Friday, August 13, 2010

IBM Buys Unica: Will Acquisitions Now Shift to B2B Marketing Automation?

IBM announced this morning that it was purchasing enterprise marketing automation leader Unica for $480 million, more than double the company’s current stock market valuation. This is wholly unsurprising: as the last and only big independent left in its space, Unica was obvious acquisition bait. It was also a motivated seller, since it faced an increasingly impossible struggle to fund the product enhancements necessary to compete with the likes of SAS, Teradata and Siebel / Oracle. Conversely, IBM is on a customer intelligence acquisition spree that has already included Coremetrics Web analytics, Sterling Commerce B2B integration and Cognos and SPSS business analytics.

There’s been some comment (I’m looking at you, Jonathan Block of SiriusDecisions) relating the IBM/Unica deal to consolidation with the B2B marketing automation industry. Sorry, but I don’t see a connection. As I discussed in my own post on industry consolidation, Unica belongs to the class of marketing systems that serve consumer marketers. Its acquisition is basically the completion of the consolidation of that space, not the start of consolidation among B2B marketing automation vendors. (I’m overstating a bit: there are a couple of B2C vendors left including Neolane, Alterian and SmartFocus, although the latter two use proprietary database engines that would make them difficult to integrate into a larger enterprise suite. Probably the most prominent survivor is Aprimo, but they’re more B2B.)

If there’s any connection at all, it’s that this acquisition may spur Web content management vendors to accelerate their own acquisition of marketing automation capabilities. I discussed this a bit in my post on Adobe’s acquisition of Day Software and in the industry consolidation post. Given that there are so few B2C marketing automation vendors left, the Web content management players are almost forced to consider buying a B2B marketing automation system. (The other option would be email vendors like ExactTarget and Responsys.)

This isn’t really a bad thing: the B2B marketing automation products have pretty much all the capabilities of the B2C systems and then some. On the other hand, most B2B systems are designed for smaller data volumes and have less flexible data structures.

The bottom line is probably that the upper tier B2B marketing automation vendors (Eloqua, Silverpop, Aprimo, possibly Marketbright) are next in line to be bought. But you already knew that.

8 comments:

jblock said...

David, while I agree with most of your analysis, Unica has been addressing the B2B market, which was the impetus behind its SaaS solution. While much of its customer base is skewed toward B2C, it has been growing its B2B customer base and are high on the consideration lists of our clients, which are primarily B2B.

Jonathan

David Raab said...

Jonathan, yes Unica has been addressing B2B, but they are not a major player and IBM certainly didn't buy them for that reason.

Jeff said...

Where's the love? No mention of Entiera in there as an EMM player? Actually, my fault, I haven't updated you on the application for over a year, but we should talk and you should see where we've come.

It is interesting to me how immediately following an aquisition, everyone is so positive about the potential. Me, I tend to look at the history of this market and I see it littered with former leaders in this category that are now no longer heard of. There is:

1. Max$ell - bought by Harland in 2005 and is dead.
2. CIC/AnalytiX - bought by Experian in 2008, gone.
3. Xchange - bought by Amdocs in 2002...gone
4. Prime Response - bought by Chordiant in 2001 - not seen lately
5. e.piphany - bought by Infor in 2006(?) - Didn't make recent Analyst evaluations...

So, my question is...will IBM really be the exception here?

David Raab said...

There's a bigger question, which is IBM's attitude towards application software in general. They haven't traditionally done a lot in that market. But it seems they're focused on it now. Their strategy with other recent acquisitions (SPSS, Cognos, Coremetrics, Sterling, etc.) seems to be let them retain separate operateions. That would bode well for Unica's chances at keeping its identity and thus its market position.

museandmaven said...

Hi David,

As a former IBMer, a marketer, as well as someone who has delivered Unica projects, here's a different viewpoint...and I should make clear that these are my opinions as an observer, not those necessarily of my former employer (disclaimer complete: check).

