This is how IBM iX is cutting out traditional advertising agencies

In March 2017 Gartner named IBM iX a leader in global digital marketing agencies, giving it high marks for agility, collaboration, strong creative and design capabilities, and its expertise in data and analytics.

The creative and design division has gradually built itself into the largest digital agency in the world, with more than 10,000 employees and is growing its global activities with clients.

The new division of the IT giant made waves in the advertising industry in 2016 with the acquisition of three creative agencies - Ecx.io, Resource Ammirati, and Aperto - in the space of one week.

In an interview with Business Insider in IBM's London office Alison Clark, associate partner at iX said: "We are competing, to a certain degree, shoulder to shoulder with traditional creative agencies, in certain areas. We don't operate in the same way agencies do."

iX works with major clients including Nestle, Unilever, Audi and General Motors. It doesn't want to do the same work as an advertising agency. Instead it wants to combine all of the IT divisions in the company and tie them into creative work.

"There's a big difference in how we can build something, solution something, and design something because IBM has all of this heritage in the moving parts of a business' IT that often advertising agencies or creative groups don't have that insight into," Clark said.

It's also how the majority of clients have come to iX, she explained. Many of their clients came to them through other divisions of the IT firm.

Consulting companies Deloitte and Accenture have made similar moves, by growing their creative divisions and providing additional services to their existing clients. At the same time ad agencies, like like Interpublic's R/GA, have rapidly growing consulting divisions to keep up.

Clark, whose division will regularly work together with the business consulting and systems architecture teams at IBM, said it's the nature of the way the business has evolved. She said technology has become an integral part of marketing.

This shift ends up being a big benefit for clients, she said, because any creative work is also connected to the other parts of their business and can be managed by a single external partner.

"We don't operate in the same way that agencies do. We never go after individual clients. You go after the space you want to play in and where there's a gap. You look for the opportunities to fill that gap," Clark said.

She acknowledged iX often came up against traditional ad agencies when working with clients. The agency prefers clients that have come in through its IT services door to avoid the endless pitching sessions common for agencies.

The shift towards creative production work was a natural one for IBM, which was already one of the leading providers of marketing cloud software and one of the main CRM software providers, following its 2010 acquisition of marketing software Unica for $480 million.

Earlier this year IBM announced it had been using its artificial intelligence system Watson to target consumers in programmatic ad buys, in the process significantly reducing its costs and would be taking that capability to clients.

The only thing missing was a capacity to produce creative work, which it now has in iX.

'Not what you would have expected from IBM'

"We're at the forefront. When the bigger parts of IBM want to show the new IBM, they come here. They bring clients in here and they say 'it is different, there are different ways to do things'," Clark said. "And as soon as people walk in here they realize it doesn't feel the same and it's not what you would have expected from IBM."

It also doesn't employ the people one would normally expect to be working at IBM. The division has hired away creative talent from agencies owned by the big five agency holding groups and design firms. Clark herself previously worked at WPP-owned branding agency RAPP and was managing partner at Havas Helia before that.

Bob Lord, another big hire for IBM, also came from the advertising world. Lord ran the Publicis-owned Razorfish and became IBM's first chief digital officer.

In an interview with Business Insider he said: "I think the only way you can get business done now, is you can't think about technology and marketing separate from each other."

He said his background as the former head of an advertising agency allowed him to approach IBM with a new strategic point of view. As the company's chief digital officer he works with CEO Ginni Rometty and has helped pivot the company in a new direction focused on artificial intelligence.

"With augmented intelligence and cognitive computing there is so much that can be done in the marketing space to provide an increased value exchange to the consumer," he said.

Lord said he already began seeing a shift at Razorfish towards the increased use of different technologies in creative production and ad targeting. In 2013 he moved to AOL as CEO of AOL's advertising solutions, "Platforms."

He thinks IT providers, like IBM, stand a stronger chance of moving into marketing than the opposite.

"Right now, marketing is still trying to catch up to technology," he said.