The digital commerce industry has been abuzz since last month’s announcement that HCL Technologies will acquire several technologies from IBM, including the entire Commerce portfolio IBM developed over the last two decades.
We asked our Commerce Chief Strategist, Mike Rabbior, to share his insights on what this news means for the commerce technology industry, our Commerce clients, and partners like us.
Why do you think IBM decided to sell these portions of its portfolio?
Mike Rabbior: Having worked as an IBM technologist for almost a decade, I can tell you that IBM is a company that is over 100 years old because it constantly reinvents itself. I think one of the greatest banners it can fly is that it has constantly kept up with the change in direction and demand.
This sale is just part of the continuing evolution of IBM. The artificial intelligence (AI) and internet of things (IoT) direction that IBM is taking and the company’s push toward cloud is their strategic focus. Selling its Commerce portfolio allows IBM to divest in areas that aren’t strategic and fully commit to technologies they feel have the potential for higher value and higher margin. And this isn’t just speculation. Recent statements from IBM have reiterated the shift in focus to solely what’s viewed as high value, high strategy initiatives.
Back in 2000, when I was helping build the Watson Commerce platform (known then as WebSphere Commerce), IBM was examining whether it was a middleware or an application company. There were debates about how Commerce fit within IBM, even in the dot com era. So this isn’t really new information. IBM has been deliberating about how Watson Commerce fits within its portfolio for a long time.
Everything in IT is going through a bit of a transformation, pushing to cloud, creating more software-as-a-service (SaaS) opportunities, and commoditizing software in general. When a software development company has a legacy platform that isn’t viewed as strategic, one of the challenges it faces is not getting the investment dollars to truly evolve and reinvent a platform for what it needs to be. If another company comes along that views the platform as strategic and is willing to make that greater investment, rather than incremental enhancements and small feature updates, then it’s beneficial for the portfolio to take it to the next level.
What initial reactions have you seen from the industry regarding this announcement?
MR: IBM is one of the oldest digital commerce vendors out there. Its initiatives started on the digital commerce ground floor back in 1996, when Amazon was a little online bookstore. IBM’s platform is used by some of the largest internet retailers. It’s no surprise then that when one of the founding members within the industry says, “No, this isn’t strategic to us anymore,” it causes a bit of panic and uncertainty.
From analysts, there’s a mix of reactions in the marketplace. There is surprise from some, and “They finally did it” sentiments from others. Comments from most of the ex-IBM community on social media are similar to, “They finally decided to do this after 15 years of threatening to do it.” The news isn’t as surprising to them because they’ve heard IBM question digital commerce within its portfolio for most of their professional careers.
Keep in mind that over the last decade, almost every major digital commerce platform has gone through a major acquisition. Magento was acquired by Adobe last year. Before that, CloudCraze and Demandware were bought by Salesforce. SAP bought Hybris not too long ago. All have been retooled and repurposed through acquisitions, and none have gone extinct in the process.
The news has also made people very aware of HCL’s Mode 1-2-3 strategy for evolving their company, and that HCL is trying to grow and diversify into a product-focused, intellectual property-based organization. Historically, HCL’s been known as a software services company. There’s understandable angst in people’s reaction when you consider that a trusted, battle-hardened system, previously backed by one of the oldest professional software development firms, is now placed into the hands of a services company undergoing a transformation into a software product company.
HCL will have some work to do to convince people that it’s as committed and capable of standing behind the product as IBM was (and in some minds, even more so than IBM was). However, the partnership between IBM and HCL has existed for a number of years, and HCL has taken a number of antiquated pieces of the IBM portfolio, like Lotus Notes and Domino, and breathed new life into them, executing on the product roadmap and implementing new capabilities.
That’s promising if you look at this sale from the viewpoint of an IBM Commerce customer. You’ve probably been concerned that IBM is not investing in the platform as much as other strategic technologies and acquisitions in the last five years. HCL has invested a quarter of their annual revenue into this initiative. They’re clearly viewing it as strategic.They have also set a bit of a precedent of breathing new life into other IBM platforms they’ve acquired and driven forward in the marketplace. There is reason to believe that IBM Commerce will see accelerated growth and velocity as a platform as a result of this deal.
What about the reaction from other technology vendors?
MR: Understandably opportunistic. Many have used this confusion to stir up concern and angst in the ecosystem in an attempt to gain market share, especially because IBM and HCL cannot come out and publicly say too much until the deal is final. IBM customers have been on these vendors’ radar for a while, and we anticipate a lot of chatter in the coming months. The real challenge for clients and customers will be to discern the reality from the hype. That’s where I am really excited about the value we bring to clients helping them choose the right platform for them.
Are there any misconceptions that can be put to rest?
MR: Some of the confusion in the industry was caused by the initial press releases that referenced only “on-premise” technologies. Some stated that IBM would continue with its cloud and SaaS offerings, and only give the legacy on-premises platform to HCL as part of the acquisition. That’s not the case. Every commerce platform built by IBM is going to HCL as intellectual property.
If IBM customers have an existing contract for IBM Commerce Managed Hosted or IBM Commerce on Cloud, then those contracts will continue to operate through the duration of the agreement. Neither HCL nor IBM have said what is going to happen when those contracts expire, and they probably won’t make any public comments until the acquisition is official in mid-2019.
