On November 2, 2010, Oracle announced its intention to acquire e-commerce solution provider Art Technology Group (ATG) for $1 billion. The deal is likely to establish Oracle as a cross-channel retail software and hardware provider, combining ATG's online solutions with its existing ERP, CRM, supply chain, business intelligence (BI), and in-store applications.

According to Aberdeen's January 2010 Fast-Track Cross-Channel Gains benchmark report, increased cross-channel integration capabilities are a top priority for 43 per cent of large retailers with over $1bn in revenue. This is a key customer demographic target for both Oracle and ATG. Increased cross-channel integration capabilities provide retailers with higher customer satisfaction rates, increased customer conversion rates, and improved days to ship performance.

Oracle is one of the largest enterprise suite providers in the retail industry. According to a survey of 112 retailers from Aberdeen's January 2007 report, The 21st Century Retailer, 24 per cent of survey respondents indicate using Oracle's ERP applications, compared to 14 per cent of SAP and 11 per cent of JDA.

Over the course of the last five years, this company has followed a dual growth strategy in retail that includes growth through acquisition and organic growth through retail suite research and development (R&D) investments. An example of Oracle's R&D investment for integrated retail applications is the concept of providing an Oracle Retail Workspace, which has helped the company to unify disparate solutions from disparate acquisitions into a single point of access.

On the acquisition side, the company has purchased such notable organizations as Sun Microsystems, BEA Systems, Siebel Systems, Retek, ProfitLogic, 360Commerce, PeopleSoft, AVT, and Primavera in the recent past. For better or worse, all have provided valuable business planning, collaboration, and execution tool pickups for Oracle that have extended the company beyond its traditional data management offerings and into particular niches previously dominated by vertical market point solution providers.

ATG brings to the table a significant e-commerce solution set, which includes a SaaS — and on-premise-based online commerce platform, composed of merchandising, marketing, personalization, search, and product recommendation modules for both Web and mobile applications. The only difference between the ATG acquisition and others is the focus it brings to cross-channel commerce, versus a specific type of IT solution.

Aberdeen research finds that cross-channel alignment is a top retail priority, both for identifying new sales opportunities and developing a unified customer experience. According to Aberdeen's January 2010 Fast-Track Cross-Channel Gains benchmark report, over half of best-in-class retailers are embracing cross-channel retailing to identify new sales opportunities (57 per cent).

43 per cent are developing channel integration plans for a unified customer experience (see the chart below). According the same benchmark, embracing cross-channel efficiencies leads to higher customer satisfaction rates, increased customer conversion rates, and improved days to ship performance.

Best-in-Class Strategies for Cross-Channel Retailing

Source: Aberdeen Group, January 2010

The Impact of this Acquisition on Online Retailers
The relevance of Oracle's purchase of ATG depends on perspective. For larger retailers with annual revenues above $1bn, there are major benefits to this acquisition. Conversely, for the small to mid-size, sub-$1bn retailer, the Oracle-ATG acquisition could be viewed as an impetus to look for alternative solutions.

By combining Oracle's solutions with ATG, large retailers are likely to achieve this cross-channel integration from a single organization. Aberdeen data also reveals that 57 per cent of larger organizations are challenged with complicated, multi-generational IT application portfolios, a situation in which Oracle's vast application experience may be able to assist.

Small to mid-size online retail organizations may want to focus on broadening the reach of their specific channels before prioritizing their coordination. 58 per cent of SMB organizations cited lack of maturity of channel assets and associated business processes as a top cross-channel integration challenge. Additionally, the price point of a joint Oracle-ATG ecommerce solution may make utilization a non-starter. A third of SMB retailers cited constrained new spending in the current economic environment as a top integration challenge.

A Crucial Next Step for a Competitiveness
Oracle's purchase of ATG combines a high-end online commerce application with existing ERP, CRM, and supply chain functionality. The result is a competitive cross-channel solution that will attempt to service retailers at all customer interaction points.

This solution may be more beneficial for larger retailers than for smaller companies in the sector. However viewed, it responds to a clear market demand for increased cross-channel integration demand by retailers of all sizes.

Done correctly, increased cross-channel integration provides retailers with higher customer satisfaction rates, increased customer conversion rates, and improved days-to-ship performance.

Pic: Rd. Vortex cc2.0