8, upgraded to speed the development of applications and services.

IBM WebSphere ESB Registry Edition, to accelerate the adoption of Service-Oriented Architecture (SOA) adoption.

IBM WebSphere Application Accelerator, deployed in conjunction with Akami.

IBM Workload Deployer, to help customers setup private clouds at a much more rapid rate.

There were a host of other product and service announcements which we will not get into in this initial commentary.

The most interesting perspective in reflecting on the morning keynote is that IBM has invested over $60 billion in the acquisition of 16 companies that returns IBM to being a software and business process solutions provider.  That now includes smarter commerce, distributed order management and supply chain capabilities.  IBM is now positioning to inform and motivate customers to take advantage of the new portfolio.  The remainder of our commentaries will reflect on the supply chain related aspects of these capabilities.

Bob Ferrari