October 27, 2009
Around the world, there are roughly 700 IBM sales persons in 32 countries peddling product lifecycle management (PLM) software bundles from the Paris-headquartered Dassault Systemes (DS). DS has just offered U.S. $600 million to buy them from Big Blue.
At 11 PM Pacific Time last night, while some of us were watching the Nightly Business Report or getting ready for bed, DS finalized an agreement to buy “IBM sales and client support operations encompassing DS’ PLM software application portfolio, as well as customer contracts and related assets ...”
When the deal closes, the IBM PLM sales team will become DS employees. Al Bunshaft, IBM’s current vice-president of PLM sales, could soon be calling DS’ president and CEO Bernard Charles his boss.
The price tag represents “the largest investment in our corporate history,” revealed Charles. Indeed, the offer is more than the $408 million DS spent in 2006 to snatch up MatrixOne to bolster its PLM portfolio for medium to large enterprises; and more than the $310 million it spent in 1997 to purchase SolidWorks to grab a share of the midrange mechanical CAD market.
According to Charles’ recollection, the IBM PLM sales team was responsible for 30-35% of DS’ revenues last year. In its 2008 Annual Report, DS listed €1,335 million in revenues. So 35% of that would be roughly €467 millions or U.S. $650 million. This figure suggests, if IBM sales team can draw in just as much or more for 2009, DS could easily recover the acquisition’s cost.
A Look at the DS-IBM Partnership
In general, the DS-IBM partnership, which began in 1981, is set up as follows: DS develops (and sometimes acquires) PLM products; IBM sells them and helps buyers integrate them with their choice of hardware, middleware, and IT-ware.
IBM maintains relationships with all three leading PLM providers: DS, PTC, and Siemens. In fact, all three PLM merchants belong to the IBM Global PLM Alliance. This has led some industry watchers, like Brad Holtz, president and CEO of Cyon Research, to call the DS-IBM partnership “an open marriage.”
Reflecting on DS’s announcement today, Holtz wrote, “While DS gains custody of their offspring [the PLM sales operations and the associated large accounts], IBM will remain close by, freed up now to focus its efforts on its strenghts: providing middleware and global services to PLM customers ... Although they will no longer be sharing the same bed, they have renewed their vow of friendship, tightening their relationship between them at levels that are much more meaningful to all” (read Holtz’s entire blog entry here).
Jim Brown, PLM analyst and founder of Tech-Clarity, wrote, “For many, this is the dissolution of a long-standing marriage that they are comfortable with and makes sense ... To me, this is just the final correction to a legacy relationship that has served its time and purpose” (read Brown’s commentary in full here).
After the acquisition, DS expects to become an IBM Global Alliance partner (not the same as an IBM Global PLM Alliance partner), a smaller IBM inner circle. The club includes SAP, Oracle, Infor, and a handful of household names in the technology sector.
Being a Global Alliance Partner, explained Karen Lilla from IBM’s global communication, “will give DS a dedicated alliance executive at IBM and an extensive coverage model to reach a wide set of customers across all IBM divisions.”
What Can DS Customers Expect
DS’ Charles noted, as a result of the sales operation consolidation, DS customers will get a “simplified engagement process. The software acquisition will be under one set of contracts [as opose to two sets: IBM’s and DS’].”
Ken Amann, director of research at PLM consultant CIMdata, observed, “IBM will focus on its core competencies in middleware, hardware and services and will deliver solutions from multiple PLM suppliers as appropriate for each of their customers. DS will have the challenge of integrating a large organization, but they have been successful in absorbing the partner network previously managed by IBM.”
Partnership RedefinedBeside simplifying the customer acquisition and retention process, DS can soon exercise greater control over its large accounts, which IBM now handles for the company. The transfer of the sales team to DS is expected to let IBM concentrate on providing PLM consulting and integration services, the domains Big Blue is best equipped to tackle. It also leaves IBM free to resell PLM products from DS’ rivals, if it chooses to.
In the announcement to the press, IBM and DS assured, “Both companies are dedicated to strengthening and extending their cooperation in the areas of professional services, cloud computing, middleware, flexible financing, hardware, and sales and distribution.”
But by Charles’ own admission, “There was no exclusivity in the IBM and DS contract.”
Perhaps publicly professing devotion to each other while leaving enough room to explore additional opportunities is a common phenomenon of Global Collaboration.