Editor’s note: Geoff Woollacott is Senior Analyst/Engagement Manager and Bryan Belanger is Professional Services Practice Analyst at research firm Technology Business Research. This is the second of a three-part analysis of IBM’s (NYSE: IBM) plans to exploit business opportunities based around its “Watson” program.

HAMPTON, N.H. - Stitching IBM Analytics technologies into the fabric of the business via simple manipulation and output consumption improves speed of deployment.

On the first day of its recent analysts briefing, IBM spoke of analytics as the silver thread stitched into the IT fabric. It allows the business to explore and mine its business inputs to determine the right levers to pull to drive the business. IBM stressed the skills shortages universally predicted in the industry around analytics. IBM will take its analytics capabilities and “harden” its offerings.

Translated, it will wrap GUI-driven tools around core SPSS and Cognos technologies to simplify the data manipulation as well as the data consumption. Line-of-business personnel can rapidly explore the data warehouse for actionable outputs through SPSS Modeler.

Similarly, the executive road warrior can quickly consume and comment on the outputs on mobile devices to pull the levers needed to drive the business.

[Part One: IBM’s Watson play paying off.

[Part Two: Inside the Watson play – pushing new products.]

IBM Smarter Commerce has built a clearly articulated and integrated cross-organizational vision for its Smarter Commerce business that emphasizes transforming the customer experience and optimizing the enterprise value chain by using disruptive technologies to better understand, as IBM phrases it, “customers in context.”

We believe IBM’s capabilities and approach to Smarter Commerce place the firm on a solid trajectory to meet its objective of 14% CAGR growth in a market IBM identified as representing more than a $90 billion opportunity in 2012.

However, like its peers in the space, IBM faces three distinct challenges in growing its Smarter Commerce business:

(1) Talent: Competition for talent in the Smarter Commerce space will intensify due to an increasing shortage of technical experts, particularly in big data. Furthermore, the influx of competition from relatively new market entrants such as the Big Four will create a crowded hiring environment. IBM will ensure long-term competitiveness for top-tier Smarter Commerce talent by strengthening ties with U.S.-based universities and creating educational programs around Watson and other key technologies.

(2) Acquisitions: M&As formed the foundation of the Smarter Commerce portfolio, as IBM invested $2.5 billion in more than 12 acquisitions to add high-value analytics, mobility and other technologies related to Smarter Commerce. As competition intensifies, IBM’s Smarter Commerce expansion will hinge on the continuous identification and integration of strategic M&As that add assets, particularly in big data processing, to its Smarter Commerce stable of solutions. Acquisitions also will enable IBM to supplement its ongoing R&D
efforts to commercialize Watson for customer engagements by creating more robust solutions that incorporate both acquired and Watson analytics functionality.

(3) Growth Markets: Despite deal wins in growth markets, IBM Smarter Commerce’s key client reference list remains highly centered on the U.S. Effective adaptation of solutions and marketing messages for growth markets will fuel IBM’s Smarter Commerce expansion, as growth markets represent an expansive untapped opportunity. Emerging global enterprises in APAC and LATAM will seek to jump-start globalization by leapfrogging mid-tier systems and undertaking comprehensive, bundled transformational solutions, creating
large opportunities for IBM.

TBR believes these challenges are good for IBM, as past and current investments in Smarter Commerce will enable the firm to capitalize on investments in these areas. Specifically, IBM’s strategic emphasis on putting the consumer in context, consistent innovation with the commercialization of Watson, and integrated stack of services and technologies will solidify the firm’s stake as a market mover and share leader in the customer engagement/CRM space.

IBM Smarter Commerce focuses on putting the customer in context

The resounding theme of the 2013 IBM Smarter Commerce Global Summit was the concept of a new class of consumer, the “chief executive customer.” Presenters highlighted the need for marketing organizations to create individualized “moments,” as opposed to broad campaigns based on demographic segmentation, to build sustainable relationships between individuals and brands. IBM Smarter Commerce focuses on delivering these moments and transforming customer engagement through a three-tiered process of understanding, connecting with and engaging customers.

