December 8, 2011, 11:05 AM

IBM to buy DemandTec

IBM is paying $440 million for the firm.

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In its latest move to provide more technology for helping retailers understand and market to consumers, IBM Corp. today said it will pay about $440 million in cash for DemandTec, which sells web-based technology that compiles consumer purchasing data across retail channels. Retailers, for example, can use DemandTec’s software to predict how consumers will respond to possible changes in pricing and merchandising.

The acquisition adds to IBM’s Smarter Commerce initiative, which IBM defines as a business unit that provides digital technology and services to help retailers compile consumer buying data, analyze it and develop marketing and merchandising programs. Smarter Commerce also contains other companies IBM has acquired over the past two years, including web analytics provider Coremetrics, online marketing firm Unica Corp. and Sterling Commerce, a provider of order management software.

Earlier this year, IBM launched Coremetrics Lifecycle, web-hosted software that helps retailers understand customer buying interests over a long term and then craft effective marketing campaigns across multiple channels, including e-mail, online display advertising and social media. Cloud-based software resides on vendor-provided web servers, freeing the user from having to invest in its own server infrastructure.

"IBM Smarter Commerce is redefining how brands buy, market, sell and service their customers in ways that their customers want," says Craig Hayman, general manager of industry solutions at IBM. "Bringing science to the art of pricing and promotion is a big part of this strategy, and the combination of DemandTec and IBM will help marketing and sales executives in retail and other industries drive more revenue and increase profitability."

Industry analysts say DemandTec brings IBM a capability it needs to better compete against other leading technology providers. “IBM has made it clear that they're getting into the software solution space and DemandTec is a valuable asset in that space,” says Nikki Baird, managing partner of research and advisory firm Retail Systems Research LLC. “Not only does it add an important capability to IBM's portfolio, which they'll need to compete against Oracle, JDA, and SAP, it makes it harder for technology  providers like Manhattan Associates and RedPrairie to address that missing piece in their own portfolios.”

DemandTec serves about 450 companies worldwide in retail and consumer products manufacturing, covering categories including grocery, drugs, convenience stores, consumer electronics, office supplies, apparel, department stores and quick-serve restaurants. The company is based in San Mateo, CA, and has more than 350 employees.

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