IBM Sells Rivermine, Acquired by TEM Leader Tangoe

News last Friday that IBM has sold Rivermine to Tangoe, the market-leading TMS firm. Rivermine, a telecom expense management (TEM) provider, was part of the Emptoris product line. It was acquired by the sourcing suite vendor just months before IBM announced it was acquiring the overall Emptoris business in 2011. Tangoe is a $200m annual-revenue-sized, US-based, publicly quoted and market-leading provider of “Connection Lifecycle Management software” – the business of supporting their clients’ telecoms management. Or as their strap line says: “Turn-on, manage, secure, and comprehensively support all communications connections needed to run your enterprise.”

I met some of the Rivermine founders just after they became part of Emptoris and liked them - it struck me as a good business, and personally I thought with the size of IBM’s client base, there should have been a good opportunity to sell advanced TEM services into that wider market successfully. But perhaps it was a little esoteric to fit into the broader IBM vision. Although how Emptoris itself fits into that vision is a question we might come back to anyway ...

In the press release announcing the acquisition, Tangoe said, “IBM’s Rivermine TEM business includes comprehensive fixed and mobile telecom expense management software and related services, as well as a global blue chip customer base. The business fits particularly well within the core of Tangoe’s broader Matrix solution suite, which helps clients turn on, track, manage, secure and support its IT assets, expense and usage including mobile, fixed, machine-to-machine, cloud software and services, enterprise social and IT.”

Our US colleagues have excelled themselves on this news, with a superb and detailed article published on Friday covering the financials and strategy behind the deal, technical issues, and a good overview of the TEM challenge generally. Here are a couple of extracts from that, but if you have any interest in the subject, we’d urge you to read the whole thing on the Spend Matters US site here.

Here is what they say about Tangoe’s situation:

The fragmented asset base is not nearly as scalable as a single purpose-built platform ­­– and we hope that Tangoe will be able to pull off that transition. Financially speaking, Tangoe appears to need a shot in the arm as the company is barely profitable (FY 2014 saw total revenues of $55M and GAAP income of only $3.3M) and the company's stock (NASDAQ: TNGO) has dropped in half over the past 18 months, and the acquisition announcement hammered the stock even further. IBM on the other hand, needs to do something to get its stock price back on the growth path; the past 12 quarters have been on a disappointing downward trend. From our vantage point, it would be great to see procurement and sourcing (including the Emptoris line) move the needle for IBM.”

Then, moving onto a what TEM is all about:

“But in reality, there is not one "telecom" category. There are many, from connectivity and bandwidth (e.g., the fat pipes that feed data going into and coming out of organizations) to mobile (e.g., smart phones and mobile devices used by front line employees) and a tremendous amount in between.

The fundamental challenge of managing these diverse sub-categories within telecom revolves around a common set of contracting, provisioning, compliance and invoicing challenges. Today, solutions from procurement and ERP vendors such as Ariba, SAP and Oracle (and previously Emptoris) don't begin to address the nuances of telecom procurement outside of initial negotiation and contracting, transaction/document exchange and limited aspects of vendor management, areas that represents a small component of the overall challenge”.


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