10 Things To Know About IBM's Acquisition Of Bluewolf

Putting Salesforce In The Driver's Seat

IBM revealed Thursday that it would be purchasing Salesforce.com superstar Bluewolf, No. 240 on the CRN Solution Provider 500, in a deal Re/code reported to be worth more than $200 million.

As part of the planned acquisition, New York-based Bluewolf will be folded into Armonk, N.Y.-based IBM's Interactive Experience (iX) practice, which is part of IBM Global Services, No. 1 on the CRN SP 500.

Bluewolf CEO Eric Berridge and IBM iX global leader Paul Papas spoke with CRN about what brought the two companies together, cultural similarities between the two firms and geographic expansion opportunities. The duo also addressed Berridge's role within iX and the future of the Bluewolf brand.

Here's what Berridge and Papas had to say.

10. IBM Global Services Does Not Work With Other Channel Partners

IBM Global Services does all of its work directly with clients, Papas said, meaning that Bluewolf will be out in the field post-acquisition providing all of its services right to end users.

Bluewolf was the second CRM-focused solution provider acquired by Big Blue in less than a month. IBM Global Services also purchased English Microsoft Dynamics provider Optevia on March 18.

There are no plans, though, to bring together the capabilities of Bluewolf and Optevia.

"That acquisition represented an important area for another part of our Global Business Services outside of iX," Papas said. "Bluewolf, and this acquisition, are specific to IBM iX."

9. The Acquisition Is Focused On Growth, Not Layoffs

Berridge said Bluewolf faces massive capacity issues in the market right now and will be dedicated to getting its Salesforce consulting practice to fit the scale of an IBM.

"Our challenge is going to be growing the organization quickly and finding more resources and getting them trained and onboarded," Berridge said.

Berridge is confident that most Bluewolf employees will opt to remain with the company through the transition given the opportunities for growth and advancement once they're a part of IBM.

"If you create a stage for people to perform upon, they will perform," he said.

8. IBM's iX Business Has 30 Studios And More Than 10,000 Employees

IBM formally announced the creation of an Interactive Experience (iX) practice within its Global Business Services division two or three years ago to marry digital agency, management consultancy and global system integration capabilities all under one roof.

"With the world changing, we recognized in IBM that we needed to change," Papas said.

IX announced two years ago that it would open 10 studios around the world and staff them with 1,000 people, Papas said. By the end of March 2016, though, iX was already up to 30 studios and more than 10,000 employees, making it the largest digital agency in the world, according to Ad Age.

"Our growth has really been explosive," Papas said.

7. IX Has Been On The Prowl For Acquisition In 2016

For the most part, iX seized organic opportunities during 2014 and 2015 to achieve the scale it enjoys today, Papas said.

But the business pivoted this year, carrying out four acquisitions just in the first quarter of 2016. Two of those deals were for German companies -- Aperto, a Berlin-based digital agency, and ecx.io, a Dusseldorf-based full-service agency -- while the third was in the United States for Resource/Ammirati, a Columbus, Ohio-based digital marketing and creative agency.

"Our strategy remains the same," Papas said. "We're always looking for ways to add higher value for our clients."

Whether iX does that organically or through acquisitions, Papas said, depends on the situation.

6. Nearly Half Of Bluewolf's Revenue Comes On A Recurring Basis

Bluewolf typically retains clients and works with them over long periods of time, Berridge said, meaning their revenue stream is typically valued on a relationship basis rather than a share of wallet basis. Nearly half of Bluewolf's client work is done in an annual fashion.

"We're a services company," Berridge said. "We're only as good as our last project."

Berridge said Bluewolf brings to the table best-in-class methodologies, a technology-based approach to deploying Salesforce, and ongoing innovations around the CRM software that enable clients to accelerate success and improve business outcomes.

"We're bringing tools and methodologies to the table that are absolutely intellectual property," Berridge said.

5. The Bluewolf Name And Organization Will Be Maintained

Upon closing, Papas said, the firm will be known as Bluewolf, an IBM company.

IX decided to retain the Bluewolf name to leverage the power of the brand it has built as well as its reputation of being the market-leading provider of Salesforce services, Papas said.

IX intends to walk the tightrope of keeping Bluewolf together holistically while still integrating it more broadly into iX so that everyone has access to the broadest possible range of capabilities.

"We're acquiring something magical here, and we want to make sure whatever we do from an integration perspective [is] respectful to the magic of what we're acquiring and only helps to increase it," Papas said.

4. The Deal Will Enable IX To Simultaneously Serve Both The Enterprise And The Midmarket

The ability to bring the power of iX's and Bluewolf's services to both enterprise and midmarket segments simultaneously is a unique combination that doesn't exist in the marketplace today, Papas said.

"We're just bursting at the seams with excitement about where we're going to go together," Papas said.

From Bluewolf's perspective, becoming part of iX will enable them to tap into everything from IBM's analytics, mobile and Internet of Things capabilities to its expertise around Apple and Watson. The primary obstacle, Papas said, will be figuring out how to integrate all of these things together.

"We were destined to come together," Papas said.

3. Both Berridge And Papas Built Their Organizations From Scratch

Bluewolf was established by Berridge in 2000 as a Salesforce consultancy, while Papas launched and scaled iX as a division within IBM focused on digital transformation.

"There was a sense of pride in what we had built with our own hands and our own people," Papas said.

Although iX is part of a legacy company, it enjoys more of the startup vibe found at places like Bluewolf. For instance, Papas said, all 30 iX offices have a completely open floor plan.

"If we didn't feel this was the right fit for each other's families, we would not have moved forward with this deal," Papas said.

2. Berridge Will Lead IX's Global Salesforce Business

IX plans to merge its existing Salesforce business into Bluewolf and put Berridge in charge of the entire operation.

Therefore, Berridge and Bluewolf's existing management team will be leading iX's entire global Salesforce business, according to Papas.

"Eric [Berridge] and his team are just world-class and have built up what they're doing," Papas said. "We feel the best way to go about this is with his leadership at the helm."

1. Bluewolf Looks To Grow Rapidly In Europe As Part Of IBM

Berridge feels the Salesforce marketplace and ecosystem are pretty fragmented today, with tons of market share up for grabs.

"There isn't a continent or a place where IBM doesn't exist," Berridge said. "You guys even have a presence in Antarctica."

Although Bluewolf is already performing very well in the United States, Berridge feels the company will further grow its North American business once it's part of iX.

A big part of Bluewolf's strategy will focus on rapid growth throughout continental Europe, as the company is in only the United Kingdom and France today. Plus, Bluewolf is looking to expand its presence in Asia-Pacific beyond existing sites in Sydney and Melbourne, Australia.