In its second-largest acquisition, Amazon buys the company for $970 million.
Normally a vendor to big firms, IBM uses software-as-a-service to compete for smaller clients’ business.
IBM Corp. is forging ahead with its “cloud-based,” or Internet-hosted, e-commerce technology strategy as it faces growing competition from technology rivals.
Last year IBM began offering software-as-a-service e-commerce technologies, rather than only licensed software that clients maintain on their own premises, in its Smarter Commerce suite. With the latest Smarter Commerce applications that it released last month, including a tool to parse through the tomes of consumer sentiment data on social networks to help marketers track how consumers view their brands, the company says it now offers more than 100 cloud-based tools to retailers.
In addition, IBM this month it acquired cloud computing infrastructure provider Softlayer Technologies Inc., which will expand IBM’s ability to offer data storage and computing services in the cloud through networks of Internet servers. That will enable IBM to compete with Amazon.com Inc.’s Amazon Web Services, which provides web-based data storage and computing power to organizations of all kinds, including Netflix Inc., the streaming entertainment provider that is No. 9 in the 2013 Internet Retailer Top 500 Guide.
IBM is positioning itself to compete with software-as-a-service, or SaaS, e-commerce technology providers, such as Demandware Inc., NetSuite Inc. or Commerce Guys, that cater to midsize retailers and divisions of large retailers, says Gene Alvarez, vice president and information technology analyst at Gartner Inc. Moreover, by adding cloud services IBM is able to offer more ways for its target market of large companies to own its products, he says. “Cloud providers have captured a portion of the market that larger vendors have missed,” he says. “But larger vendors are realizing they should be spreading out” with the technology options they offer.
A retailer using a SaaS platform pays a monthly or yearly fee to access a vendor’s Internet-hosted technology, rather than paying what is usually a much higher upfront fee to license software. In some cases, a retailer may use licensed e-commerc e software as its main e-commerce technology platform, while using SaaS or cloud-based technology for sister sites or specific applications, such as product recommendations or ratings and reviews.
For example, a top retailer in the United States might want to expand to Portugal, but the cost of running all its existing technologies in that country could be much higher than it is domestically, Alvarez says. So, it might make more sense for the retailer to launch in Portugal on a cloud-hosted e-commerce platform, he says—and if the retailer is an IBM client, it could simply purchase the SaaS version of the licensed technology it’s already using at home. “As commerce is more important globally, organizations cannot have a one-size-fits-all approach,” Alvarez says.
Indeed, IBM rivals like Demandware and NetSuite have won deals with retailers expanding their e-commerce operations internationally. Lands’ End, for example, is an apparel and home furnishings brand of Sears Holdings Corp., No. 6 in the Top 500 and a client of IBM’s e-commerce platform. But Lands’ End has been using Demandware’s SaaS e-commerce technology to launch new sites across Europe. And Williams-Sonoma Inc., No. 22 in the 2013 Internet Retailer Top 500, operates its main e-commerce site on an internally built e-commerce platform while using IBM for web analytics, but in May launched several e-commerce sites in Australia on NetSuite’s SaaS e-commerce platform.
But IBM is also winning over retailers with its expanding technology options. Dutch web-only department store Wehkamp, which booked 600 million euros ($792 million) in 2012 web sales, for one, has been adding IBM Smarter Commerce tools piecewise to its e-commerce platform. In June, it began using one of the company’s cloud-based tools to optimize its markdown pricing. The technology automates how deeply prices are discounted at the end of the season in order to manage inventory levels and ensure the retailer meets its profit goals, the retailer says.
It hasn’t yet revealed how effective the tool has been, but it says other IBM tools it’s used previously have generated significant returns. Wehkamp, which is No. 30 in Internet Retailer’s 2013 Europe 500 guide, also uses IBM’s digital analytics tools to optimize e-mail and advertising campaigns. With those, it boosted the ratio of sales to the e-mails it sent by 271%, e-mail open rates by 23%, e-mail click-through rates by 68% and banner ad click-through rates by 500%, it says.
“Through IBM’s solutions, we are able to put our customers firmly at the center of everything we do, whether it’s managing markdown prices, delivering email campaigns or improving our online experience,” says Alexander van Slooten, Wehkamp’s marketing director.
IBM ranks No. 1 among e-commerce platform providers in Internet Retailer’s Leading Vendors to the Top 1000 E-Retailers guide.