Emerging social, mobile, analytics and cloud technologies form the foundation for this multiphased Smarter Commerce engagement approach. Paul Papas, global leader of Smarter Commerce, IBM Global Business Services, cited three best practices for optimizing the customer experience through Smarter Commerce: harness big data, maximize and own the moment, and exploit the convergence of the physical and digital experience. Predictive and cognitive analytics solutions serve as the core engines that enable IBM to help clients better understand consumers through data, while building end-to-end social media strategies and creating comprehensive mobile  solutions allow enterprises to maximize the moment and create individually tailored experiences. Shifting Smarter Commerce solutions to the cloud allows clients to rapidly generate ROI by reducing cycle times for delivering new customer-centric innovations.

Craig Hayman, general manager of Industry Solutions, cited multiple client references that showcase IBM’s ability to successfully deliver on these three best practices. Hayman cited ING Direct and how IBM is delivering a bundled Smarter Commerce suite of services and technologies to optimize the bank’s Orange Snapshot mobile banking initiative. IBM will focus on helping ING Direct create unique customer experiences by creating tools such as Small Sacrifices, a social-media-enabled application that helps create links between day-to-day savings activity, such as passing on a cup of coffee, and larger, long-term investments such as retirement.

IBM Smarter Commerce offers a clear, consistent message, supported by a robust portfolio of solutions and an impressive list of client references. However, as the customer engagement process increasingly emphasizes the individual, IBM’s primary challenge will be to deliver Smarter Commerce solutions at scale. IBM’s ability to aggregate M&As, research-developed solutions, services and hardware into productized, repeatable solutions addressing the customer experience, coupled with its integrated global delivery model, will define the firm’s long-term growth and profitability in Smarter Commerce.

‘Integration’ differentiates IBM Smarter Commerce from competitive offerings

While the Watson Engagement Advisor offers a unique, differentiated technology, ultimate outputs generated from the tool are based on a range of evaluable, probabilistic options. As such, the value of the solution truly lies in IBM’s cross-organizational integration and its ability to blend this technology with advisory and implementation services, software and research to create solutions that leverage Watson to address client-specific customer engagement outcomes.

The organizational convergence accelerated by Watson applies to the entire IBM Smarter Commerce portfolio; the firm’s key source of differentiation in the space is its breadth of capabilities across the solution stack as well as its ability to seamlessly integrate and aggregate existing, acquired, R&D-created and partner capabilities into holistic solutions addressing business imperatives across the commerce life cycle.

When asked to define IBM Smarter Commerce’s key source of competitive advantage, Peter Korsten, vice president and partner, Customer Value Strategy at the IBM Institute for Business Value, cited one key factor:

integration.

This notion was echoed by presenter examples throughout the conference. IBM emphasized the acquisition of Tealeaf, and how the integration of Tealeaf functionalities into core IBM solutions such as IBM Case Manager has optimized its suite of customer experience software assets and allowed the firm to capture client opportunities. IBM also pointed to its recent creation of the MobileFirst portfolio, a new brand that aggregates IBM’s enterprise mobility technologies and services capabilities, as an indication of the firm’s aptitude for bringing to market comprehensive solutions value propositions.

TBR believes this integration will remain paramount to Smarter Commerce expansion as IT and business strategy convergence precipitates new market entry by large-scale firms and niche solutions providers. While consulting-led TBR firms such as PwC, Accenture and McKinsey are using acquisitions to get closer to technology implementation, investments have been piecemeal to date and pale in comparison to the synergies offered by the integration of IBM’s services, hardware and software assets. Technology-centric vendors such as Oracle have bolstered their technology competencies in the customer engagement and experience space, but lack IBM’s consulting and global delivery footprint, which is pivotal to successful delivery on transformational projects.

As a result, IBM continues to win large, transformational deals focused on customer engagement, such as its 10-year contract with Banorte to deliver end-to-end services to transform, optimize and manage the bank’s customer engagement and IT processes. IBM’s cross-organizational integration of services and technology assets, coupled with its research capability, ensures the firm’s long-term Smarter Commerce competitiveness, growth and profitability as disruptive technologies drive CxO-level demand for customer engagement transformation.

(C) TBR

[IBM ARCHIVE: Check out more than a decade of IBM stories as reported in WRAL Tech Wire.]