Mergers & Acquisitions are often an outcome of one of two things: first, M&A can be a sign of a maturing market that has too many solutions fighting over a stagnating revenue opportunity; and secondly it can be a sign that the early winners in an emerging market have some structural weakness that can be attacked. Last week, we saw a bit of both, and they are important to the retail community.

Maturing Market

The first was SAP’s announcement of the acquisition of hybris. hybris offers a high-end B2B and B2C e-Commerce solution. SAP is the 4^th largest software company in the world (following Microsoft, IBM, and Oracle – according to 2011 revenues), known for its ERP. SAP has made several smart investments that have improved its positioning with retailers in the last decade, including Khimetrics (whose “science ” was subsumed into SAP’s retail ERP offering), Ariba (procurement processes), Business Objects (analytics), SuccessFactors (Human Resource management), Sybase (mobility & database), and SAF (forecasting & replenishment).

Curiously, aside from the company’s acquisition of point-of-sale provider Triversity in late 2005, the software giant hasn’t overtly dived into the “customer-facing ” pool. Some technology industry analysts lamented that SAP missed a big opportunity when arch-rival Oracle bought ATG in 2010 (ironically it was many of the same analysts that lamented SAP’s “missed opportunity ” when Oracle bought POS provider 360Commerce in the beginning of 2006, there being some debate at the time about “360Commerce vs. Triversity “). But the byword for the hybris acquisition might be, “finally! ” SAP needed to address the reality of consumers’ digital shopping behaviors in some way, and hybris (another German company whose home city of Munich is only about 4 hours’ distance from SAP’s Waldorf facility), is the best – and perhaps last – candidate to fill the obvious hole.

The truth of the matter is that SAP and hybris have had a solid working relationship for some time. As recently as last month, hybris announced at SAP’s SAPPHIRE conference that its hybris Commerce Suite can be integrated with SAP. So the announcement should be no surprise, and the technology community responded favorably (although it is worth a bemused footnote that an executive of would-be competitor Netsuite felt compelled to slam the deal as creating a “hairball “- ironic because none other than Larry Ellison, CEO of mega-acquirer Oracle, is a major investor in Netsuite).

The general message that the hybris acquisition underlines is that e-Commerce, once thought of as a bolt-on to the traditional retail offering, is now central to it. There shouldn’t have been any doubt about that before the announcement last week, but this puts an exclamation mark to it. That is, if your company claims to be a “retail ERP “, you’d better have a robust and flexible e-Commerce component that prominently features a distributed order management capability and extends to the omni-channel (including the store). And if you’re a retailer, your selling environment had better have a digital side to it.

New Markets Ready to Be Exploited

I talked about IBM’s Smarter Commerce push as recently as two weeks ago (IBM’s Smarter Commerce Gets a Big Brain, Retail Paradox Weekly, 5/29/13), but what I didn’t mention in our review of the company’s recent Nashville conference was its push to make the Smarter suite available on the cloud as a service. But it should be no surprise that the technology giant would go in that direction. The question has been, can IBM address the technology-as-a-service needs of the SMB world? While IBM has managed cloud services and offers enterprise-capable business solutions delivered via a cloud, many “born on the cloud ” emerging companies have gotten their start on services offered by Amazon and others, who have offered cheap and fast ways to get up and operating ( “cheap ” and “fast ” are not two words usually associated with IBM).

The answer to that came in the form of an announcement that IBM is acquiring Softlayer Technologies, an acquisition that seems pointed right at Amazon. Softlayer has about 21,000 customers now, many of them born-on-the-cloud, e-business oriented enterprises that service mobile, gaming, e-marketing and digital content, and various SaaS offerings. The company boasts a technology that makes it extremely simple for clients to manage the integration of proprietary components via a single API layer in a cloud- in other words, its fast and its cheap, and it works.

The news of the IBM/Softlayer acquisition was greeted enthusiastically by the technology analyst community. In one stroke, the move strengthens IBM’s portfolio of cloud-based offerings and goes after a lucrative and growing market of emerging and mid-tiered companies that assume that technology solutions should be delivered over a cloud (i.e. the notion of “on-premise ” is foreign to them). This of course is the market that Amazon and other “21^st Century ” companies have been able to exploit while traditional giants like IBM have focused on modernizing their traditional client base. But one has to believe that IBM’s historic ability to manage technology, married to the fast-and-cheap capabilities of a modern provider like Softlayer, is a powerful combination.

What This Means

Both of these announcements are important to retailers, not only because they create new options for them, but because they underline the current state of the industry. “Omni ” is real and “Cloud ” is real. There certainly shouldn’t be any debate about the first point (although surprisingly, there still is). SAP has bought into it. As to the 2^nd point, there are many who argue that “cloud ” is just so-much hype, that it’s really no different than managed services or outsourcing. I’m not going to get into that here (it starts to be a religious debate), but here’s what we can learn from the announcement: IBM thinks it’s real.