December 31, 2011, 12:00 AM

IBM buys DemandTec, adding to its retail portfolio

In a move that positions it to better compete against other vendors that provide comprehensive software suites to large multichannel retailers, IBM said it will pay $440 million for DemandTec, a provider of technology designed to help predict how consumers will respond to changes in pricing and product lines.

IBM Corp., which has been on a retail technology buying spree, is adding another piece to its offerings for multichannel retailers. IBM announced last month that it would pay about $440 million in cash for DemandTec, a provider of web-based technology that compiles purchasing data across retail channels. Retailers, for example, can use DemandTec's software to predict how consumers will respond to changes in pricing and product lines.

IBM plans to roll DemandTec into its Smarter Commerce 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.

As part of advancing this initiative, IBM last year launched Coremetrics Lifecycle, web-hosted software that helps retailers understand customer buying interests over a long term and craft marketing campaigns across multiple channels, including e-mail, online display advertising and social media. "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 will help IBM 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. "It adds an important capability to IBM's portfolio, which they'll need to compete against Oracle, JDA, and SAP."

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