IBM's Analytics Shopping Spree Continues With Varicent Acquisition

By Darryl K. Taft  |  Posted 2012-04-13

IBM's Analytics Shopping Spree Continues With Varicent Acquisition

IBM (NYSE: IBM) continued on its shopping spree for analytics expertise with its acquisition of Varicent Software, a provider of analytics software for compensation and sales performance management solutions.

The acquisition advances IBM's efforts to drive analytics capabilities into the hands of front-line employees, particularly in the area of sales, where many organizations still rely on silos of data and antiquated spreadsheets to manage this key area of their business. Varicent software automates and analyzes sales data across finance, sales, human resources and IT departments to uncover trends and drive improved sales performance.

The software is used by nearly 200 of the world€™s largest banks, insurance companies, retailers, IT and telecommunications providers to enable better quota planning, as well as territory and channel management.

Varicent is a privately held company, with headquarters in Toronto. Financial terms of the deal were not disclosed. Varicent software automates and analyzes the collection and reporting of sales data across finance, sales, human resources and IT departments to gain efficiencies, uncover trends and improve sales performance. The acquisition accelerates IBM's Smarter Analytics capabilities across line-of-business operations in all industries, and will be combined with IBM's existing software offerings that are delivered to clients through on-premise or cloud computing models.

"The acquisition of Varicent advances IBM's efforts to drive analytics capabilities into the hands of front-line employees to transform business operations and ultimately improve the bottom line," Les Rechan, general manager for business analytics at IBM, said in a statement. "For the thousands of sales organizations still relying on silos of data, spreadsheets and email to manage sales, there is an enormous opportunity to apply analytics to this vital area of business and uncover new, untapped growth opportunities."

€œSales Performance Management is still viewed by many in the industry as an art versus a science, but there is plenty of opportunity for this mindset to change,€ said Dan Shimmerman, president and CEO of Varicent, also in a statement. €œAs part of IBM, we can now bring our technological expertise in maturing and advancing the efficiency and effectiveness of the sales function to a broader range of clients across the globe who are looking to improve their processes, and strategically align incentive compensation with profitable growth.€

With continuously growing volumes of data, companies are increasingly looking for ways to automate and gain faster, more accurate intelligence on sales and financial management data in order to increase competitiveness. According to Gartner, organizations that adopt compensation management solutions can expect to reduce errors by more than 90 percent and reduce processing times by more than 40 percent.

Varicent's software automates and integrates all aspects of sales, client and financial performance management across the enterprise, which is traditionally a labor-intensive process. Unlike traditional tools, Varicent provides a single management system that relies on a sophisticated calculation engine to model and analyze the effectiveness of incentive spend.

The software allows clients, such as banks, insurance companies, retailers, information technology and telecommunications providers, to more accurately determine compensation, streamline territory assignments, manage quotas, and report and analyze sales activities. The software also strengthens audit and compliance readiness and provides transparency for all aspects of incentive compensation.

IBM Will Combine Varicent With Other Analytics-Related Acquisitions

Founded in 2003, Varicent has more than 180 customers using its software, including Starwood Hotels, Covidien, Dex One, Manpower, Hertz, Office Depot and Farmers.

IBM said it will combine Varicent with its R&D and prior analytics-related acquisitions, including Algorithmics, Clarity Systems, OpenPages, Cognos and SPSS, to expand IBM capabilities in business analytics and optimization across finance, sales and customer service operations. These acquisitions are part of IBM's larger focus on analytics, which spans hardware, software, services and research.

Officials at Big Blue said the company sees enormous opportunity to apply advanced analytics to sales functions that can help organizations uncover new, untapped growth opportunities. Indeed, IBM anticipates business-analytics revenue for the company will reach $16 billion by 2015. IBM has been building its R&D and acquisition assets to define this new business opportunity.

Moreover, IBM's software business continues to be highlighted as a key contributor to the company€™s bottom line. Over the last decade, the profitability of IBM software has nearly tripled to more than $10 billion in 2011, and revenue doubled in the same timeframe, the company said. IBM projected its software business would become almost half of IBM's profits by 2015.

In addition, IBM has almost 9,000 dedicated business analytics and optimization consultants and 400 researchers, and has secured hundreds of patents a year in analytics. The company continues to expand its ecosystem, which consists of more than 27,000 IBM business partners; and has also created eight global analytics solution centers in Berlin, Beijing, Dallas, London, New York, Tokyo, Washington and Zurich.

These investments have enabled IBM to introduce Smarter Analytics Signature Solutions to address issues, such as fraud detection, financial operations and customer service. They have also led to breakthrough technologies like IBM Watson, a new class of industry-specific analytical technology that uses deep content analysis, evidence-based reasoning and natural-language processing to identify relationships buried in large volumes of data that can be used to improve decision making.

IBM€™s acquisition of Varicent is subject to customary closing conditions and is expected to be completed in the second quarter of 2012. With the closing of this acquisition, it is expected that all of Varicent€™s employees will join IBM's Software Group.


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