Look at the value equation to see how likely Unica is to survive as its own entity...IBM paid 4.9B for Cognos. They paid 480m for Unica. So yes, they are acquiring software, but let us not overestimate this acquisition. I'd characterize it as small but strategic.

As with any IBM acquisition, they should retain separate operations for a period, at least 6 months. It takes anyone that long to understand how to navigate the global and virtual halls of a 300,000+ person organization. After that, it takes some time to fit the pieces together, so call it a year before integration. Sales and Financials are priority. Whereas financials will be integrated, it will be necessary for IBM to rely on Unica sales, IBM hasn't made a practice of selling to CMOs. (Face it, IBM has a CFO, CEO, CIO and even HR and Supply Chain executive study. However they have yet to fund a CMO study. I tried, oh how I tried)...

Where Unica could pay real dividend to IBM would be in opening doors that might have been a little stubborn or stuck in marketing. Unica name longevity is tied to its ability to build IBM brand permission - and that requires the full abilities of the organization (and its partners) to deliver. The average Unica deal size (between 300k to 500k in 2009) is such that unless it is coupled with additional parts of the blue stack, additional services (whether GBS or recurring), it isn't going to set the IBM world afire. Sorry.

The goal will be for everyone to figure out what's in it for them. Software, GBS, MBPS, and outsourcing all overlap, but don't necessarily collaborate perfectly in an enterprise of that size. (And yes, I could have been more critical there but then I once bled blue.)

Last, IBM's other revenue maker is outsourcing. There are few really successful models - IBM or other - that manage outsourcing of campaign development to India/Phillipines/Czech/Brasil. Not that it cannot be done - it surely can. Just as of earlier this year, it wasn't.

After I read Jon's off-base post I decided to address the situation in my own blog. I can understand when someone only sees a small slice of the situation how they might reach those conclusions.

I will do another one this week, discussing how customers can get the most out of this. I am not sure what Aprimo might do, but I know Alterian has a new and improved analytics GUI in the works that is worth seeing...

David Raab said...

Thanks Cristene. Excellent insight and you're probaby right that Unica is too small to remain an independent brand within IBM. Based on their comments, it's pretty clear that IBM sees Unica as giving it an offering for CMOs, where it never had one. So maybe they'll finally fund that study for you!

They see a CMO product from IBM as "transformational" (their word) becasue they feel no other enterprise software company has ever had a product targeted at CMOs, even though the actual functionality has been available elsewhere. This is the sense in which it "legtimizes" the category (not their word) by giving it a clear definition and, thus, should greatly expand adoption.

Reading between the lines just a bit, the fact that IBM is now offering this may give CMOs more credibility with CIOs, CFOs and CEOs when they propose buying the system. As we all know, CMOs don't usually get a lot of IT support.

It's a plausible argument, but success requires support from the rest of IBM's sales organization, which isn't assured for such a relatively small ticket item. Combined with the price they paid, this suggests to me that IBM believes Unica will pull through much larger sales of other IBM products. I'm not so sure of that, but time will tell.

Note that this approach relies heavily on the power of the IBM brand, making it more likely that the Unica brand will fade away.

Jeff said...

David,

I appreciate your recognition of Aprimo's strength in B2B Marketing. It shouldn't be presented to the deficit of our B2C Marketing Solution capability, however. B2C Marketing customers represent more than half of our current customers. Aprimo is rare in our ability to serve the needs of both and go-to-market uniquely for both B2B and B2C.

As to IBM buying Unica, you need look no further than IBM's financials for insight. Any company with 80% of their revenue from services has clear purpose. IBM is a services company and is looking for ways to expand their offerings.

Tewks said...

David,

As you said, certainly the acquisition shouldn't come as a huge surprise. Also, I hadn't noticed your coverage of it before, but I hugely concur that WCM/CMS or ESP's will be the 2nd wave of acquisition.

I also concur with Cristene that this acquisition really dove ties with the data driven marketing story that IBM can now tell to the CMO. I see the Unica acquisition as enabling the speaking component of the stack they are putting together.