In the last week IBM has acquired three companies in the digital agency market: Resource/Ammirati, Aperto and ecx.io. This signals a strong intent by the company to rapidly grow IBM Interactive Experience (IBM iX), which according to Ad Age is already the largest global digital agency in the world.

So, what is IBM getting from acquiring these companies?

Resource/Ammirati is a well-established creative agency, having worked on some of the very first Apple campaigns – in fact they were set-up with some investment from Cupertino. It has a number of offices throughout North America and a strong client book. Ammirati is a US centric business and perhaps as a counter balance the purchase of Aperto brings in a European focused business.

Aperto is based in Berlin with a portfolio of big name European clients and additional offices in Basel and Beijing. Ecx.io is another German based agency with offices around Europe, which brings specific capabilities and partnerships around Adobe, Sitecore and SAP Hybris.

Adding up the benefits

There are 3 key benefits that we see for IBM in these acquisitions.

The first is that it increases IBM iX’s delivery capabilities with the addition of new offices bringing the total to 30 studios worldwide with over 10,000 people. If IBM’s ambition is rapid growth then this is much quicker than setting up new offices itself. To be a global agency serving clients that operate around world then one needs boots on the ground in as many locations as is sensible. Of course IBM is already the world’s largest company with operations just about everywhere.

The second is that there is the addition of new talent, which come with skills that bolster IBM’s offerings: for example ecx.io brings strength in certain products from partners (Adobe, Sitecore, SAP Hybris). With it comes experience in those areas and partner relationships. IBM will already have many of the skills (and partnerships) that these acquisitions include but they also bring with them existing clients and strong portfolios of work done over many years.

Lastly, but most important in our view, is that these companies address a challenge with the market perception of IBM iX. While iX has done some great work for clients such as Wimbledon (tennis) and Jaguar Land Rover, it remains a part of Global Business Services (GBS), IBM’s business consulting practice. No one would doubt IBM’s technical capabilities; however it does not have equal strength in its reputation for design creativity. This is especially the case in the context of the agency market when viewed against big competitors such as WPP, Omnicom, Publicis and Interpublic.

By acquiring agencies with a strong pedigree and market recognition for create services; IBM can accelerate the shift in this perception. This is critical if it is to truly become a rival to the big agencies and groups.

Questions to be answered

A key question for IBM is how it will manage these acquisitions. It appears that they will continue to operate as individual businesses. With each looking to use the IBM relationship to expand there is the risk of them competing with one another as well as with IBM iX. While IBM will highlight the complimentary nature of the different businesses, making sure that everyone feels equal as well as helping each of the different businesses to grow, will be challenging.

This in turn leads to question about how the overall engagement model looks for customers, especially in terms of how does the various levels of IBM iX offerings and capabilities align with other ways that IBM’s Global Business Services (GBS) engages with its clients?

Specifically for IBM iX, there will be the question of how the new businesses play into its existing portfolio of offerings. Does its global customers get spread across the new acquisitions or does IBM iX keep its clients within its home grown talent? These are all issues that the big agency groups have wrestled with for some time. Despite the image that they may wish to portray externally I know from personal experience working within one of the large agency groups that it can be difficult at times. IBM iX is not a group but a business and one has to wonder if a better strategy would be to absorb the three agencies into the iX business and brand rather than continue to operate them under their own names?

Three acquisitions that make good sense

While there are questions to be answered these acquisitions make good sense. Not just for IBM iX but IBM overall, which continues on a trajectory towards being predominantly a services business. If one looks at GBS, iX and Global Technology Services (GTS) there is perhaps the strongest and most complete enterprise services offering in the market. Strengthening iX’s creative credentials will only help as it broadens IBM’s offensive on the 3 competitive fronts of business consulting, technology outsourcing and digital services. Combining these, the company has the potential to be better than competitors who only specialise in one of those 3 areas, and also more effectively deliver the integrated services that clients are looking for.