Their is also the misconception that this is the end of the IBM Commerce platform. On the contrary, I think you will see a HCL bring a second wind to the platform and will be a greater threat to competing platforms in the future. HCL can approach the platform and marketplace in ways that IBM did not. Imagine a more agile, more hungry IBM team and platform. Competitors have reason to take notice.
What should our clients currently using IBM technology know about this acquisition?
MR: In terms of affecting our clients, I think they have to remind themselves (and I’ve been busy reminding people over the last month) that nothing is changing for six months. The ownership doesn’t change hands until the middle of 2019. You have time to digest this news.
Also, when a company spends almost $2 billion dollars buying assets from another company, it has a strong desire not to damage or cause negative consequences to those assets. Based on my interactions with HCL, I expect HCL to be very open to customer and partner feedback. I expect HCL will be doing everything it can to not only maintain the platform’s market share, but also grow it.
If HCL does take the product in a direction with which you may not agree, then the platform and version you’re on now has years left in it before reaching end of life. You can still remain on the legacy version that IBM built for you for years to come. It would make sense to assess whether a different platform is a better fit for your needs at this point.
However, if you were already looking at the platform and thinking it might not be right for you, then this may be the time to assess your platform. I think many [clients] will look at the platform and see the value of IBM’s capabilities. It has been my experience that when clients evaluate moving to another system, they realize the shortcomings of some platforms when compared to IBM’s. They also realize how much business process change needs to occur during the transition and how the platform has structured the way they function as a business. This doesn’t happen in every case, but it does happen.
This acquisition may serve our clients as a polite reminder to be proactive in self-assessing every two or three years. Take stock of where your organization is, where it needs to be, and if the platform you’re on is the right fit. That’s not an easy task to do. Platforms are always changing. But, blindly ignoring any problems and not constantly reevaluating or asking, “Are we doing the right things for our business?” is a recipe for falling behind your competitors.
That’s one of the values we, as a technology-agnostic partner, can provide our clients. We can evaluate the situation and options and say, “Given where you are and where you want to head, the platform that was great for you yesterday might not be great for you tomorrow.”
Speaking of partners, how does this change impact IBM’s existing partner ecosystem?
MR: HCL has come out publicly and said that it sees the value in the IBM partner ecosystem and the necessity of maintaining it, especially around digital commerce. HCL plans to onboard all IBM Commerce partners into the new HCL partner ecosystem.
There will be a transition as we learn the ins and outs of how HCL will leverage its partners. Our initial conversations with HCL regarding partnerships have been very encouraging. We plan to not only continue to provide the same strategic advice and participation in early adopter and council programs we have for years with IBM, but also help define the role partners play in helping guide the direction of the platform in the future.
Partners have tremendous value to both clients and to the software vendor building the platform because they help to service the entire breadth of customer industries, geographies, and sizes. Every business sells a product or a service, but no two are alike and no two industries are the same. Partners help provide insight into the market the platform is trying to serve and no single organization can serve every customer.
I am certain that HCL understands this as they themselves have been an IBM business partner and know how IBM depends on partners. I expect HCL to leverage this insight in how it comes to depend on partners to evolve the platform and grow the install base.
What is Perficient Digital’s position in the midst of this acquisition?
MR: This doesn’t change our position at all. As Perficient Digital, we look at doing what’s right for our clients and advising them in what is best for their individual businesses. The value we provide in the marketplace is unique. We’re not a point player that is married to a single vendor or platform and is limited to selling and servicing that technology.
It’s not like that for Perficient Digital. We understand that clients want a partner that can advise them on the right platform for their strategy. We maintain deep expertise across a wide range of digital commerce platforms to ensure clients are selecting the best platform for their needs.
In 2018, we were IBM’s Digital Commerce Partner of the Year and won two Magento Excellence Awards in B2B. When we partner with a vendor, we fully commit to establishing ourselves as the go-to partner. We know the value the Watson Commerce platform has for clients and will continue to strongly recommend it as a strategic platform that can serve the demands of some of the largest, most complex organizations.
We also know that when you only have a hammer in your toolbox, the entire world is a nail. That’s not the value we want to provide our clients, and we will continue to position ourselves so our clients remain confident that we can advise them on what platform is best for their business. That is also why we have developed a platform assessment offering that allows customers to see how we score their needs against the capabilities of a platform. Clients love having the ability to justify their selection and be confident in the due diligence provided.
What do you want clients and potential clients to keep in mind as they think about this acquisition?
MR: Don’t overreact to the news. Nothing is immediately changing. However, use this as an opportunity to ask yourself:
- Are we confident we know the latest trends in the industry? Are we the disruptor or the disrupted?
- Are we confident in our digital strategy? Do we know what our strategy should be?
- Do we understand the value our current platform(s) and solution(s) provide?
- Does our platform align with our strategy?
- Have we assessed our plans and strategies recently? If not, how do we get started?
You certainly don’t need to do this alone. With the number of available platform options and how quickly the industry is changing, you probably need help understanding those options and what would be best for your organization. Take that to heart. Then, use this news as a catalyst for assessing your situation, and finding someone who can help you exercise the due diligence in choosing the direction that is right for you.