Guest post from Derek Singleton, ERP Analyst at Software Advice.

IBM Is Looking To Buy Where Will They Shop?

The celebration of IBM’s 100th birthday last month focused the spotlight squarely on Big Blue. In an industry where companies fail all the time, IBM’s ability to stay relevant is impressive. So how does a company like IBM manage to stick around for so long?

As the ERP market analyst at Software Advice, I typically write about trends related to manufacturing software. But IBM is such a fascinating company and so pervasive in the world of enterprise technology that I just had to dig deeper into what’s keeping Big Blue on top of their market. [ML – That and the fact that IBM have said they will spend $20billion on acquisitions in the next 5 years…!]

It’s hard to put a finger on it, but one aspect is definitely their willingness to purchase hot tech companies that mesh well with their portfolio. IBM is never far from a conversation about tech M&A – and for good reason. They completed over 100 acquisitions in the last decade alone. Their purchases span the entire map of enterprise technology – from professional services to data management to application performance management.

With much of the media focus squarely on IBM’s history recently, I thought it’d be fun to try and divine their future. I honed in on their M&A strategy and decided to dig deeper.

The first order of business was pulling together the last ten years of purchases. Putting this into a spreadsheet didn’t do much to help visualize their history so I decided to make an infographic out of it instead.

To nobody’s surprise, IBM has bought a lot of professional services (14 to be exact) in the last ten years. Another obvious area of focus is in business analytics, which includes the $5 billion purchase of Cognos.

After laying it all out, it became pretty obvious that they like to purchase fairly deep in the technology stack. I looked out at the landscape of companies working in the vast infrastructure market and started to come up with potential targets.

Here are a few of the markets I can see IBM shopping in:

• Network & Service Assurance
• Virtualization
• Data Warehousing

Network & Service Assurance

This is one area that hasn’t been a huge focus for IBM but it makes sense given their presence in the data center. In fact, it’s one of the few areas that they don’t manufacture their own products in. Their purchase of Blade Networks in 2010 could be a sign that they are going to change that.

In this market I see two targets that IBM could go for, Juniper and Brocade. I think IBM goes for Juniper if they are looking to compete with Cisco and HP (who just bought 3Par). If they want to get in the market but don’t want to tarnish their existing relationship with Cisco, Brocade is a reasonable play and would send fewer shockwaves through the networking community.

Virtualization

IBM has stood by while their competitor EMC has dominated this market. Of course IBM has supported EMC’s virtualization competition, but it hasn’t had much of an impact. Instead VMware has only grown more dominant.

I think Citrix is a viable target for IBM if they want to step up their game in virtualization. Citrix is no stranger to M&A themselves and could bring a lot of technology beyond virtualization to the  IBM portfoilio. On the other hand, IBM may just make an offer to EMC to own VMware. This is a little bit out there because it would be such a costly move, but IBM is one of the few companies that can actually make such a deal happen.

Data Warehousing

Analytics is such a focus for IBM that it’s hard to imagine a scenario in which they don’t continue carving out territory in this space. The future is in big data. We’re drowning in data today and it’s just waiting to be mined. Who better to hammer down this market than Big Blue?

Informatica is an attractive target for IBM. They excel at data warehousing and have integration features that fit well into IBM’s middleware portfolio. At a market cap of $5.7 billion it wouldn’t be cheap, but it’d be worth it. A little less likely, but even more valuable, would be SAS. Jim Goodnight is getting to retirement age these days. If he’s going to let go of SAS there aren’t any other big tech companies that I can see him selling to.

Of course, this isn’t the only area a company of IBM’s scale could shop in. I’ve included some more possible targets on my blog at: IBM Mergers & Acquisitions: Who’s Next? We’re also hosting a poll over there so please stop by and make your voice heard. If you have a better idea than what I’ve listed, feel free to suggest it in the comments section. In a couple of weeks, we’ll be publishing the results.

Are you one of the fastest growing technology companies in the UK? Your chance to prove yourself against the best – the Deloitte Fast 50 competition measures the fastest growing UK technology companies by revenue growth. See Fast 50 2010 winners. To enter the Fast 50.

See previous winner Stuart Miller, Founder & CEO of ByBox, talk about what makes a high growth business fly.

