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How Optevia Acquisition Will Boost IBM’s Strategic Imperatives

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Competition is growing in CRM space

So far in the series, we have discussed various facets as to why Optevia appealed to IBM (IBM). 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 (WDAY).

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Optevia’s acquisition will boost IBM’s strategic imperatives

IBM’s Optevia acquisition is in sync with its strategy to boost its strategic imperatives. IBM’s strategic imperatives relate to the company’s investment in cloud, analytics, mobile, social, and security technologies. The company’s investment in these areas grew 24% to $28.9 billion in constant currency terms in 2015. Of IBM’s 2015 revenues of $81.7 billion, the contribution of strategic imperatives rose to 35%. IBM’s total cloud revenue grew 57% on a year-over-year basis to $10.2 billion in constant currency terms.

However, despite double-digit growth in strategic imperatives for the last 15 quarters, including recent fiscal 4Q15, IBM has failed to report any revenue growth. IBM failed to report 4Q15 growth in most operating segments and geographies. Optevia’s strong position in the UK market may remedy this situation to an extent.

As a result, IBM is aggressively making an effort to identify and boost new avenues of growth to offset the decline in its perpetual licensing business. 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.

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