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IBM Emptoris v10, Smarter Commerce, and Strategic Sourcing

Written By: TEC Staff
Published On: November 27 2013

By Bob Eastman and P.J. Jakovljevic

Emptoris has been part of IBM for about 20 months, and we’re coming up on the close of its first full fiscal year under the IBM label. Since the acquisition, IBM has been integrating Emptoris into its three-year-old Smarter Commerce conception (Emptoris was known to have had some 750 employees at the time of acquisition, but IBM will not disclose the number of employees now associated with it). This has included passing the reins from former CEO Patrick Quirk to longtime IBM Software Group veteran Roque Martin, who previously worked on the integration of Sterling Commerce, and before that was an executive with IBM Rational. (For more background on Emptoris, read P.J. Jakovljevic’s comprehensive profile: Emptoris: Opening a New Chapter of Prosperity, Part 1, and Part 2, as well as the article Talking to an Emptoris Exec Post-Empower 2011 (and Pre-IBM 2012), on the TEC Blog.)

IBM’s acquisition of Emptoris (chosen, by all indications, over Ariba) should be looked at as part of a long series of acquisitions that IBM has made to feed its Smarter Planet initiatives (more on this later). IBM was actually an Emptoris user before acquiring the company, and, Emptoris is in fact in the midst of another 2-year rollout within IBM, to help IBM manage some of its $37B of purchases across IBM. (Of course Emptoris also serves as a technology enablement for IBM’s procurement consulting business.

On the product front, IBM Emptoris has a lot to talk about. In particular, IBM’s Virtual Supply Master (VSM), a global master repository for supplier information, has considerable potential for offering further savings with the reconciliation of data across multiple applications and across categories, regions, suppliers, and organizations. The VSM technology cross-references records from different sources to build complete supplier master profiles, unifies all activity with a supplier across geographic regions and business units, and promises to simplify and automate the process of on-boarding new suppliers. There is an initial customer in the process of rolling out VSM, with multiple other customers likely to be reported in the first quarter of next year.

IBM—like many other enterprise software vendors these days—is known to be putting considerable focus on mobile, cloud, social, and analytics (not surprisingly, analytics gets particularly strong play from IBM). IBM Emptoris’ solutions are part of IBM’s SmartCloud solutions, and IBM reports seeing strong cloud activity from the Emptoris customer base.

To best understand Emptoris one needs to understand IBM’s Smarter Commerce.

Smarter Commerce Revisited
Smarter Commerce, introduced three years ago in April 2011, is IBM’s well-promoted vehicle for leveraging a broad set of technologies within IBM’s portfolio, and presenting these as a focused set of solutions designed for a specific set of customer processes.

While IBM has described this as “leading a new market”, the Smarter Commerce initiative is really more about how to package and present IBM’s solution offerings around its four Smarter Commerce focuses—“Buy”, “Market”, “Sell”, and “Service”. While some might argue that Smarter Planet is as much an ad campaign (that you may find to be either brilliant or condescending), there can be little question that IBM has done a creditable job at putting together a coherent and sticky message around its “Smarter” business which IBM has called a “new market that it estimates will grow to $20 billion in software alone by 2015”.

IBM’s focuses are on four key growth initiatives (Smarter Planet, Growth Markets, Business Analytics and Optimization, and Cloud Computing); Smarter Planet is broken up into Smarter Commerce, Smarter Cities, and Social Business, split as follows:

Smarter Planet:
  • Smarter Commerce
    • Smarter Commerce Buy—Adaptive procurement and optimized supply chain
    • Smarter Commerce Market—Targeted and personalized marketing across all channels
    • Smarter Commerce Sell—Seamless cross-channel customer experience
    • Smarter Commerce Service—Anticipating behavior and delivering flawless customer service
  • Smarter Cities
  • Social Business
In support of these initiatives, IBM has been busy with a series of acquisitions for some time (IBM reported in February that it had spent some $16 billion (USD) on 35 acquisitions since 2005), and is unabashed about the likelihood of additional acquisitions. Key acquisitions to-date that support the Smarter Commerce initiatives have been:
There continues to be speculation about why IBM decided to acquire Emptoris rather than Ariba (which has since been acquired by SAP). By not acquiring Ariba, IBM missed an opportunity to add a supplier network along the lines of that offered by SciQuest, TradeShift, E2open, and others. IBM would say that its focus more on strategic procurement lessens the immediate need for this, however the company prides itself on having a portfolio to cover the entire agenda of the chief procurement officer (CPO), and so there will continue to be speculation about what IBM eventually does in this area. (Might we see IBM absorb Kinaxis, and marry this with ILOG and Sterling Commerce to compete with E2open?)

How IBM Emptoris is Changing the Strategic Sourcing Landscape
The sourcing landscape has been at least as interesting to watch as other software segments, as it has been a continually morphing landscape as of late, where more than a few recognizable names have disappeared lately, while new players have been entering the market (most recently, Nipendo). There continues to be a lot of activity as vendors across the sourcing landscape form alliances around strategic sourcing, spend management, BPO, and procure-to-pay to offer broader capabilities across the entire sourcing spectrum.

There is, by all indications, a strong trend of vendors wanting to offer a broader set of sourcing capabilities in a suite offering. There has been therefore a lot of activity in the form of mergers and acquisitions, or lesser tie-ups and alliances to be able to offer these capabilities. There is no reason not to expect this jockeying for position to continue. Understandably, IBM is cagey about what vendors they think have the potential to challenge them. In addition to SAP/Ariba, other challengers could come (or have come) from the group of BravoSolution, Perfect Commerce, SciQuest (with CombineNet), and Zycus, one of the BPO consultants (Accenture has just acquired Procurian), or, longer term, potentially from any of several of other vendors (given all of the turmoil in this sector.) IBM partners with Coupa for spend management with a handful of customers; could Coupa be a future acquisition?

How Strategic Sourcing and Smart Commerce are Serving IBM
With all of IBM’s focus on marketing and thought leadership, one cannot help but wonder if execution—which means more than being in a constant state of restructuring—is getting lost in the shuffle. IBM itself pointed to execution issues in its latest quarterly call.

Among all of the points made by IBM’s Mark Loughridge (senior vice president and chief financial officer) in the quarterly call, these few stood out to us:
  • IBM’s results were affected by the lack of growth in China and other “growth markets” which turned out to not actually be growth markets, particularly for IBM’s hardware business.
  • IBM is looking to Smarter Planet, business analytics, and the cloud to drive a higher mix of software revenue which delivers higher margins for IBM, and to drive these to an annuity (i.e. SAAS) stream.
  • IBM’s Smarter Planet solutions were reported to be up more than 20% in revenues, analytics up some 8%, and IBM’s overall “cloud revenue” up more than 70% year-to-date (September 30, 2013), year-over-year.
IBM’s Smarter Planet and Smarter Commerce initiatives are very strategic and critical initiatives; IBM, despite its well-publicized challenges, is a formidable competitor in the market, and likely even more so as IBM adds additional acquisitions to its arsenal.
 
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