Business of Software, Boston, MA, October 24-26^th – http://businessofsoftware.org – For people growing sustainable, profitable, software businesses.

If you have been living in a cave for the last couple of months you may have missed our Money in Mobile Forum and BLN Growth Forum. All is not lost as we will be posting the speaker talks from both events on our Blog over the Summer.

Stuart Miller, CEO at ByBox had a bit of a Tour de France moment and couldn’t join us for his presentation (wishing you a speedy recovery) so thought we would share an interview we did with him last year for The UK Deloitte Technology Fast 50 in which Stuart says the key to success is to have rebellious leaders who are ‘pirates not passengers’.

Stuart Miller, CEO, ByBox

The Fast 50 competition measures the UK’s fastest growing companies measured, objectively, by revenue growth over a five year period.

BLN is delighted to be partnering with Deloitte for the 3rd successive year on the UK Deloitte Technology Fast 50 and here are another couple of rebels to tell you about why you should consider entering this year.

Barry Houlihan, CEO & Founder, Mobile Interactive Group (MIG)

Peter Bauer, CEO and Co-Founder, Mimecast

To find out more go to About or Apply Here

A roundup of some of the press and blog coverage of the BLN Growth Forum run in partnership with BDO and supported by Mills and Reeve, Kleinwort Benson and Intel Capital. If you wrote something, send us a link and we will share.

Business Weekly: It’s all about the people, BLN Growth Forum Told

“The importance of people – whether employees, customers, or collaborators – was a recurring theme at the BLN Growth Forum 2011 at the Hauser Forum, Cambridge.

“There were likely to be very few people in the room who hadn’t given money to either ARM, Pace or Rackspace said BLN founder Mark Littlewood as he introduced speakers from these three heavy hitting technology companies on the subject of ‘Making it Big.’

“David Kelly from Rackspace, which sells IT online, said he hoped his company could achieve what PACE had in the next two to three years and wanted it to be recognised as “One of the world’s greatest service companies by delivering fanatical support.”

““Technology is no longer a block to running a successful business, allowing start-ups to have a major impact in weeks,” he said. By 2015 only 20 per cent of new companies would own their own hardware and by 2020, 70 per cent of email would be in the cloud. This move towards technology becoming a commodity meant the competition would be fought elsewhere, making people an important asset again.” It’s all about the people, BLN Growth Forum Told

Springboard’s inimitable Jess captured the Springboard mood…

“15 of our crew infiltrated the event, and with a conference theme of BIG we had a sizeable day in store from 9 til 6. The lineup of presentations was impressive, the guest list was top notch, and organising madman Mark Littlewood went out of his way to make it valuable for us – what more could we ask for?!

“With a speaker lineup including the CEOs of ARM, PACE, Mimecast, and JAGEX (to name but a few), I’d struggle to do every presentation justice here. Nevertheless there were some common themes and key nuggets of wisdom, with takeaways including:

– Consider what big really means! Brand? Influence? Market presence? Translating that brand and market presence into value? Profit? Revenue? ARM is seen as a ‘big’ company, shipping 6.1 Billion chips in 2010, yet only has 1900 employees. You don’t have to be giant in traditional measures to have a major impact.

Read more of those takeaways at the Springboard blog.

Martin Leuw, writing in Real Business: Politics and business – a toxic mix

“How often have you heard of Sales complaining that they get insufficient leads from Marketing; or Customer Service screaming at Production because they had insufficient visibility of product quality before delivery to customer (“it was just chucked over the wall for us to pick up the pieces”)? And what about Finance only seeing the costs, not the value creation; and everybody complaining that Sales have sold something that you haven’t got?

“Remember, every employee, regardless of their role, contributes to the total customer experience and that’s what we all sell.” Politics and business – a toxic mix

Questions and Answers at BLN Growth Forum, a delegate’s eye view from Guy Mucklow, CEO of Postcode Anywhere

“I don’t think that I’m unusual in finding life sometimes fairly lonely running an SME. The environment is in a constant state of flux and there are fewer people with the specialist knowledge and experience to turn to when I want answers to questions.

“Those questions might be: how do we scale an international business; what is the most appropriate organisational structure; and, should the sales function be treated any differently to the rest of the business?

