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Thursday, August 26, 2010 by Helena Schwenk
It’s been a couple of weeks since IBM announced it wanted to buy marketing automation software provider Unica for $480 million. Coincidentally it just so happens that it’s been a little over two weeks since I joined MWD and so has come the perfect opportunity to put some of my thoughts down on paper and introduce myself to the MWD blog.
Paying the price for a market-leading vendor
Unica is a market-leading marketing automation vendor with around 1500 customers across a range of vertical industries including eBay (online marketplaces), ING (financial services), and Telefonica (telecommunications). Its technology helps companies integrate and streamline aspects of both online and offline marketing, a set of capabilities that typically comes under the marketing automation or enterprise marketing management banner. Given its profile IBM is clearly not frightened of paying a premium to get its hands on the company. It is paying $21 per share for Unica, which is a considerable mark up (around a 120% increase) on the stock’s closing price of $9.55. Clearly once the deal has received the necessary regulatory and shareholder approval IBM will be keen to integrate the company quickly to ensure it starts contributing revenues.
Unica brings a new customer analytics focus to IBM
The announcement also blows away the myth that IBM doesn’t do “applications”. Unica has built its business up by developing business-focused packaged analytic applications targeted specifically at marketing professionals rather than going down the traditional path of selling tools to IT. Similarly the acquisition also significantly bolsters the company’s customer analytics software credentials. While IBM has spent a considerable amount of money on acquisitions as part of its Business Analytics and Optimisation strategy – such as Cognos and SPSS – these acquisitions provide a more horizontal BI and analytics flavour to its expanding software portfolio.
Unica, on the other hand, focuses steadfastly on marketing operations where its software is designed to improve the customer management process. For example, one of the most common usage scenarios of its software centres on improving customer retention. Unica Enterprise (its core product suite) allows organisations to build predictive analytic models that analyse behavioural factors associated with customer churn and retention and assess their propensity to churn. This information is then used to create effective customer retention marketing programmes targeted towards those customers they don’t want to lose. Likewise customer acquisition is a core area for Unica Enterprise. This is an area that is set to become more of challenge for marketing organisations as they get to grips with new marketing channels such as Twitter and Facebook, and as customers increasingly expect a more tailored and personalised marketing experience.
However the benefits go two ways: as part of IBM, Unica will also be able to leverage the extensive expertise it has in Information Management. Creating a single view of a customer – especially one that takes into account their different touch points across the organisation – is an elusive goal for many organisations wanting to create effective marketing campaigns. IBM has a range of software capabilities such as IBM InfoSphere that can help organisations achieve this aim. But it’s not all about the technology; Unica (and its customers) will also benefit from IBM’s vast services organisation that can be used to accelerate adoption of its marketing management solutions.
Not surprisingly this announcement also raises questions about other possible customer application acquisitions. If IBM really wants to deliver an enhanced customer experience (as outlined here in its Unica FAQ document) then will it go after a CRM vendor? I don’t believe this will happen anytime soon, but that said it is one area where its main competitors Oracle and SAP can claim to have an advantage as they own a large proportion of customer management processes.
Talking of competitors I can’t help but feel that SAS will feel increasingly under threat by one time friend IBM. The company is the established leader in predictive analytics and has found success with its business-focused solutions including those for marketing automation. This acquisition, alongside that of Cognos and SPSS, is only likely to up the ante between both companies and place them increasingly at odds.
Product rationalisation must remain a priority
This acquisition also shows IBM isn’t letting up on its recent buying spree. This announcement comes hot on the heels of other acquisitions including Coremetrics, a web analytics provider, and Sterling Commerce, a B2B commerce provider, which were announced in August and May 2010 respectively. IBM is framing all three acquisitions as part of its move to support marketing professionals and build upon its investments in Business Process Management and e-commerce. While there are synergies between these three acquisitions, Unica will complement other parts of the IBM software portfolio in areas such as BI (for reporting), performance management (for planning) and Information Management (for data integration and data quality).
However there are some obvious overlaps too. Firstly in web analytics, Unica’s NetInsight product competes in the same areas as Coremetrics. Likewise Unica’s PredictiveInsight product has strong overlaps with SPSS. And let’s not forget that SPSS has experimented in web analytics when it acquired NetGenesis in 2001. The challenge for IBM going forward will be to rationalise some of these overlaps and clearly define its vision for how these acquisitions fit into its broader software portfolio as part of its goal to deliver a replete set of integrated marketing solutions. I look forward to hearing (and writing) more about this in the future.