IBM signs up B&Q for hosted app service

B&Q has signed up for an application hosting service from IBM designed to help the retailer determine the most appropriate prices...

B&Q has signed up for an application hosting service from IBM designed to help the retailer determine the most appropriate prices for its merchandise.

The IBM Consumer Demand Management Service with DemandTec has been available since January.

"B&Q is the first taker we're talking about publicly for this service, but we have other customers as well," said Dev Mukherjee, vice-president of marketing and strategy for e-business on demand at IBM's Global Services unit.

The offering combines software for establishing retail prices from independent software vendor (ISV) DemandTec and hosting services from IBM. IBM delivers as a hosted service the DemandTec software and charges clients based on usage.

This "software as service" offering is aimed at companies that do not want to go through the trouble of buying the DemandTec software, adding whatever new hardware, networking wares and storage units might be required for it, installing it, testing it and maintaining it.

Through the IBM service, the client taps into the software remotely and IBM takes care of all the back-end work, such as installing it, maintaining it and upgrading it.

It is also very good business for IBM, whose e-business hosting services generated more than $1bn in revenue in 2003, and have generated revenue annual growth of more than 20% in the past three years, he said.

The DemandTec software is designed to provide sales-cycle data that retailers can use to evaluate the effectiveness of a particular campaign and predict the effect of price changes, among other things.

B&Q will use it to keep prices as low as possible.

The offering benefits from being specific to one industry, which will seem more useful to potential clients - in this case in the retail and consumer products sector - than a more general service that is not tailored to any specific type of industry, said IDC analyst Amy Konary.

Insight into how a pricing strategy is working is very important in the retail sector, more so than in other industries, so this software addresses a key issue for retailers, she said.

The ability to pay for the software based on usage should also be attractive for retailers, whose businesses tend to be very seasonal and thus fluctuate markedly, increasing at specific times in the year, such as Christmas.

Retailers should like that the heaviest usage of the software - and therefore the higher spending on it - will happen when the company's income is rising.

This service is priced to match the size of a retailer and the amount of retailer data.

Clients will incur a one-time charge, which includes setup and enablement of the resources required, and then pay a monthly usage fee for the service based on the number of stores, number of store keeping units (SKUs) and total amount of data processed, according to IBM.

The entry level pricing model for The IBM Consumer Demand Management Service for a retailer with up to 15 million SKUs begins with an estimated one-time charge of $13,500 and estimated monthly recurring charge of $9,300.

Juan Carlos Perez writes for IDG News Service

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