Experts Weigh In on IBM/Sterling Commerce Deal
On Monday, IBM announced its intent to acquire Sterling Commerce from AT&T for approximately $1.4 billion in cash.
Sterling Commerce's offerings are expected to strongly complement IBM's middleware portfolio. Currently, Sterling Commerce provides cross-channel and B2B solutions for more than 18,000 customers worldwide. The company enables more than 1 billion business interactions a year for clients in the financial services, retail, manufacturing, communications and distribution industries.
By acquiring Sterling Commerce technology and its large trading partner network, IBM anticipates it will be able to deliver powerful new cross-channel solutions to its clients. In addition, Sterling Commerce technology is expected to complement IBM's industry-focused software offerings, enabling the addition of capabilities to IBM's frameworks supporting the retail, manufacturing, communications, health care and banking industries.
We asked the experts from IDC, Gartner and Altimeter Group to weigh in on the deal, which is expected to close in the second half of 2010, subject to regulatory approvals and the satisfaction of other customary closing conditions. What are its implications for the consumer goods clients and how will IBM integrate Sterling Commerce's offerings into its existing technologies and services? Here are their thoughts:
CGT: What were AT&T's motivations for selling Sterling Commerce?
Bob Parker, IDC Industry Insights: That is a very good question. Sterling and IBM were adamant that the existing co-selling activities (AT&T and Sterling Commerce) will continue. However, AT&T is a telecomm services company, not a software company, and there was always dissonance in the business models. Also, AT&T has more pressing issues in increasing its network capacity and picking up more than $1 billion in cash from IBM doesn't hurt.
Benoit Lheureux and Gene Alvarez, Gartner: AT&T's strategy has changed over the years -- it is now more focused on mobility and other initiatives, and Sterling Commerce had become less strategic with its move into the applications market.
CGT: How will the acquisition affect IBM's standing in the business-to-business (B2B) integration software and services market?
Parker: IBM had a self-admitted weakness in the area of B2B integration. While the WebSphere tools are quite effective for intra-enterprise integration, most companies look for alternatives when integrating across the business network. Sterling Commerce offerings fill a real need for IBM.
Lheureux and Alvarez: IBM already had many integration products in its portfolio, so that by itself doesn't affect IBM's standing in the middleware market, except to give it another product overlap to deal with. On the integration services for traditional e-commerce and B2B integration outsourcing, IBM now has a strong offering that puts it directly in competition with GXS, E2open, Crossgate, etc. Sterling Commerce was already holding its own in the market under AT&T, but IBM -- which better understands and is more likely to capitalize on such integration services -- is a bigger threat to the other providers of integration services than AT&T was.
Cecere: I don't think that it will make much of a difference for anyone. IBM has had a difficult time competing in the B2B market. The price points are very low; and IBM has had difficulty meeting them. However, IBM is a better home than AT&T because they understand the enterprise applications market. So, overall net neutral. No one will do anything for a while, it will be a wait and see move. The unanswered question for me now is what happens to GXS?
CGT: What implications will this acquisition have on Sterling Commerce's existing consumer goods clients?
Parker: There should be little impact on existing consumer goods customers. Those that use the B2B integration product for EDI connectivity will see continued investment in the product. IBM and Sterling Commerce won't reveal a lot of details before the deal formally closes, but we suspect that a complete review of the respective WebSphere and Sterling Integrator platforms will be undertaken with the objective of making both platforms more integrated and valuable. Other interesting combinations are likely to be investigated. For example, the former IBM FileNet document management applications enhanced by Sterling Managed File Transfer.
Lheureux and Alvarez: Sterling Connect:Direct and Gentran customers need to find out if IBM will sustain Sterling Commerce's "no planned sunset strategy" approach to their legacy MFT and translator solutions. IBM already has its own translators and MFT solution, so while it has a track record of at least maintaining support on acquired, legacy middleware customers probably should not expect significant product enhancements. For customers using IBM WebSphere Commerce for Internet sales, they will be able to leverage the Sterling Commerce order management capabilities of Sterling's Selling and Fulfillment solution. For the Sterling customers using Selling and Fulfillment, we believe that over the next several years that Sterling's B2B sales capabilities will be incorporated in IBM WebSphere Commerce and that this will strengthen IBM's B2B Internet sales capabilities. However, the transition will not be easy as a normalization of functions will need to be done where the two products overlap.
For more information on IBM acquisition of Sterling Commerce, click here.