Teradata – Aprimo: Our Initial Take On the Combination
Teradata today announced their purchase of Aprimo, a traditionally strong player in the marketing resource management space. This $525 million purchase, expected to close in first quarter of 2011, will add Aprimo’s marketing applications to Teradata’s data warehousing and business analytics offerings. According to the press release, Aprimo will continue to market its products and services under the Aprimo name.
This move by Teradata was not a huge surprise. Teradata competitor IBM made a similar move earlier this year with the purchase of Unica. Increasingly, these tech giants are seeing that an integrated stack – database software & tools, hardware, services and apps – is what drives the mega data warehousing deals that really “move the needle” on revenue, so to speak. Teradata is now following suit by acquiring a very strong player in this market.
Expectations aside, there is still much to be said about the implications of this deal. Does this signal a move by Teradata into the B2B market? What does this mean for the marketing automation market in 2011? What additional M&A activity can we expect to see?
Here’s what we think…
Teradata will market to the B2B space, but will penetrate only the largest accounts
In our B2B marketing world, the most pressing question arising from this acquisition is: Will Teradata, a traditionally B2C-oriented company, move into the emerging B2B marketing space? Short answer: Yes. Teradata wants to address a larger market and B2B is a logical extension. They are headed this way.
To understand the likely impact on the B2B market, however, you have to look at Teradata’s legacy. Their focus has traditionally been on large B2C players with massive data sets, where big deals with 7-figure price tags are the norm. Their sales organization and delivery model is architected to support this. The B2B market, meanwhile, is fragmented with many SMB firms – the growing tech companies that comprise the bulk of today’s marketing automation market. As a result, most B2B deals have a much lower price point.
Not that Teradata won’t go after the B2B market. They will. Teradata will be an important player in the largest B2B deals. We just don’t expect them to play much in the SMB tier. The relative return wont be large enough to focus on that market with the same intensity and targeted model that the current B2B specialists are bringing to bear. So, the dynamics of the B2B marketing automation market won’t change overnight.
Finally, we think it’s important to make a distinction between the marketing resource management (MRM) applications where Aprimo has its strengths and the lead nurturing applications that are the core of the newer breed of marketing automation players (e.g. Eloqua, Marketo, et. al.). The former are more focused on internal marketing organization management while the later are more campaign and customer interaction oriented. The lines blur quite a bit, but the distinction is important.
HP, Salesforce and Adobe are the most likely to make the next move
Teradata is the third giant to dip their toe into the buzzing marketing automation pool this year and we anticipate further consolidation. The question is, who will write the next check?
Salesforce is a big question mark in this space. Many are surprised that they have not already made a move to add a “Marketing Cloud” to their existing stack. Currently, they partner with several marketing automation vendors, many of whom have developed apps on the Force.com platform. Financially, they are well-positioned to make a purchase, but they are increasingly focused on delivering platform-as-a-service (PaaS), rather than expanding their application offering. We’ll see.
Adobe – the Omniture division – is another possible player that could break into the marketing automation and Revenue Performance Management (RPM) space. They are clearly interested in expanding their enterprise-wide marketing software offering. Test and Target is hugely relevant to B2B markets and they acquired Web Content Management (WCM) leader Day Software in October of this year. A marketing automation acquisition would make for a reasonable follow-up purchase.
HP is a direct competitor with Oracle and Teradata in the data warehousing, hardware and software markets, so they might want marketing apps to complete the stack. Also, with Leo Apotheker as the new CEO, we anticipate a drive for more software M&A. In our recent market map, we grouped Neolane with the likes of Unica and Aprimo, making them a likely candidate for HP.
But we don’t see Eloqua or Marketo selling before 2013
There has been a lot of speculation around market leaders Marketo and Eloqua as the next acquisition targets. Many experts we consulted with today offered them up as the next logical targets in this M&A frenzy. Their products, momentum and mindshare make them desirable options, for sure. However, we don’t think the timing is right.
Eloqua is in a solid financial position with roughly $50 million in revenue and positive cash flow. They accepted their last investment several years ago and their next step appears to be an IPO, according to CEO Joe Payne. Also, with Aprimo out of the market, they can claim to be the largest standalone marketing automation player. Based on our recent conversation with Joe, we think he’s targeting a little richer outcome than the Aprimo deal (think: IPO in 2013, market cap ~$1 billion).
Marketo recently reaffirmed their focus on independence by securing another $25 million in VC funding. The end game, according to CEO Phil Fernandez, is an IPO and a billion dollar, independent company. Marketo is too early in its development and growing too fast to sell out now. They would be leaving too much on the table. Moreover, they seem to be having fun doing what they’re doing.
Bolstering our argument is the current vision being espoused by both Eloqua and Marketo: Revenue Performance Management (RPM). Both of these vendors are painting a larger, higher-value vision for their market, whereby their analytics-intensive solutions empower the marketing department to take responsibility (and credit) for overall revenue. The vision is in its early stages of acceptance, but its grand scale tells a story of two vendors that want to be big-time enterprise players, not quick flips for their investors.
Oracle will feel the need to ramp up its marketing presence
M&A aside, we think the most likely repercussion from this deal will be a renewed focus on marketing automation at Oracle. Teradata and Oracle are going head-to-head on big data warehousing deals and the rivalry is intensifying. Oracle loves to tell its “stack” story, but its current marketing automation tale is a little tired.
Siebel had a fairly credible marketing automation solution when Oracle acquired the company. However, we don’t think the product has moved forward much since that deal. Earlier in 2010, Oracle acquired Market2Lead in an asset purchase, but there wasn’t much noise around the acquisition. Now, with Teradata able to tell a strong story in marketing transformation mega deals, will Oracle start to feel the pressure to take the marketing automation space more seriously?
These are just our hare-brained opinions. David Raab also provides an interesting take on acquisition on his Customer Experience Matrix blog here. But we want to know what you think. Please feel free to provide your feedback, opinion and predictions in the comments below.