IBM Buys DemandTec In Cloud Analytics Move

IBM has signalled its continuing commitment to the Cloud after announcing a deal to acquire DemandTec, a maker of cloud-based marketing and sales software, for $440 million (£280m).

IBM officials said the acquisition of DemandTec will extend IBM’s Smarter Commerce initiative by adding cloud-based price, promotion and other merchandising and marketing analytics to help companies better define the best price points and product mix based on customer buying trends.

The deal, announced 8 December, is expected to close in the first quarter of 2012.

More Responsive

“IBM Smarter Commerce is redefining how brands buy, market, sell and service their customers in ways that their customers want,” said Craig Hayman, general manager of Industry Solutions at IBM, in a statement. “Bringing science to the art of pricing and promotion is a big part of this strategy, and the combination of DemandTec and IBM will help marketing and sales executives in retail and other industries drive more revenue and increase profitability.”

IBM officials said they believe companies are struggling to meet the demands of rapidly shifting customer buying patterns in the era of mobile and social networks. This new digital marketplace requires companies to be highly responsive to consumer demands on the fly. Whether it’s setting and executing the right pricing strategy or the ability to automatically adjust pricing based on online and offline data, being able to rapidly shift to market changes has become a key competitive advantage for global businesses, IBM said.

IBM estimates the market opportunity for Smarter Commerce at $20 billion (£13bn) in software alone. Extending these capabilities to the cloud gives organisations immediate access to consumer information, potentially providing instant return on investment.

DemandTec produces cloud-based analytics software that enables businesses to examine different customer buying scenarios, both online and in-store. As a result, companies can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

Good Fit

“DemandTec has unprecedented capability to improve customers’ price and promotion tactics on a stand-alone basis and connect retailers and manufacturers for collaborative planning through the cloud,” said Dan Fishback, president and CEO of DemandTec, in a statement. “IBM Smarter Commerce is the perfect fit for DemandTec. IBM is the only provider of price and promotion offerings within a rich solution set that supports companies’ buy, market, sell and service processes.”

“We view this deal as consistent with IBM’s focus on value-added data analytics (also seen in past acquisitions such as Q1 Labs, i2, Netezza, etc.),” said Brian Marshall, an IT hardware analyst with International Strategy and Investment Group (ISI Group), in a notice on the acquisition. “We would expect that IBM’s broad channel and global customer footprint will help accelerate growth and make the deal accretive (i.e., “Sam wants his money back…”). As online and mobile commerce grow rapidly, we think this software asset will prove very strategic to IBM in helping customers identify and benefit from shopping trends.”

IBM launched its Smarter Commerce strategy in March 2011 and claims leadership in several of the various categories that make up Smarter Commerce. The acquisition of DemandTec will extend this leadership by enabling companies to use cloud computing services to gain insights about customer merchandising and pricing preferences to better market, sell and deliver the right product at the right place, and at the right price. DemandTec also expands IBM’s Software-as-a Service (SAAS) strategy by adding additional, subscription-based offerings to IBM’s SAAS solutions portfolio.

The acquisition is subject to DemandTec shareholder approval, applicable regulatory clearances and other customary closing conditions.