IBM has announced that it has acquired Optevia, a
privately owned Software as a Service, (SaaS), systems integrator specializing
in Microsoft Dynamics CRM solutions for public sector organizations. Optevia
will join IBM Global Business Services and help meet the increasing client
demand for CRM SaaS solutions within the public sector.
Industry experts estimate that the world-wide
Customer Relationship Management (CRM) opportunity is in excess of $23B, with
cloud-based CRM solutions expected to surpass 50 percent of that total. The
acquisition of Optevia, will help IBM establish itself as a premier SaaS and digital
consultant and accelerate leadership in CRM solutions.
Optevia’s main focus on UK Emergency Services,
Central Government, Local Government, Health Authorities and Housing and Social
Enterprises, allows them to offer their clients highly differentiated
solutions. Optevia’s client base includes ministries, councils, regulators,
licensing and grant management organizations, transport authorities and social
housing organizations.
“By acquiring Optevia, IBM will be able to provide
Public Sector clients and prospects with a range of unique, industry focused
CRM based solutions,”said Joanna Davinson, IBM Public Sector Leader - Europe.
“This strategic acquisition will help strengthen IBM as a SaaS provider and
Global Software Integrator.”
It’s the rapid growth expected in the CRM and SaaS
(software-as-a-service) space that has prompted IBM to pursue Optevia. According
to the Cisco (CSCO) Global Cloud Index, SaaS is expected to be the
fastest-growing cloud service segment through 2018, as the above presentation
shows. SaaS is expected to grow at a compound annual growth rate (or CAGR) of
33%, whereas the cloud market as a whole is expected to grow at a CAGR of 24%.
CRM is the largest component of SaaS, which explains
Salesforce’s continued double-digit revenue growth. Taking a look at Gartner
estimates, though the CRM software market is expected to grow only at a 14.8%
CAGR (compound annual growth rate) by 2017, SaaS CRM is expected to grow at
22.6%.
The growth in the CRM space that pushed IBM to
acquire Optevia also propelled Oracle (ORCL) to speed up its effort and
initiatives in this space. In its latest fiscal 3Q16 earnings release, Larry
Ellison, founder and executive chair of Oracle, stated that the company’s
positioning “should make it easy for Oracle to pass Salesforce.com and become
the largest SaaS and PaaS cloud company in the world.” Oracle stated that it’s
growing faster than Salesforce (CRM) in the SaaS space and has ten times more
customers than Workday
It’s Salesforce’s dominance in the CRM space that
made it a potential target for Microsoft (MSFT) though the acquisition did not
happen. Salesforce leads the CRM and SaaS space. Investors interested in
gaining exposure to IBM can consider investing in the SPDR S&P 500 ETF
(SPY), which has an exposure of 8.7% to application software and invests ~0.7%
of its holdings in IBM.
Since its founding in 2001, Optevia has rapidly
established itself as a trusted partner for Public Sector and Social Enterprise
clients. The acquisition will allow IBM to scale Optevia’s solutions across
other areas worldwide, where Optevia's software, assets and highly skilled,
industry-focused workforce, coupled with their expertise will significantly
increase IBM’s current capabilities.