IBM Buys Marketing Agency To Bolster 'Strategic Imperatives'

IBM has been very picky about which firms it buys and why. So far, its acquisitions have been very point specific, usually to obtain some technological expertise that complements its Strategic Imperatives, which represent 35% of Big Blue's sales.
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Piece by piece, IBM continues to add new units to its "Strategic Imperatives" program, this time announcing the purchase of Columbus, Ohio, based Resource/Ammirati, a digital marketing/creative agency. The firm will be melded into IBM Interactive Experience (iX), Big Blue's digital agency.

The price of the acquisition was not disclosed.

Resource/Ammirati, which has about 350 associates, will be folded into IBM iX, which fields a 10,000-strong workforce spread among 25 offices globally.

While IBM iX is identified as one of the world's largest digital ad agencies, it is, in fact, a multi-tasked unit offering advice on business strategy, design, systems integration, mobile, and technological implementation, explained Paul Papas, global leader for IBM iX. "It is a holistic set of people under one roof," he said in an interview with InformationWeek.

[ Is your enterprise ready for this? Read Design Thinking Is Taking Hold At IBM. ]

Resource/Ammirati's experience is more focused on strategy, creative design, and retail/consumer expertise, Papas noted. It brings with it a number of clients to the IBM iX lineup, among them Sherwin William, Toys 'R Us, White Castle, Newell Rubbermaid, and Nestle.

Papas gave three reasons for buying Resource/Amirati: "Growth, growth, and growth." Aside from growing IBM's digital ad business, Papas also stressed growth in providing value to the client. In addition, he sees growth opportunities for the agency's employees, given the access they'll now have to Watson, advanced analytics, and mobile. These areas are pillars of IBM's Strategic Imperatives, which is the company's commitment to develop new lines of business centered on big data, analytics, mobile, security, and cloud.

IBM iX is part of the company's Global Business Services segment, which also includes cloud and analytics. Despite growth in these areas, GBS suffered a drop of 9.9% in sales to $4.3 billion in Q4 2015.

The purchase of Resource/Ammirati marks the second major acquisition by IBM already this year. On Jan. 21, IBM picked up UStream, a cloud-based live-video streaming service, which will be joined with IBM's Cloud Video Services Unit.

IBM has been very picky about which firms it buys and why. So far, its acquisitions have been very point specific, usually to obtain some technological expertise that complements its Strategic Imperatives. In 2015, IBM spent more than $3 billion to purchase 14 companies. For a company of IBM's size, that amount hardly come close to betting the farm on new technology.

While IBM has ramped up revenues from its Strategic Imperatives to reach 35% of its total sales, that has not been enough to offset the decline in revenues from legacy businesses. IBM posted its 15th consecutive quarter of decline earlier this month.

IBM's corporate culture is all about being the "one-stop shop" for corporate customers seeking IT solutions. That comprehensive heritage is driving a holistic approach towards offering new services based on the Strategic Imperatives.

Yet investors are not keen on the holistic approach, preferring "pure plays" that offer products and services based on specialization, preferably in tech areas that are also growth markets. Other companies have reorganized with that in mind.

Xerox Corp. announced on Jan. 29 that it was splitting itself into separate companies specializing in document technology and business services/office equipment. Hewlett-Packard pursued a similar course in 2014, splitting off PCs and printers from its enterprise technology efforts. Ebay also spun off PayPal at roughly the same time.

IBM has had its share of divestitures, selling off its server and PC units in recent years. (IBM had to pay Global Foundries $1.5 billion to take its chip-making business off its hands.) But those efforts are far short of breaking the company up into pieces "to create shareholder value."

To Papas, everything IBM is doing right now is to create value for clients. It's likely this will be the guiding mantra for future acquisitions by IBM.

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