The Marketing Software Convergence Continues: Teradata Acquires Aprimo For $525 Million

Teradata announced today that it was entering into an agreement to acquire Aprimo, a privately held enterprise marketing platform company, with a strong focus on Campaign Management and Marketing Resource Management (MRM). Coming on the heels of the acquisition binge by IBM who acquired Unica, Coremetrics, and a bunch of other analytics and data management companies, we can safely say that marketing automation and campaign management solutions are up for grabs.

I was briefed by Teradata and Aprimo executives on the rationale for the acquisition. They expect the deal, valued at US$525 million, to close in Q1 2011. Now this is an even greater premium than IBM paid for Unica. So besides this being a very happy holiday season for Aprimo executives and the board, what does this mean for marketers, CI professionals, and competitors? Here’s my take on the deal:

  1. Signals Teradata’s seriousness about the application business. Clearly all the data that drives Teradata's revenue isn’t enough. This acquisition signals a belief that Teradata views the business application space as critical to drive the utilization of the enterprise data warehouse. The fact that Aprimo has a strong on-demand marketing software business isn’t lost on Teradata either.  
  2. Strong complementary fit. In my experience covering this market and helping CI professionals select marketing technology, I rarely see Aprimo and Teradata compete in the same deal. Aprimo is always a better fit in B2B, mid-enterprise, or process management focused deals while Teradata TRM is a better fit in high-volume, retail-centric, or analytical campaign management propositions. So the coming together of these companies means strengthening the other’s weakness. In addition, they share some marquee clients like Walmart and Dell, which always helps.
  3. Campaign management technology to serve multiple markets? Both executives suggest that the two campaign management systems – TRM and Aprimo’s  Marketing Studio – will coexist indefinitely.  I am more skeptical. I think eventually the product strategy will play itself out, and we may find that Teradata reverts back to old form. But in the meantime, we will have to take the comments on face value. One other question is how will Teradata's large sales team, used to selling high-ticket data warehouse deals to large B2C clients react to the notion of selling much smaller on-demand deals to both B2C and B2B marketers.
  4. Campaign management is coveted technology. With Unica and Aprimo, the two largest enterprise marketing platform companies off the block, it’s clear that campaign management is attractive technology to acquire.  Why is campaign management so coveted? Besides being a growth category – our last forecast estimated that this market is growing at roughly 17% – campaign management is mission critical. It is the fundamental technology that allows marketers to use customer data to develop relevant, multichannel communications. Simply put, it unlocks the value in customer data. This is particularly timely given the unprecedented growth in data volumes, driven primarily by the popularity of online, social, and mobile channels.
  5. More acquisitions will follow. We expect the market to remain active. As large players drop, the ones left standing become a little more valuable. Or do they? While most vendors would like us to believe that this is good for the market and sets the price, I am hesitant to think that other players with smaller technology footprints, limited functionality, and lower barriers to entry will command the same multiple. We expect the market to remain active and other analytical campaign management, email, Web content management, MRM, and DAM solutions to become viable targets, although not at the same multiples. To be as valuable, the technology should offer truly differentiated capability like multichannel support, optimization, comprehensive process management, large on-demand client base, or a laser-like focus on the mid-enterprise market.
  6. Innovation under threat. As campaign management technology gets consumed into the CRM/enterprise software stack, we risk seeing a slowdown in innovation. The large players are either too busy integrating the acquisitions or just too slow to support innovative functionality development to support different market segments. We expect innovation will indeed slow down unless new players enter the market or existing providers like Neolane, Alterian, Responsys, ExactTarget, and Eloqua step up.
  7. Buyers should dig deeper into product strategy. As buyers evaluate campaign management platforms, our advice to them is to dig deeper into the product road map and ask the tough questions. Which database platforms and operating systems will you support? What will your on-demand capabilities looks like? How committed are you to the marketing space and how will you prove it? How will you support new product development and what are your approaches to accelerate innovation? How will you enable online and social channels?

