IBM and Emptoris — "Squeezing Value out of Aging Assets" or More? (Part 2)

In the first post in this series, I quoted a number of one-liners from my long-time colleague and friend, Vinnie Mirchandani, as he questions IBM's broader M&A and software strategy as anything more than "squeezing value out of aging assets" -- at least from a user perspective. Customers should look at this statement by considering the corollary. The flip side of "squeezing value out of aging assets" means getting customers to pay more -- or at least contribute to higher margin revenue. However, I personally do not question IBM for the cynicism that I have based on the internal and services expense that often comes with maintaining software. Quite often, I think there is a certain place for significant configuration and integration work, where required.

Nor do I question IBM and Vinnie's statement based on the broader corporate development or marketing strategy they may link. Rather, my beef is with IBM's reputation -- perhaps not always accurate -- for turning the innovation faucet to trickle levels following software acquisitions. After all, when so much of one's revenue is based on services that aim to get traditional applications to work (or to effectively manage on an outsourced basis) doesn't true software innovation represent a threat to the core business model?

For the procurement sector, this means that if history is any lesson, Emptoris customers, many of which purchased Emptoris because their solutions were indeed innovative (at least once upon a time, if not today), should be wary of where they'll be in 2015 relative to the market. Unless your contracts specifically stipulate that upgrades are included and that Emptoris/IBM will commit to certain features that market leaders (e.g., in sourcing optimization, CombineNet and Trade Extensions, and in contract management, Upside) are already shipping with their SaaS versions today, then it will pay to be skeptical, with history as a guide.

Of course this says nothing for the quality of the Emptoris R&D and development team at the point when post-merger integration begins. But my own opinion is that in five year's time, we're at least somewhat likely to categorize the Emptoris deal, based upon what IBM does with the underlying capabilities, as more similar to what Vinnie refers to as "Squeezing Value out of Aging Assets" as not. If you're an Emptoris customer today or are debating a purchase of Emptoris software in the near future, it's worth investing the time to develop your own perspective here. That is, provided you're not buying solutions simply for the proverbial reason that "no one got fired for hiring IBM." Some will undoubtedly fall into this camp.

- Jason Busch

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