May 26, 2010 0
On Monday, IBM announced that it had reached a legal agreement to buy Sterling Commerce from AT&T in an all-cash transaction of approximately $1.4B. Yes you read that correctly. $1.4B in cash.
It’s the first major acquisition after Sam Palmisano discussed a pool of cash to the tune of $20B set aside for strategic purchases. Obviously the acquisition is subject to all the normal applicable regulatory clearances and other customary closing conditions, but the deal is expected to close later on this year. So what is the detail behind the deal and why is it important? I thought I’d take a look at the details available to ascertain a bit more about what Sterling Commerce do, and what products and services the company provides. What I found was that B2B integration and the ambition to provide cross-channel selling infrastructure are at the heart of the deal.
So who are Sterling Commerce?
In essence Sterling Commerce is a software and services company that specialises in business to business integration, order management and logistics, as well as cross-channel selling and fulfillment solutions. Their aim is “to help businesses connect, communicate and collaborate with their clients, partners and suppliers to increase revenues, reduce costs and streamline the way organisations do business.” Not a bad business mantra at all. And with IBM aiming to be top of mind and centre of attention when it comes to demonstrating the ability to provide the middleware to support intelligent, dynamic business networks, improved customer experience and seamless cross-channel sales and fulfilment – at face value this seems like a wise move.
Whilst you may not have heard of Sterling Commerce, the company is not new. For over 30 years, Sterling Commerce has “enabled industry-leading companies to engage in productive collaboration with customers, partners and suppliers and they state more than 18,000 clients worldwide” according to the press materials distributed after the announcement. And it’s also fair to say that Gartner, Forrester and the analyst community pretty consistently list Sterling Commerce as leader in B2B integration and crosschannel solutions.
Also interesting is the fact that Sterling Commerce’s selling and fulfillment solutions are available both as “on premise” licensed software and as SaaS (Software as a Service) and Managed Services. This is an area that IBM has typically been quite slow to move into – but is rapidly engaging in.
But why did IBM splash the cash?
There is no doubt that there has been a huge shift in recent years toward fully integrated systems across front and back offices. In retail that means the integration of key business processes through the entire cross-channel lifecycle – from marketing and selling to order management and fulfilment. And that is why this deal makes a great deal of sense. IBM will use this acquisition to provide retail (and indeed manufacturing or distribution clients) with the flexibility to extend the management of their network of business partners through public or private cloud computing environments. And their ultimate aim? To make supply chains and partner networks smarter and much more efficient by enabling integration beyond the enterprise while improving the customer experience through a seamless cross-channel sales and fulfillment capability.
There is no doubt in my mind that if you can integrate internal systems AND the entire value chain it is possible to attain rich information that can be used to identify actionable insight in operations, and an agile infrastructure on which to act on those insights. Sterling Commerce’s strong capabilities in B2B integration, B2B focused cross-channel selling and order management and fulfillment capabilities will only help IBM reach this objective. And the combination of IBM’s SOA solutions with Sterling Commerce B2B integration accelerates IBM’s ability to extend SOA and BPM capabilities beyond organisational boundaries to clients, partners and suppliers.
It will be fascinating to watch how Sterling Commerce technology be integrated into the IBM software portfolio. IBM’s stated intent is to integrate offerings from Sterling Commerce into IBM’s Software Group as part of the AIM (Application Integration Middleware) division. We will have to wait for the acquisition to close before we see the beginning of any impact. But I should imagine IBM’s completeness of vision and ability to execute have been sharply increased. And it will be up to business partners like Salmon to help realise the potential.