In January 2012 we introduced the O3 Retail IT Model - which is more than simply modernising the application and commerce portfolio, but rather represents a complete re-platforming of the IT landscape to enable business results for the next decade. Later this year we have finalised the reference maturity model for OmniChannel Commerce & Marketing.
Let's focus now on the technology elements of the maturity model and map these towards current vendor offerings and recent movements to unveil gaps that can be potentially closed via M&A activity.
A good initial question for enterprise technology buyers is then: where do I start from? The following questions happen frequently in consumer industries nowadays.
- Should I quickly deliver mobile or social capabilities, or should I embed these steps into a longer term innovation framework?
- Should I focus on back-end first by replacing the 15 years old transactional system to fulfill new digital customer requirements at low TCO or should I firstly review my value chain strategy or begin with the front-end technology model?
- How do I deliver personalised customer offers in real-time? Once again, should I start with front-end or back-end systems transformations to enable the OmniChannel strategy for the organisation?
- Do I need a (new) ERP or should I look to a different enterprise platform?
As one can see from the attached figure, the objective of the O3 technology investment aligns with customer centric strategies as it puts the customer experience optimisation at the centre, whether that is individual shopping episodes or the long term experience with the brand. Working from the outside in, the platform is enabled by foundational technologies that are maturing rapidly - big data, cloud, social, and mobility.
The O3 platform itself is a central repository for standard information/content management as well as operational processes. The platform integrates sensor networks and disparate store technologies, as it delivers a single technology model for the store and the other channels. The platform should also address mobile, by providing a single management system for mobile device configuration, mobile application management, both in associate driven and consumer self-service applications. To complete the landscape, the O3 platform should also connect with enterprise data pools like GS1 or equivalent for trading partner collaboration (watch out for the evolution of Ariba and JDA trading platforms/services going forward).
Great value from the platform will be harvested from the real-time intelligence layer across functional domains: Omnichannel fulfillment; Omnichannel merchandising; Omnichannel marketing and Omnichannel commerce.
Regardless of the specific IT landscape in place, the IT architecture is always a good starting point to enable the OmniChannel (OC) goal. The IDC OC maturity model points at step 3 to convergence (as opposed to traditional IT integration) - which in turn requires a converged platform approach built upon the initial foundation of step 2.
M&A activity in retail and other consumer industries has been an important asset for technology vendors in 2012, aimed at delivering many of the required OC technology elements. Going forward converging into a unified environment.
Some examples are:
- the recent merger of JDA and RedPraire,
- the acquisition of Sterling Commerce, Emptoris, Demandtec, Teleaf, Coremetrics and Unica by IBM Smarter Commerce,
- the launch of Toshiba Global Commerce Solutions as a new company formed by Toshiba TEC and IBM Retail Store Solutions,
- SAP's acquisition of Ariba, Khimetrics, SAF,
- Oracle's acquisition of ATG, Endeca, Collective Intellect, Virtrue,
- Salesforce's acquisition of Buddy Media
- and last week NCR acquisition of Retalix! NCR will benefit in terms of extending and integrating store operations software, self-service, promotion and payment software services into the OC mix. Plus will further extend and strengthen their services offering.
What M&A activities can someone expect to see in 2013? The following are our best logical bets based on deductions coming from the O3 IT model and OC maturity model requirements. Readers are advised: IDC and myself personally are taking no liability nor responsibility for investments decisions or any other actions that may result from reading the following, it will be reader's sole responsability. Once again, the following thoughts should be used only as a technology vendor and industry guide, we are not providing investment advice and this is just our interpretation of a potential market development scenario based on our assessment of the competitive environment.
- JDA+RedPraire - IBM and Oracle would build further their OC Commerce, Marketing, Fulfillment and Merchandising foundations. SAP too while driving industry consolidation to their market share benefit. But every potential buyer will most likely need to wait until the IPO of the new company before a merger can take place.
- Hybris - would be a good fit with SAP to extend into OC commerce (Demandware may be an option), or be a target for Infosys and other services companies. Depending on JDA+Red Praire investors' objectives, the acquisition of Hybris would make sense to the new company to extend portfolio end-to-end - from supply chain to the customer - while further augmenting market capitalisation. Meanwhile Hybris may go for acquiring Prudsys right before another possible IPO for Hybris itself.
- Facebook - after acquiring Instagram, may further expand into promotions and social commerce carefully, not to cause Facebook friends disaffection.
- QlikView - analytics and big data is a key theme. Would be interesting to combine QlikView with JDA+RedPraire (and their cloud services).
- Google - Google search now provides an initial service around photo recognition. If/when combined with geo-location and analytics could result into a OC marketing platform. Google would then play the OEM/platform role into this functional domain. May lead to acquisitions or organic growth efforts.
- Cegid - if combined with Hybris would create a OC commerce platform appealing to select industry segments, for example fashion & luxury internationally. Atos Origin may also find some common ground with Cegid to further extend their eCommerce services portfolio into OmniChannel solutions.
- Oracle - would benefit from integrating Bazaarvoice into their ATG/Endeca eCommerce and cross-channel stack.
- Tyco - By acquiring JDA and RedPraire would extend their technology platform, RFID, store performance and inventory portfolio into OC commerce and fulfillment. More realistically Tyco would go for acquiring specialised software vendors that will extend their suite functionalities.
- 2013 will see also good M&A activity for specialised software vendor targets, ranging from consumer-grade UI (digital customer experience and associate empowerment) to RFID software/services and retail specific workforce management tools.
- Back-end content management and product information management - many of the large vendors have a CMS or PIM system as part of their portfolio, whether general purpose built or specialised to fit front end requirements (like for example on eCommerce in the case of Hybris and Oracle/ATG). Still, many retailers own a custom built CMS system. The architecture gets pretty complex as retailers have to store data in a data warehouse, add on top a MDM layer, and then add on top a CMS tool to present data to internal users and let them more easily manipulate the content as required by the business. Then finally content can be elaborated and distributed. Therefore we foresee an evident gap that vendors can fill in by reducing technology complexity and augmenting business benefit, either by driving internal developments or M&A activity. As large IT Services organisations like Accenture are focusing more on delivering Business Services rather than just IT services, the next generation of Intelligence Outsourcing services would strongly benefit from an acquisition in this space too.
- Adobe - expanding the content management discussion in the previous bullet towards (digital) marketing, may suggest platform software companies to be looking into acquiring Adobe. SAP would be a platform software candidate for making such an interesting and significant move.
- Video analytics - one to watch beyond 2013. Video/image analytics technology is used in many ways, from self-checkout recognition of fresh goods to make product search by image more instant and effective online/mobile, to automated store level intelligence.
Delivering the promises of OmniChannel strategies will result in a unique asset for retail and consumer enterprises to drive sales and profit performance going forward. Retailers need guidance and vendors need to align to fast changing technology buyer requirements.
All the best for a very successful 2013!
Ivano Ortis, Head - International IDC Retail Insights