As with most acquisitions in this space, the picture is nowhere near complete and how the combined entity executes will determine if this tale will have a happy ending. We’ll get more information after the transaction closes, per standard operating procedure for a deal of this nature. What are your impressions, and how do you think this will play out in the long term?

Comments

An additional twist, Suresh,

An additional twist, Suresh, is that Teradata is probably an acquisition target itself. We've talked about HP potentially acquiring Teradata for years, and Oracle is always good for an acquisition just to take a major competitor out. With an ever richer portfolio of CRM products - in addition to its base data warehouse platform - does that make Teradata an easier or a more difficult pill to swallow?

An additional twist

Good point Boris! Teradata is an acquisition target itself given the race to add database capabilities to the mix. I don't think that this acquisition makes a difference to Teradata's value as an acquisition target in the near term. However, if Teradata is able to show that it can scale a business applications business and that its sales team can successfully sell both the warehouse and value added business apps then I am sure this acquisition will make Teradata very attractive. I guess it all depends on how they execute. But this acquisition certainly gives Teradata a serious platform to build out applications to serve the entire marketing (B2B and B2C, online, brand, and relationship) organization - Something that they have attempted, without too much success, in the past. What do you think Boris? Who else in the BI and Information management category is looking to expand into the marketing space?

Aprimo has a strong on-demand marketing software business?

Suresh,

Great post! Lots of good insight, thanks. I've been with Eloqua for eight years and know the space well. I've competed against, and have replaced Aprimo a few times in my eight years with Eloqua. Did Aprimo share with you stats related to their "on-demand" marketing software business? Most of us in the marketing automation space know them to be strong in the On Premise world and not so strong in the On Demand world. Their Marketing Studio product is relatively new to the market and Aprimo has struggled to migrate On Premise clients to their On Demand product and has also struggled to get new clients to adopt their Marketing Studio offering.

If I have my facts wrong, or if Aprimo is defining On Demand a different way, please share with me and the community what you know.

Many thanks!!

Jill Rowley
Eloqua
Director of Strategic Accounts
jill.rowley@eloqua.com

Hi Jill - notice I refrained

Hi Jill - notice I refrained from commenting about Aprimo's on-demand solutions. I think the Online Marketing Studio has generally been well received by clients. You will appreciate that I can't share numbers. But suffice to say Aprimo has on-premise, on-demand, and hosted clients. I also think the marketing automation vendor community gets too caught up in the "on-demand"/ "cloud" story and buzzword bingo, talking in highly technical terms to a very results focused user with evolving needs and skills.

At the end of the day, marketers that buy these solutions are looking for incremental business value, freedom from IT, options for opex spend, total cost of ownership, time to market, and most importantly functional fit. If that means an "on-demand", "on premise" "hosted" or "hybrid" model then so be it. Marketers pick whatever adds value and meets their need.

Agree?

Suresh - you are so right

Suresh - you are so right about the 'buzzword bingo'. Vendors use 'cloud; SaaS; on-demand; hosted' interchangebly and there really isn't any difference in the client's mind...they all mean "no software installed at our premises please!". In MRM the trend is immutable. 95% of our clients are 'offsite' and we expect this to be 100% by end 2011. MRM is not hinged off the customer database like Campaign Management and therefore there is less sensivity about taking it outside. Furthermore, offiste is a higher ROI, incredibly simple to upgrade (the processes to do that are opaque to the users) and IT doesn't have to grapple with a complex, heavy data (think xTB in graphics etc) MRM system in its mix. Any data integration is well-proven 'over the cloud'. The heavy emphasis in the Aprimo/Teradata announcement on Aprimo continuing to support cloud-delivered solutions is designed to comfort marketers who will be naturally worried about the direction Teradata will take with Aprimo apps - java, installed etc. What could be light and simple has started to look heavy and complex.

