Instant Analysis: IBM Makes Another Cloud Acquisition

By Markets Fool.com

IBM recently acquired Optevia, a privately owned software as a service (SaaS) systems integratorthat specializes in Microsoft Dynamics CRM solutions for public sector organizations. Optevia mainly focuses on U.K. emergency services, central government, health, housing, and social enterprises. IBM will integrate Optevia, which will be acquired for an undisclosed amount, into its global business services division.

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IBM CEO Ginni Rometty. Image source: IBM.

Another piece of the cloud puzzle
IBM has been trying to break a streak of 15 consecutive quarters of sales declines by divesting lower-margin businesses and investing more heavily in its five "strategic imperatives" -- cloud, analytics, mobile, social, and security services. Last quarter, IBM reported that sales from those businesses rose10% annually and accounted for over a third of its full-year sales. Unfortunately, that growth failed to prevent total quarterly sales from falling 8.5% annually to $22.06 billion.

To bolster those strategic imperatives, IBM has been aggressively buying up cloud companies like Optevia. Since the beginning of 2016, IBM announced plans to buy cloud-based video streaming company Ustream, cloud-based healthcare data provider Truven Health Analytics, cybersecurity company Esilient Systems, and three digital marketing companies. It also closed its acquisition of The Weather Company to beef up its Watson AI and data processing platform.

Where does Optevia fit?
Buying Optevia strengthens Big Blue's presence in the CRM market. Industry experts cited by IBM believe the CRM market represents a $23 billion opportunity, and that cloud-based CRM solutions could "surpass 50% of that total." IBM claims the acquisition of Optevia will help IBM "establish itself as a premier SaaS and digital consultant and accelerate leadership in CRM solutions."

IBM's purchase of Optevia, which installs Dynamics for its clients, could help Microsoft and IBM expand their CRM market shares against Salesforce . According to research companyGartner, Salesforce controls 18.4% ofthe global CRM market, while Microsoft and IBM respectively control just 6.2% and 3.8%. The purchase might also slightly boost IBM's global business services revenue, which fell 10% annually last quarter and accounted for nearly 20% of its top line.

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On its own, the Optevia deal probably won't generate much growth for IBM's strategic imperatives or global business services. But the purchase could play a supporting role in the company's long-term plans to grow its cloud-based revenues.

The article Instant Analysis: IBM Makes Another Cloud Acquisition originally appeared on Fool.com.

Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Gartner and Salesforce.com. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.