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IBM intends to purchase Toronto-based Varicent Software Inc., a sales and performance management (SPM) software provider, the company said Friday. It’s the latest in a string of purchases to build out IBM’s line of analytics products. Financial terms of the deal, expected to close in this fiscal quarter, were not released.

The acquisition is being touted by IBM as a “strategic fit,” helping to expand its analytics portfolio beyond finances and into sales. While Varicent’s software can collect and analyze data from an organization’s sales department, it is capable of pulling in sales data from the finance, human resources and IT departments as well. Plus, the software can be applied to things like managing territory coverage, commissions and quota approvals.

“This announcement extends analytics beyond the CFO’s office to the VP of sales,” said Paul Hill, vice president of performance management at IBM.

What is performance management software?

Performance management software is a computer program or suite that makes it possible for an organization to monitor and optimize the overall effectiveness of its workforce at the individual and collective levels. A good performance management program can help an enterprise to attract and keep the best possible talent.

Varicent was founded in 2003 and serves more than 180 customers including Starwood Hotels and Resorts, Office Depot and Farmers Insurance Group, according to an IBM press release. Last year, Ventana Research in San Ramon, Calif., labeled Varicent a “hot vendor” in its SPM value index report.

“IBM did not have a direct presence to sales organizations with applications that are built and dedicated to sales operations and management,” said Mark Smith, CEO and chief research officer at Ventana. “This is a strategic move for them.”

IBM’s news follows NICE Systems Ltd. acquiring Merced Systems for $150 million in December, Smith said. That leaves just a handful of SPM providers -- such as Synygy, Callidus Software and Xactly -- to be acquired by larger vendors.

“Now Oracle, Salesforce and SAP need to determine if they want to be a strategic provider in SPM, as they do not have the depth and level of applications that Varicent has,” Smith said.

For IBM, the acquisition edges the company into the new market niche, but it’s not a surprising move to Paul Hamerman, principal analyst in business applications for Forrester Research Inc. in Cambridge, Mass.

“The acquisition is not intuitive,” he said, “but I do see a fit here.”

Within its analytics portfolio, IBM has several performance management offerings for finances, he said. Varicent’s software addresses sales performance management, which creates a broader brush stroke across business domains.

“IBM doesn’t want to own the systems of record; it doesn’t want to own the core transactional systems like SAP and Oracle,” Hamerman said. “It wants to offer business analytics products, which includes performance management.”

IBM has also invested in companies at the periphery of customer relationship management (CRM), gobbling up Unica, a marketing automation software vendor, and Coremetrics, a Web analytics vendor.

The acquisition suggests IBM is looking beyond IT and trying to make itself more relevant to the business side of things, Hamerman said, deviating from Oracle and SAP enterprise performance management (EPM) strategies.

“IBM sells to IT,” he said. “But within this group of business analytics and performance management, the products are sold to the business and not to IT.”

Here comes the cloud
IBM’s press release on news of the acquisition stresses the terms automate, integrate and cloud.

“[A cloud computing model] is added value,” Hill said. “We want our clients to have a choice.”

Hamerman said integration fits into IBM’s platform strategy of extracting data out of multiple tools and analyzing it together for a bigger picture perspective. That includes data from enterprise resource planning, human resources, finance and CRM systems, like Salesforce.com. But offering a cloud option is relatively new.

“IBM traditionally sells on-premise,” he said. “But all vendors are being pulled to the cloud. You can see evidence of this in terms of recent SAP and Oracle cloud-based HR acquisitions.”

Less than a month ago, IBM released of a new line of predictive analytics services and software for fraud detection, financial performance and customer insight, which also offers the choice of working in the cloud.

After the acquisition has been completed, all 195 Varicent employees will join IBM’s software group, according to the press release.

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