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IBM announced a definitive agreement to acquire DemandTec, a maker of cloud-based marketing and sales software, for $440 million.
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 customers’ buying trends. The deal, announced Dec. 8, is expected to close in the first quarter of 2012.
“IBM Smarter Commerce is redefining how brands buy, market, sell [to] and service their customers in ways that their customers want,” Craig Hayman, general manager of Industry Solutions at IBM, said 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 customers’ rapidly shifting 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 in software alone. Extending these capabilities to the cloud gives organizations immediate access to consumer information, potentially providing instant return on investment.
DemandTec produces cloud-based analytics software that enables businesses to examine customers’ different 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.
“DemandTec has unprecedented capability to improve customers’ price and promotion tactics on a standalone basis and connect retailers and manufacturers for collaborative planning through the cloud,” Dan Fishback, president and CEO of DemandTec, said 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.),” Brian Marshall, an IT hardware analyst with International Strategy and Investment Group (ISI Group), said 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 strategy by adding additional, subscription-based offerings to IBM’s SaaS solutions portfolio.
DemandTec has approximately 450 customers worldwide in retail, consumer products and other industries. Retail industry segments served include grocery, drug, convenience, consumer electronics, office supplies, apparel, department stores and quick-serve restaurants. Manufacturer segments include fast-moving consumer goods categories, such as food, beverage, and health and beauty. DemandTec also has a portfolio of 31 patents in the areas of pricing, response analysis and promotion analysis.
Moreover, consistent with IBM’s Smarter Commerce strategy, the company will continue to support and enhance DemandTec’s technologies and clients while allowing them to take advantage of the broader IBM portfolio. DemandTec will be integrated into IBM’s Software Group, which is a key driver of growth and profitability for IBM.
DemandTec is based in San Mateo, Calif., and has more than 350 employees, with additional offices in Minneapolis, London, Paris and Bangalore. The acquisition is subject to DemandTec shareholder approval, applicable regulatory clearances and other customary closing conditions.