Why IBM spent $200 million to buy a huge Salesforce partner with Marc Benioff's blessing

IBM Ginni RomettyIBMIBM CEO Ginni Rometty

In IBM’s new mission to become the king of the up-and-coming cloud computing market, the company made an acquisition on Thursday that, on its face, seems sort of puzzling. IBM bought big Salesforce partner Bluewolf Group.

IBM didn’t disclose the price paid, but unnamed sources told Re/code it paid over $200 million.

And the two companies that should be annoyed are SAP and Oracle.

This is not a move by IBM to snatch Salesforce’s customers away.

It’s a move by IBM to become a big consulting partner for Salesforce. IBM says Salesforce consulting is quickly becoming a $111 billion business.

Away from old-school consulting

IBM’s current consulting business has been in decline for the past few years because companies are rarely embarking on the kind of huge, multi-million, old-school IT projects they used to hire IBM to do, such as installing massive new SAP systems at enterprises. IBM is a huge SAP partner.

Those old-school deals have an high failure rate: running over time, over budget and sometimes winding up in court.

Companies are turning to cloud computing instead, especially Salesforce.

For instance, just this week, Salesforce announced that it had secured a massive $100 million “blanket” contract from the US Department of Health and Human services.

That contract included another $503 million that the HHS can spend on consulting services related to using Salesforce.

IBM is already a consulting partner with Salesforce. Bluewolf speeds up its plans.

Salesforce is IBM’s next SAP

In other words, IBM views Salesforce as its next SAP when it comes to its consulting business.

And no one is happier about that than Salesforce CEO Marc Benioff, who clearly knew about the sale.

Benioff is even quoted in the press release, giving his blessing to the union.

SAP can’t be thrilled.

SAP offers a CRM system that competes with Salesforce. Not only that, SAP chose IBM, its old-friend and partner to be the backbone of its own cloud computing offerings rather than building its own data centres.

But Oracle is the company really being kicked in the teeth.

Oracle and IBM have been competitors in the database business for eons. And ever since Oracle became a hardware company, it’s been blasting away at IBM in everything from ads to keynote speeches. As Oracle tries to ramp up its own late-to-market cloud business, Larry Ellison views Salesforce as his biggest competitor.

And now two of its competitors are getting really chummy.

Bluewolf’s 12 global offices and 500+ employees are joining IBM Interactive Experience (iX) unit. Through acquisitions like this, IBM has quietly built iX into the world’s the largest digital agency with more 10,000 employees.

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