It makes perfect sense for IBM to pick up Sterling Commerce from AT&T. After all, I'd sooner trust an aspiring software giant that already has deep SI and BPO practice understanding of functional integration between partners to do more with the Sterling asset than AT&T, which can't even seem to get wireless 3G voice signals to hold calls in most major cities. iPhone network criticisms aside, the IBM acquisition of Sterling from AT&T makes sense on a number of levels, including the potential to more closely integrate supply chain trading partners. But before getting into some of these details, let's consider the basic facts.
According to the above-linked coverage from the WSJ, IBM "agreed to acquire business-to-business services provider Sterling Commerce from AT&T Inc. for roughly $1.4 billion in one of its largest deals in nearly three years." Interestingly, this could be the first of many large software deals for IBM in the coming years. Much like SAP, IBM has "stated an intent to be more acquisitive, having spent nearly the same amount on deals in the first quarter as it did last year. The company said it would spend $20 billion on acquisitions by 2015, underscoring the need to compete against other tech giants, which have been eager to scoop up businesses to widen their own product offerings and reach."
The Sterling deal specifically gives "IBM a presence in the business-to-business market with business integration services, supply chain software and other customer service products, as well as 18,000 clients from a wide swath of different industries." Sterling is one of a number of legacy EDI players which has slowly made a transition to offering a range of more flexible integration services, including On-Demand integration that looks more like an Ariba, Hubwoo, Perfect, Basware, OB10 or related types of network-based exchange models. Still, the core of what Sterling does is often highly specific to organizations and includes, in their words, "integration adapters for any ERP, messaging system, or data storage system" as well as "document conversion and processing–routing, business rule validation, delivery, alerting, exception handling, and archiving providing end-to-end process automation." Sterling also offers "automated exception handling, manual business process automation through choreographed Web forms, supplier and customer portals, and manual document conversion services (fax, e-mail, postal mail)."
In other words, Sterling sounds a lot like an Ariba, Basware or OB10 PO/invoice type of supplier network. Yet Sterling is doing this today primarily on a one-to-one basis, which is the scourge of the legacy high cost structures of EDI. Could Sterling take the plunge and leverage their existing assets to build a many-to-many supplier network -- and even a network of networks, if they decided to? Absolutely. But in targeting procurement processes, it would be far easier for IBM to make an acquisition in the Spend Management area, acquiring both technology and talent to drive this effort. Granted, supplier networks continue to chomp away at the margins of point-to-point EDI integration and such a deal would be a bit like eating your own children. But I have no doubt Big Blue could develop such a familial appetite if it meant growing a profitable franchise with more potential than legacy EDI.
- Jason Busch