IBM announced today that it is selling its $1.15B Retail Store Solutions (RSS) business delivering and supporting retail point-of-service (POS) terminals to Toshiba for a reported $850 million. IBM will continue to have a nearly 20% stake in the new company formed by the deal, with plans of divesting that over the next three years. With retail being such a core vertical market for IBM, the deal begs some questions.

Why would IBM sell such a significant business in a core vertical market?

  •  Channel-centric solutions are on the endangered species list. While I do not expect to see a bunch of stories out of Eugene, Oregon about protests over the environment for retail POS systems,* the market for POS systems has changed dramatically over the last few years. Retail store systems have become a maintenance business with little growth. Retailers are closing stores, distressed commercial retail real estate is everywhere but the top luxury malls and downtown cores, and there is very little incentive for retailers to upgrade or replace retail systems today, in part because . . .
  • . . . We are dropping have dropped the ‘e’ in eCommerce systems. Companies are increasingly leveraging their eCommerce systems – from platforms to OMS – to enable mobile and tablet based POS experiences in the hands of retail sales people. These tie the store-based experience with the web, mobile, and call-center experiences the eCommerce systems already support, opening up opportunities for better customer experiences and creating a unified view of the customer, inventory, and orders. We see this everywhere from the local coffee shop, dog groomer, or SCUBA instructor running Square, Intuit, or PayPal’s dongle systems to large retailers like Nordstrom, Home Depot, and Disney. Our clients increasingly are looking for enterprise solutions which will support the entire enterprise, not channels. (For more on this trend, click here)

What does this mean for IBM’s retail vertical customers?

  • A clarified IBM road map focused on integrated enterprise commerce solutions. The rationalization of the POS solutions and services with IBM’s Smarter Commerce initiative was a problematic one. Which solution trumps the other – POS or eCommerce – and how do they co-exist? That no longer presents a challenge as IBM can move forward with clarity building an enterprise solution built around the eCommerce, OMS, analytics, marketing and supply chain solutions, but effectively dropping the ‘e.’ Customers on the Toshiba TEC solutions will integrate to the system if they like – as can others – but IBM can now laser focus on building out commerce solutions that that enable their customers to serve all consumer touchpoints – and supporting business processes – in a unified fashion.  
  • For RSS clients there is no need to panic, expect this to be smooth. The near-term implications for IBM Retail Store Solutions customers are minimal. The people, the processes, and the products are all moving together, as are the maintenance contracts and key relationships. Current customers should expect relatively few changes or problems. IBM GBS customers are not impacted at all. However, in the long term clients of the new Toshiba unit will face the same challenges determining the long-term road map for their channel-centric systems, and whether a move to a channel-agnostic technology architecture is in their long-term best interests. Toshiba will be a Smarter Commerce partner, but the questions go much deeper than integration of these systems.

If you are a client and want to discuss what this means to you, I encourage you to set up an inquiry with me or one of my retail IT colleagues to discuss.

* A reference to the stereotype of the Eugene “treehugger.” Indulge me, I am a University of Washington grad with a bunch of Ducks for in-laws. I take my shots where I can. In all transparency, I too love trees.  Go Huskies!