Grant Halloran
CEO - orbisglobal.com

Buzzword bingo

Hi Grant,

Based on your comment about buzzwords in technology, you may enjoy this blog article at Fearless Competitor. "16 B2B Marketing Terms to Ban in 2011" http://fearlesscompetitor.net/2010/12/13/16-marketing-terms-to-ban-in-2011/

Jeff Ogden, the Fearless Competitor
President, Find New Customers "Lead Generation Made Simple"
http://www.findnewcustomers.com

Opportunity, warnings and the innovation imperative

Examining how the Teradata/Aprimo acquisition will impact marketers and the competitive landscape, especially on the heels of other recent consolidation, should be imperative for all vendors in this space if they expect to maintain market share and influence. We agree with many of your points about the need to continue momentum around innovation and the value of campaign management to unlock the value of customer data. Specific to your comments about an active acquisition market and future deal valuations in other solution categories, we think your assessment is right on the money [pun intended]: “To be as valuable, the technology should offer truly differentiated capability like multichannel support, optimization, comprehensive process management, large on-demand client base, or a laser-like focus on the mid-enterprise market.” That is exactly why we are so passionate about the next phase of marketing technology – we believe marketers need conversational marketing platforms that leverage existing customer knowledge to ultimately drive more effective communications strategies. As we recently wrote in The Cross-Channel Conversation blog (www.neolane.com), for companies, especially in the Fortune 100-5,000 range, there is tremendous opportunity for companies like Neolane to offer marketers “a breath of fresh air” with the flexible technology they need to remain agile and effectively build and sustain one-to-one personalized lifetime dialogues that drive revenue and marketing efficiency. So far, 2011 appears it will be an exciting ride!

Opportunity, warnings and the innovation imperative

Thanks Stephan. I am glad you agree.

Very interesting insights on this merger

I agree with what you said here. Aprimo is a client of Find New Customers (http://www.findnewcustomers.com) so we have an interest in this. We too agree that the merger makes business sense - complimentary technology and not in same deals. Teradata is focusing on the application space and more players will be acquired.

The impact on companies such as Eloqua, Silverpop and Marketo will be interesting to watch.

Jeff Ogden, the Fearless Competitor
Find New Customers "Lead Generation Made Simple"
http://www.findnewcustomers.com

Excellent review Suresh.

Excellent review Suresh. This is probably the most comprehensive view of the value of the acquisition available.

Like you, I see this as the thin edge of the wedge for software acquisitions by Teradata. For years they've focused on growth in the data warehouse appliance space, and done extremely well at it. Now, however, that growth rate appears to be under pressure which means new revenue streams must be found.

I'm particularly interested to see if one of the 2011 acquisitions Teradata makes is in the text analytics or ECM space.

Regards,
Paul O'Hagan
IBM ECM - Offering Manager
pohagan@ca.ibm.com
@paul_ohagan

Excellent review Suresh.

Thanks Paul. Appreciate the feedback. I see two levels of convergence happening in the marketing space - 1) a cross channel marketing convergence like IBM acquiring Unica and now Teradata acquiring Aprimo. Of course, this started with Oracle's acquisition of Siebel. 2) an online marketing software convergence like we see with the Omniture acquisition by Adobe as well as all the WCM acquisitions.

Over the next few years, I expect that we will see more ecommerce and WCM acqusitions accompany the campaign management/MRM grabs. These types of acquisitions will straddle both the above categories.
Thoughts?

Is the battle for the enterprise over? What of the mid-market?

2011 should be very interesting indeed…. One would expect SAS, Kodak, Oracle and SAP (and what about Salesforce?) to aspire to have (and acquire to have) robust MRM and Marketing Automation functionality to remain competitive with IBM and Teradata… but as Suresh points out the next battleground is for the mid-market - which is intrinsically much larger than the Enterprise top tier and expects faster implementations, greater integration and ease of use.

2011 in marketing automation

Teradata acquires Aprimo. IBM acquires Unica. Oracle acquires Market2Lead. Eloqua readies an IPO. Linked does too.

There are only two ways for venture capitalists to cash out.
1) Sell the company
2) Go public

i expect a lot more of these in 2011.

Jeff Ogden, the Fearless Competitor
Find New Customers
http://www.findnewcustomers.com
@fearlesscomp