IBM buys DemandTec – What does this deal tell us?

IBM’s recent acquisition of DemandTec sits within IBM’s “Smarter Commerce” initiative. This strategy is all about enabling businesses to quickly adjust prices, promotions and other marketing efforts by analysing online and in-store buying trends. One could argue that this deal is just a takeover like many others. However, these are some of the things about this deal that sparked my interest:

Big software companies are all at it – Recent weeks have seen similar deals by SAP and Oracle respectively. Like the takeover of DemandTec, the purchases of SuccessFactors (by SAP) and RightNow (by Oracle) are aimed at becoming a ‘software-as-a-service’ (SaaS) company.
Software as a service (SaaS) – It sounds sexy but what does SaaS actually mean? Whereas many traditional software companies like IBM and SAP used to be about client-side servers and databases, today’s focus is shifting much more towards providing clients with web-based solutions, with users only needing an Internet browser to access the service. I started writing about this trend a while ago just because it seems quite a big strategic shift for most traditional software vendors.
‘Smarter Commerce’ sounds great but what does it mean? – I learned that Smarter Commerce is another way to phrase IBM’s intention to generate revenue out of providing businesses with cloud-based analytics products that enable them to make well-informed business decisions and to respond to customer trends in a timely and appropriate fashion. This is exactly the kind of business in which DemandTec operates.
At the end of the day, it’s all about the cloud – The aforementioned shift towards SaaS is seen as part of cloud computing which for instance means that to use the software provided by the likes of DemandTec or Salesforce.com a user typically only needs an Internet browser and, equally significantly, the software is designed in such a way that multiple clients and users can use it for their own unique purposes.

Main learning point: the recent acquisition of DemandTec by IBM signifies an interesting strategic shift towards cloud-based ‘software as a service’ products. The kind of data analytics products which DemandTec provide are all web based, accessible through an Internet browser, and which are geared towards being applied in a wide range of user scenarios, applicable to the greatest number of customers. For software stalwarts like SAP and IBM who have a made a lot of money providing large business with customised software solutions, this seems quite a drastic change of interests. To be continued.