“This is why I am a big fan of events such as the Business Leaders Network, run by Mark Littlewood and his team.

“All in all I found it a really useful day spent out of the office. Along with excellent and thought-provoking presentations, there were some great conversations with a growing network of similar fast-growth companies. These businesses included Rivo Software and Red Gate, who all have fantastic experience and knowledge that we can share, plus a few new contacts who I will be tapping into in future to help make life at the top a little less lonely.” Questions and Answers at BLN Growth Forum

Do send us your write up if you have one and we will add it.

Paul Kenny of Ocean Learning shares some thoughts on putting sales at the heart of your technology company culture at the BLN Growth Forum.

What is growth?

• At first, growth means making payroll.
• When you cover payroll and start to make progress, growth becomes about something else – return on assets, investment etc, value of the business.
• At the heart of growth, lies sales.

Frank – the archetypal sales guy

• Worked at every big technology company – Oracle, Microsoft, SAP, Business Objects. Knows everyone everywhere.
• Should not be taken into a small company. Will spend your money and destroy your business by doing things the big company way.
• Frank probably wasn’t a very good sales guy in any of the organisations that he was in in any case.

• Until you work out what kind of sales function you need and want, you haven’t got a hope of growth.
• Remember, this is YOUR sales organisation.

Questions to ask before you hire people

What is your attitude to sales and sales people?

• LOVE & TRUST
  • Be honest about how you think about sales and act on the information and knowledge this gives you.
  • You can run a business successfully in any of the four boxes but they take different approaches
    • Call centres classically love (parties, team bonding etc), but don’t trust them (standard scripts etc)
    • Red Gate loves and trusts everyone.

What kind of sales organisation are you?

• Smarketing vs Value Creation Sales Organisation
  • Companies with awesome smarketing need people at the end of a sales funnel to be nice and patient. Social skills are more important than sales skills.
    • At the other end, you need people who can find a prospect, breach the corporate defences, identify all the people needed for the sale, manage a process and make some money.

What systems do you use?

• CrM vs cRm
  • A CRM system should just be about RELATIONSHIPS, not CUSTOMER MANAGEMENT

What reward and how?

• Reward and recognition drives culture

• You have to be clear about what you want to reward, whether that is first time sales, long term relationships, insights.
• Time spent discussing commission for sales people is time wasted unless you are completely clear about what you want the business to achieve, what kind of relationships you want your customer facing people to have?

How will you define your sales story?

• Stories trump data
• The stories you tell about customers, about why you exist, about where the company came from and the problem it solves are powerful.
• Remember the ‘founders’ advantage’ – the founder usually has the sales story wrapped into a series of anecdotes. They are worth sharing and getting past the founder.

What are our sales standards?

• It’s all about performance
  • What is totally critical is HOW SOMEONE GOT THERE.
  • Too many salespeople have built careers in rapidly expanding markets
  • Quality, quantity, focus of effort are all key metrics.

How do we simplify everything?

• Focus and Magic
  • Everything you give a sales person to do that is NOT selling will become their priority.
  • To build a strong sales culture, you don’t need to be controlling, you need to simplify their lives.
  • Sales people can only do their magic when they are engaged with customers.
  • The more people your organisation talks to through your sales organisation, the more value you will create for the business by helping to define key metrics, generate value.

Don’t hire sales people unless you understand the kind of organisation you are.

Learn to love them.

PACE was a reasonably successful technology company in 2006 but was probably only number 10 in the markets it operated in. It needed to become more meaningful on a global scale and embarked on a programme to grow. As a by product, revenue grew ten fold in 5 years.

Its goal was to, ‘Make customers’ lives simpler’.

• Strategy, structure and culture key to growing a big organisation.
• Price is a silly thing to compete on, innovation is easily copied.
• To turn a business into something else, you need to think about how your people are organised, what they think and what they can do.

The company has a, ‘three on’ meme against which EVERY team within the organisation from production to finance, are measured.

• On margin
• On time
• On quality

Simple is the hardest thing to do, particularly in the fast-paced world of technology.

Growth of Pace plc 2006-2011

Pace plc customers 2006

Pace customers 2011

Pace plc wants to position itself as the gateway to the digital home for consumers and content providers.