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Posted by Joe Stanhope on May 7, 2012
On Wednesday, May 2, IBM announced its agreement to acquire analytics industry veteran Tealeaf. You can read the official press release here. The financial details of the transaction have not been disclosed, and the deal will conclude in Q3 2012, following a customary closing period. IBM anticipates that all Tealeaf staff will continue with the company. Tealeaf, a private company, was founded in 1999 as a spin-off of tech giant SAP. Tealeaf is best known for its interaction analysis — or session replay — software.
Truth be told, I'm surprised it took this long for a major analytics vendor to acquire an interaction analysis tool. After all, web analytics is great at telling us what happened, but interaction analysis provides an additional layer of contextual insight to evaluate how events unfold. This highly visual, qualitative element of analysis connects the dots between traditional web analytics and VOC programs and has many applications across site analytics, support, marketing, and design. Although interaction analysis has always been a niche market, it's logical to assume that the two capabilities would be paired up in a single platform eventually.
Tealeaf will become part of IBM's Enterprise Marketing Management group, itself the combination of three previous acquisitions in less than less than two years: Coremetrics (web analytics) in June 2010; Unica (campaign management) in August 2010; and DemandTec (pricing and merchandising analytics) in December 2011. IBM executives regularly cite M&A as a key component of their development strategy for EMM and IBM's macro Smarter Commerce initiative, with which the EMM group is tightly linked. Smarter Commerce is a major priority at IBM, and it's putting its money where its messaging is, having spent $3 billion on acquisitions supporting the program since 2010.
Interestingly, May 2 was a busy day all around, as Teradata announced their acquisition of eCircle. For more information, please see Rob Brosnan's excellent thoughts on the deal here.
By almost all measures, this acquisition makes perfect sense, nearly bordering on routine:
- Tealeaf moves into the big leagues. Tealeaf will now receive all of the standard benefits of joining IBM, mostly related to scale: continued investment in the product, the credibility of IBM's brand, instant distribution and support on a global basis, and the sense of mission and context that comes with integrating its customer experience management capabilities within IBM EMM and Smarter Commerce.
- IBM fills in another piece of the digital intelligence puzzle. By acquiring the largest and most developed provider in the niche interaction analysis category, IBM gets an established, patented, and highly productized interaction analysis offering. Tealeaf's ability to provide qualitative and contextual analysis of web and mobile interactions is highly complementary to IBM's existing analytics capabilities and has applications throughout the various phases of the Smarter Commerce offering. And it never hurts for IBM Global Services to expand its palette of internal tools.
Acquiring Tealeaf looks great on paper, but there are several items that current and prospective clients should consider:
- The EMM deals are piling up. Despite IBM's M&A expertise, the EMM group is now the product of four distinct acquisitions. Unifying four cultures, product lines, teams, and customer sets isn't an easy task for anyone. EMM is on the hook to develop a cohesive marketing platform that represents more than the simple sum of its parts. As IBM continues the integration process, change and transition will be a necessity. Change isn't bad, but surprises are. Clients must demand a very clear explanation of IBM's mid- and long-term plans for the EMM group, including leadership, client account management and support, and product road maps.
- Smarter Commerce dominates EMM's focus. IBM has heavily emphasized Smarter Commerce during its discussions of the Tealeaf transaction. Smarter Commerce is a broad, ambitious, and strategic initiative for IBM, and the EMM group is a major contributor to the offering. This focus should be well received by multi-channel retailers and eCommerce firms, but the EMM vision is less clear for other industries. Despite EMM's broad applicability, Smarter Commerce is dominating strategy, messaging, and development. To ensure a solid fit, firms need to make sure they fully understand EMM's capabilities and plans to support their industries and the degree to which Smarter Commerce is complimentary to their individual requirements.
- Reconciling diverse product architectures is not child's play. Tealeaf and Coremetrics make the most obvious pairing within EMM, and in fact, they enjoyed a partnership prior to the acquisition. A major benefit of this deal should be a truly seamless integration between the products, creating a more expansive digital analytics offering. To pull it off, IBM needs to reconcile the deployment methods of these products. Coremetrics is currently delivered as an on-demand offering, whereas Tealeaf is deployed behind the firewall as on-premise software. To be sure, this issue isn't insurmountable, and IBM certainly has the expertise to operate across environments. But it adds an extra layer of complexity to integrating, deploying, and managing the solution. Clients need to consider their deployment requirements and appetites for "hybrid" analytics solutions, as well as making sure they fully understand the technical details behind IBM's product integrations.
The IBM EMM platform is still undergoing an early-stage rapid build-out period that holds tremendous promise, with more, deeper integrations across EMM products and with IBM solutions at large. As with all acquisitions, the real work starts when the deal closes. Execution is the ultimate arbiter of long-term success. From my perspective, it's fascinating to see how a major technology vendor like IBM is pursuing digital intelligence; developing and acquiring the requisite technology components; organizing the resources through EMM; and presenting it to the market in a context such as Smarter Commerce. Addressing digital intelligence requires a multifaceted approach from both vendors and users, and I look forward to seeing how IBM's approach develops in the future.
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