Logistics technology: IBM to acquire Sterling Commerce for $1.4 billion

Last week, IBM announced it has plans to acquire AT&T subsidiary Sterling Commerce, a provider of business-to-business integration and cross-channel solutions for $1.4 billion. The transaction is expected to close later this year.

IBM and Sterling executives were not available for comment at press time.

With more than 18,000 customers and established more than 30 years ago, Sterling is engaged in more than 1 billion business interactions per year for clients in various industries, including retail, manufacturing, and distribution, among others.

Its software and related services focus on B2B integration, order management, logistics, and cross-channel selling and fulfillment services to help businesses connect, communicate and collaborate with their clients, partners, and suppliers to increase revenues, reduce costs, and streamline the way organizations do business, according to IBM.

“This acquisition will give IBM business partners access to a rich and vibrant trading partner ecosystem,” said Craig Heyman, General Manager, Application and Integration Middleware, IBM Software Group, in a letter to IBM clients and business partners. “Building on the customer relationships and proven implementation record of Sterling Commerce, IBM and its partners can create exciting opportunities to serve new and existing clients worldwide. Together IBM and Sterling Commerce will deliver comprehensive integration inside and outside the enterprise and will offer clients a complete cross-channel selling and fulfillment solution.”

Heyman also noted that both clients and business partners will have access to extensive B2B integration and multi-channel selling, order management, and logistics capabilities, and IBM’s SOA and business process management solutions. This combination, he said, will enable the integration of key business processes through the entire commerce lifecycle and give clients the flexibility to manage their network of business partners through public or private cloud computing environments, which will translate into more efficient supply chains and superior customer service.

Sterling spokesman Joe Horine told LM that this deal stands to benefit both companies in several ways.

“IBM has an integration product line that complements ours well,” said Horine. “Our products will appear as part of their Websphere and e-commerce side, and we believe our order management suite will complement their products on that side. “There are a lot of synergies between the two product sets that we believe will be beneficial for our existing customers and new customers.”

While Sterling currently processes more than 1 billion business interactions per year, IBM maintains this amount will only grow due to the proliferation of electronic business transactions, including manufacturers sourcing raw materials electronically and retailers automating stock management and managing orders online, among others.

IBM added that Sterling strongly complements IBM’s middleware portfolio, and by acquiring Sterling and its large trading network, IBM is poised to deliver new cross-channel services to its clients. And Sterling’s technology, said IBM, will complement IBM’s software by adding its capabilities to IBM’s frameworks supporting several industries, including manufacturing and retail.

ARC Advisory Group analyst Adrian Gonzalez commented in his Logistics Viewpoint blog that IBM views this deal as a way of growing its Websphere business, which focuses on on-demand business, business integration, application, and transaction infrastructure.

“A subplot of this acquisition is IBM’s further expansion into supply chain software,” wrote Gonzalez. “IBM acquired ILOG back in 2008, a provider of supply chain network design and inventory and transportation optimization solutions. Now it will add Sterling Commerce’s portfolio of warehouse management, transportation management, and distributed order management solutions. This will put IBM in direct competition with key partners like SAP, Oracle, and some best-of-breed vendors. It will be interesting to see how IBM walks this tightrope, and how its current partners respond.”