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An in-depth look at IBM's hush-hush acquisition...

25 Jun 2014

IBM’s acquisition of marketing automation vendor Silverpop in April 2014 caused barely a ripple in the IT press.

The move was not entirely unexpected.

Indeed, in Ovum’s report Marketing Automation Technologies: What’s Next for Vendors and Customers? of May 2013 we suggested that IBM was committed to increasing its acquisitions spend in the field of marketing automation.

Some believe Silverpop was a relatively small acquisition of little strategic importance.

After all, how important could a rumoured US$300m acquisition of 500-man Silverpop be in the context of IBM’s $15bn investment program around marketing automation? Upon closer examination, however, IBM’s Silverpop acquisition is much more interesting.

Silverpop provides IBM with (i) a strong mid-market marketing automation proposition, (ii) a Unica protection “surround” strategy for large enterprises, and (iii) a Salesforce ExactTarget enterprise account encroachment “neutralizer” – all for a relatively small sum of money.

Silverpop serves multiple purposes for IBM, and the acquisition is both tactically shrewd and strategically sound.

Digital marketing offer...

IBM’s digital marketing proposition is based on the Unica and Coremetrics acquisitions combination, which is a large-enterprise play.

IBM does not compete so well in the mid-market, which is where Silverpop competes. Silverpop fits in the SaaS-based, low-cost, fast-to-install, out-of-the-box, email-centric solution category that suits mid-size companies so well.

These are not attributes that one associates with IBM, so Silverpop adds enterprise mid-market addressability to IBM’s digital marketing portfolio.

Equally, Unica solutions are mostly large on-premise solutions that are ideal for centralized, high-volume B2C marketing campaigns. Unica is known for its comprehensiveness and depth of functionality rather than for being agile or fleet of foot.

Silverpop can be used by large enterprises’ strategic business units and remote locations to provide flexible links to centralized Unica systems, but without the training and specialist expertise required to use Unica.

In addition, Silverpop gives IBM a weapon to use against Salesforce’s current charge into IBM’s enterprise accounts, because Silverpop can effectively compete with Salesforce’s ExactTarget marketing automation product suite. (Salesforce acquired ExactTarget in June 2013.)

Silverpop will retain its own branding and identity in the short term

Enterprises should expect Silverpop initially to be run as a separate entity. To date it has only added the tagline “An IBM Company” under its brand logo, just as Tealeaf, for example, did after its acquisition by IBM.

Over time, like other IBM acquisitions, Silverpop will likely be merged into the IBM branded portfolio, but for now it will continue to be managed independently, and will continue to run its own direct sales and channel partner relationships.

Soon Silverpop’s product portfolio will be sold through IBM’s direct sales force and partners, which should massively increase its market footprint.

Overall, Silverpop’s customers seem to be reacting to the acquisition positively. The keynote speeches at the company’s recent Amplify user conference in London were standing room only. It appears that Silverpop customers welcome the scale and investment resource that IBM provides.

Silverpop increases IBM’s attractiveness for marketers

One key asset that IBM has also acquired, and which does not feature on Silverpop’s balance sheet, is the company’s ability to speak to marketers.

Ovum’s report Evaluating Mega-Vendors’ Digital Marketing Platforms and Strategies identified marketing savvy, a “trendy” image, and the ability to deliver integrated marketing solutions quickly as qualities that IBM lacks. These are qualities that SIlverpop has in abundance.

IBM has struggled with the tone, branding, and positioning that is attractive to marketers. Silverpop does not – marketers “buy into” its marketing-centric strategies.

If IBM can harness Silverpop’s ability to speak to marketers into its broader marketing solutions’ value propositions then it will rapidly increase its own attractiveness and market traction within the digital-marketing-buyer and end-user communities.

By Gerry Brown - Analyst, Ovum