IBM and Emptoris — "Squeezing Value out of Aging Assets" or More? (Part 1)

Over on his excellent and long-lived blog, Deal Architect, Vinnie Mirchandani, a colleague and friend, recently penned a pithy little number questioning what he refers to in a somewhat cheeky manner as IBM's "Great Society". It really is the sort of devilish little piece that analysts at larger firms would like to write but would have their wrists slapped by their sales and AR people given the millions that IBM likely spends with the broader firm. In the post, Vinnie opines, "IBM cleverly flatters city, healthcare and other 'smarter planet' customers with the smart moniker. But truly smart customers have picked up on fact that IBM mostly provides services in such projects and they can get better results with different service providers and technologies."

Let's bring this back to the procurement world for a minute. If Vinnie's observation sounds like a business model in part built on paying IBM to deploy and upgrade your complex Emptoris sourcing, contracts and spend implementation (installed or hosted -- it does not matter) with linkages to multiple instances and versions of this SAP, then you'll probably agree with what he has to say. Like Vinnie, I also question some of IBM's recent moves based on what they truly mean for customers. And I also think it is worth considering whether or not the Emptoris transaction will come to represent more than what Vinnie describes as IBM's typical modus operandi of "learning to squeeze value out of aging assets" through acquisitions. Regarding Emptoris, I have a lot more homework to do to make up my mind in this regard.

I'll leave you with this humdinger from Vinnie today (and pick up on some additional thoughts in Part 2 of this post): "IBM makes a lot of money from application management and business process outsourcing. But over the last decade, multi-tenancy and shared service efficiencies have come from SaaS vendors who support thousands of customers at a fraction of the labor IBM (and other outsourcers) assign to their application support. While labor economists like the jobs IBM creates, should its customers?" Food for spend thought whether you like the combination of IBM and Emptoris or not.

In the meantime, you can read our December 2011 coverage of the IBM and Emptoris deal here, here, here and here.

- Jason Busch

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