IBM Expands Smarter Commerce Initiative With DemandTec Acquisition

IBM said the acquisition of San Mateo, Calif.-based DemandTec would bolster its "Smarter Commerce" initiative, a potential market that IBM puts at $20 billion in software alone.

Under the all-cash offer IBM will pay $13.20 per share of DemandTec stock for a total price of $440 million, net of cash. The deal, expected to close in the first quarter of 2012, is subject to approval from DemandTec shareholders and government regulators.

DemandTec's on-demand software is used by businesses to analyze marketing and merchandising data, helping them develop the best price points and product mixes based on online and in-store customer buying trends.

DemandTec's customers include retailers such as grocery store operators, drug store chains, office supply retailers and clothing stores; and manufacturers of consumer packaged goods. Best Buy, Petco, Home Depot and Target are among the software's users.

IBM launched its Smarter Commerce initiative earlier this year, developing channel partner certifications and e-commerce consulting services around its 2010 acquisitions of e-commerce software vendor Sterling Commerce ($1.4 billion), interactive marketing application developer Unica ($480 million) and Web analytics software vendor Coremetrics (acquisition price undisclosed).

In May IBM began offering resellers up to 50 points of margin for selling Smarter Commerce software to mid-market customers under the IBM Software Value Plus program. They also get 12-month, zero-percent financing for customer deals.

A report from Technology Business Research Group said the DemandTec acquisition bridges IBM's cloud and e-commerce efforts, "delivering all the value of Smarter Commerce in addition to the ease-of-use and cost advantages of cloud delivery."

DemandTec, which has more than 350 employees, will be integrated into IBM's Software Group.

IBM's buyout of DemandTec is the latest in a recent string of acquisitions of cloud software companies by major vendors. This week SAP said it will acquire SuccessFactors for $3.4 billion and Oracle is in the process of buying RightNow Technologies for $1.5 billion.