IBM Acquires Dialexa

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Technology underpins more of the products and services that organizations offer today, both to their internal and external customers. But what if your organization has the domain expertise and the idea for a product, but not the digital product engineering expertise to turn that idea into something real?

A growing field of technology consulting services is focusing on this very discipline – taking the vision of a company like Pizza Hut or John Deere and turning that idea into a digital product.

In an August market forecast, IDC said it estimates this product engineering market will reach $700 billion by 2026. Indeed, the market analyst firm said that it is seeing more service providers crossing over from IT and business services into these kinds of operational technology services.

IBM Acquisition

“It’s actually a relatively new field that has emerged in the last two to three years,” says IBM Managing Partner Claude Guay. Guay works on acquisitions for the technology giant and spoke with InformationWeek about the company’s most recent deal to buy Dialexa.

Dialexa is a 12-year-old Dallas-based company specializing in digital product engineering services, and IBM said the deal will help IBM deepen its product engineering expertise and provide end-to-end digital transformation services for clients.

“Even traditional organizations like Pizza Hut or Deere are taking their core products and making them digital,” Guay explains. “This is about taking advantage of the power of the cloud and AI and the workflows and systems and products, and actually stitching that together to be able to offer new products or to modify existing products and processes.”

Examples of Digital Product Engineering

Guay could not provide any actual examples of how clients were using such services due to confidentiality concerns. Pizza Hut and Deere are both Dialexa clients. But Guay offered a few examples of Dialexa engagements with unnamed clients. One example is the engineering of an IoT-enabled zero-turn mower that is designed to disrupt commercial landscaping with its greater efficiency. Another example is an app that performs ocular imaging to monitor the treatment of patients suffering from macular degeneration. A third example is of a non-profit that used AI in online conversations to improve donor fundraising effectiveness.

Guay says that traditional systems integrators and digital agencies may have some of the components to perform this type of work, but not the whole suite needed for this kind of comprehensive digital product engineering.

“IBM has significant expertise in some of the areas but we never had the soup-to-nuts, the methodology, the approach, the deep understanding of what it means to be a product engineering or product manager,” he says. “It is really a new field that has emerged in the last two or three years, and we’ve decided to make our foray into it starting by this acquisition in the US.”

The Talent Component

These digital products can be internal, such as those for delivering a better employee experience or better manufacturing capabilities, or they can be external, delivering new or enhanced offerings to external clients.

And although an outside consultant is providing a bulk of the product design and build services, the consulting client that originates the idea retains full ownership of the resulting product.

Such services help organizations that are looking to digitize products with a way to leapfrog some of the obstacles along the way; for example, the talent shortage. Guay takes that one step further.

“This capability maybe is not something you need long term,” he says, of hiring talent for digital product management. A consulting engagement makes the workforce for this talent elastic.

Other IBM Acquisitions

Dialexa is the sixth acquisition IBM has made in 2022. Since Arvind Krishna became CEO in April 2020, IBM has acquired more than 25 companies and 13 of those have fallen under the IBM Consulting umbrella, which has also included Neudesic, Sentaca, Nordcloud, and Taos.

IBM did not disclose financial terms of the deal, which is expected to close in Q4.

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