Is the Ongoing Marketing Software Arms Race Justified?

Oracle recently acquired Responsys shortly after acquiring Eloqua, paying steep and multiple times these companies’ respective annual revenues. Along similar lines was’s multi-billion dollar acquisition of ExactTarget, while Adobe wasn’t a slouch either when it acquired Neolane, years after the Omniture acquisition, to bolster Adobe Marketing Cloud. IBM did its share of marketing automation software acquisition via Unica, Coremetrics, and Tealeaf, creating its enterprise marketing management (EMM) division. Teradata acquired Aprimo, while CallidusCloud acquired LeadFormix. Are these vendors’ splurges and arms race justified, and will companies’ chief marketing officers (CMOs) spend more on technology than chief information officers (CIOs) by 2017 (as predicted by Gartner)?  

No Longer Will Your Father’s “Mad Men” Marketing Suffice
There seems to be ample room for growth in marketing automation or EMM software. Sales force automation (SFA), another component of customer relationship management (CRM) software, has long been helping sales managers view their sales pipeline, forecast, and discern which sales employees perform, and what should be done to better move the leads and opportunities through the funnel. But, nearly all sales folks customarily complain about the lack of leads, particularly those leads and opportunities that are qualified and viable (i.e., “hot” leads). Even with the SFA reports and dashboards with key performance indicators (KPIs), this general complaint of lack of leads is real, and creates pressure on marketing to produce enough quality leads, in addition to their traditional branding and other intangible and immeasurable activities.
Marketing has pretty much been around forever in one form or another. Marketing was typically used to convince consumers to buy the product and then keep on buying (i.e., to “seduce and keep” the consumer). Over the past few years, the methods of marketing have changed and improved, in great part owing to technological advancements. Marketers have become even more adept at selling their products and getting their marketing messages out to the buying public (somewhat ironically even using consumers to market for them, as seen in PBS’ recent Frontline episode called “Generation Like”). The role of the marketing department is expanding, as e-commerce sales grow and social and mobile outlets emerge as additional customer channels.

Recently, digital marketing has emerged as a cost-effective way to drive better marketing results. CMOs and marketing organizations now have a greater responsibility and accountability for driving the customer relationship than ever before. However, orchestrating interaction across touch points/channels (i.e., e-mail, mobile, social, display, and the Web) has become complex. Interactions need to take place through more channels, and as consumers move seamlessly among channels and devices over time, companies need to interact whenever and wherever necessary, based on consumer preferences. At the same time, marketers are being charged with demonstrating the hard return on investment (ROI) on their marketing investments and need to have the tools to measure marketing performance across channels and at each step of the way. So the role of the marketing department is to drive growth, and that mandate today includes product development, strategic planning, and customer service and interaction—or just about everything about the customer.
Ironically, though, marketing hasn't gone through the efficiency and automation rigmarole that other departments already have. The combination of the traditional and digital methods gives marketers an opportunity to engage consumers holistically. Traditional marketing presents an effective way to reach a broad consumer audience, whereas digital marketing can be used to create a relationship with the consumer that has depth and relevancy. Digital marketing takes the marketing experience one step further, as it enables marketers to instantly customize the one-on-one experience and communication in real time. Personalized messages on social channels like Facebook give marketers the ability to target consumers based on the information they share through direct marketing.
Marketing automation software has the promise of delivering more qualified leads and driving growth. As cloud software is (at least initially) cheaper than traditional on-premise software, particularly in terms of the internal information technology (IT) department cost, it might make sense to somewhat reduce the IT budget and give it to the CMO to spend on software as a service (SaaS) for leads creation and nurturing. As most of the chief information officer’s (CIO’s) systems are in maintenance mode or will be moving to SaaS/lowering license budget (really a shell game that moves money into operational business budgets), I think that CIO budgets will not continue to grow much. CMOs and plants operations are often not under the CIO and will start to erode the CIO’s budget. For a consumer product goods (CPG) or media company, the CMO spend could eclipse the CIO budget, but I think the CIO is still safe in most other verticals.

Navigating the Marketing Software Labyrinth
EMM consists of a raft of marketing software subcategories such as Web analytics, campaign management, digital asset management, Web content management (WCM), marketing resource management (MRM), marketing dashboards/analytics, leads management, event-driven marketing, predictive modeling, and more. In addition, one should differentiate between business-to-consumer (B2C) and business-to-business (B2B) marketing approaches and savvy, for which Oracle acquired Responsys and Eloqua, respectively.
Still in an emerging stage, the marketing software market is currently fragmented with a slew of point solutions. With a low barrier to entry in the cloud, the number of point (niche) CMO solutions will likely increase. The bigger EMM players will try to go broad (in part via a slew of acquisitions), while start-ups will be very granular. Over time, market consolidation will make many point solutions obsolete and their independent business unsustainable.
While most of these CMO software apps look cool, intuitive, and are cloud based, the real trick is to do all this integration and master data management (MDM) so that you can come up with some useful analytics from that Big Data. For example, figuring out that a particular “brick and mortar” store customer is in fact the same one that is now tweeting about your brand experience and/or is currently browsing your catalog. Again, the explosion of channels, devices, and data has made marketing in a digital world an extremely difficult task. Marketers who are able to create and deliver compelling experiences in real time across channels have the opportunity to generate significant customer value and brand loyalty. Delivering the best consumer experience in real time requires a deep understanding of customers, including the ability to analyze, assemble, and deliver the most appropriate content at the very moment of engagement. This concept is what Adobe calls "the last millisecond."
A point marketing automation application like Eloqua could provide an analytics application in the cloud. But its true value comes only when companies can tie that marketing activity to their customer base, financial information, supply chain information, and more. As integration can equate to more value, that could be particularly true in marketing software.
Thus, Oracle, IBM, Adobe, and other larger players have a colossal task, but also an opportunity, to tie up all those point solutions in their respective marketing clouds. Responsys and even more recently acquired BlueKai will join Oracle Eloqua, Oracle Social Marketing (based on the acquisitions of Vitrue, Collective Intelligence, and Involver), as well as Compendium’s content marketing solution—all as part of the Oracle Marketing Cloud. One should also expect integration with Oracle Commerce (from the ATG and Endeca acquisitions) and with Oracle Service Cloud (from the RightNow and inQuira acquisitions).
It is intriguing why SAP has been missing in action when it comes to blockbuster acquisitions in the space. Some speculate that SAP might go for Marketo, Silverpop, and/or Constant Contact as the largest remaining independent software companies in the space. Some even claim that SAP was among the final bidders for Responsys before the company decided to sell to Oracle, and that SAP might still come up with a counteroffer.
Though both SAP (via the hybris acquisition) and NetSuite (via its SuiteCommerce platform) are major players in e-commerce infrastructure software, neither has a leading position in marketing automation. I still vividly remember how at an analyst briefing at SuiteWorld 2013, the analysts were hammering on NetSuite execs for the lack of good marketing CRM, i.e., "You folks don't have the capabilities for your customers to plant the seeds for their new customers, nurture the leads, etc.!"
SAP is likely to add these capabilities, perhaps via some acquisitions and the rest via in-house development on the SAP HANA big data platform. Microsoft Dynamics seems to be following a similar path by not really splurging on MarketingPilot, Netbreeze, and Parature, and by developing the remaining functionality in-house. As the market is still immature, SAP customers’ CIOs are likely to be late adopters, and SAP might still have some breathing room to deliver those capabilities and catch up with the aforementioned competition.
It is still early to predict any market winners and losers here. For now, there seems to be plenty of opportunities for all.

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