With one stroke, IBM has signalled that it believes itself ready to redraw the BI map. After a multi-year, multi-billion dollar spending spree, IBM has assembled the product portfolio, marketing and sales organization, and a 4000-person services army to launch a full-scale assault. It’s a lucrative opportunity: Mary Weier at InfoWeek quotes IDC to the effect that in 2008, the total BI market grew 10.6% to $7.8 billion. But although IBM’s acquisition of Cognos made it a formidable presence, with around 10% of the total market, until now it seems to largely have been in a holding pattern. IDC says IBM’s 2008 BI revenues were $800 million, up 5% since the previous year. But key competitors SAP and SAS, who are ahead of IBM in share, and Oracle, nipping at its heels, grew at double-digit rates. It is time to for IBM up that ante; as strong as Cognos was, it ought to have benefited more from IBM’s muscle. And now, it’s on.
The SPSS acquisition signals that IBM has rounded out the arsenal. It adds 1200 employees, many of whom can be expected to stay, and fills a key gap in the product portfolio that lines up with IBM’s stated direction to move “from sense and respond to predict and act,” as Ambuj Goyal, General Manager, Information Management, likes to say. SPSS has been successful for 40 years, with 250,000 users of its advanced predictive analytics software (PASW). Although dwarfed by SAS (which was eight times its size), SPSS had solid relationships with IBM and with SAP, whose Business Objects unit OEMs SPSS in the Predictive Workbench. SAP is putting a brave face on the announcement, issuing the following statement: “SAP’s partnership with SPSS is working well and we do not expect IBM’s intended acquisition to have an impact on this relationship.” I was told the same by IBM, but the fact is that this is a big competitive hit for SAP, if only because SPSS would have made a natural acquisition for SAP itself.
Why does it matter so much? Simple: Predictive Analytics is what’s next in BI. It grew 12% last year to $1.52 billion, according to IDC, and while IBM has built a terrific portfolio for predicting the past, its Intelligent Miner product languished. It was not being marketed as a standalone offering, but as a component of the broader portfolio. Now, as PASW starts to really take off, IBM is just in time. Its customers have application needs ranging from fraud detection to health care outcome management, and SPSS’ core competencies in modeling and deployment are attributes that extend beyond the requisite data acquisition and analysis. If they are effectively connected to IBM’s aggressive pursuit of reusable business process and industry models, the game changes.
This is about synergy. Inside the products, the synergy is driven by the degree to which IBM and SPSS were already working together to leverage a componentized analytics family. SPSS has a strong following for its programmer support; for example, Seth Grimes points out that “users can create and integrate customized functionality with R and Python in any module.” Curt Monash has pointed out that SPSS is much more SQL-friendly than SAS. Why does that matter? In the DBMS space, a key current trend is the “pushing down” of analytics into the engine to drive better performance. And this is very much in the cards, but it’s not all. Goyal says,
“Don’t think of this in terms of embedding in DB2 – think in terms of the Smart Analytics System.”
referring to the announcement of that system, made the same day as the SPSS acquisition, which I discussed here. This is a key, and very powerful point – the synergy to be realized by combining optimized, pre-integrated software on tuned hardware with other portfolio elements from IBM like master data management, streaming data, and leading BI tools and now with predictive analytics will add a turbocharger. This is a much bigger play than PASW alone. It enables prediction and action in real time, based on the latest information, within a policy context, and makes it possible to act now, intelligently, via future integration with IBM’s iLog rules engine:
“Our [SPSS] rules capability was enough to get by,”
said Jack Noonan, Pres and CEO of SPSS, but the newer synergy will be more powerful and open new possibilities.
Synergy also happens on the front end, in marketing, sales, and delivery. Even SAS doesn’t have the marketing and sales muscle, around the world and in leading industries, that IBM has. And its services ability is virtually nonexistent by comparison; IBM not only has its own 4000-person force but continues to partner effectively with SIs large and small. IBM’s target is business transformation. SAS doesn’t play there today, although it is certainly a supplier. IBM believes that information-led transformation will be as important to the next decade as application-led transformation has been to the last one. Whether IBM will do a better job of cross-sell, upsell, and new sell now than it did in its first year after the Cognos deal is the question to be answered in 2010.
One additional revenue kicker for IBM, pointed out to us by the estimable Rob Tholemeier: ” This should be a bit of good news for the hundreds of thousands of loyal AS/400 (now quizzically known as ‘iSeries’ ) users: SPSS is the current home of Showcase Essbase, SPSS’ powerful AS/400 reporting and OLAP technology. Good, native BI from IBM has been the missing ingredient for this legendary platform.” Rob is right on the money here; only Information Builders’ WebFocus plays here with any real success (IBM ships a limited version of it with the platform.) The iSeries market is a solid and reliable source of revenue and no doubt can be better exploited by IBM itself.
IBM’s move has raised some Wall Street expectations of further acquisitions while market prices remain relatively low. It would be astonishing if we don’t see moves, and soon. Players with leadership aspirations, such as Oracle and SAP, are thought by Wall Street types to be likely buyers; even Hewlett-Packard, who inexplicably snubbed a great portfolio-expanding opportunity by leaving Sun’s formidable stack to Oracle, could signal that maybe its bid is more than just talk with a play here. Microsoft rarely makes such lists because it’s seen as acquisitive of smaller players, but the opportunities here are exactly that. Small players such as Accelrys, Applied Predictive Technologies, Genalytics, InforSense [edit – Curt Monash points out the IDBS acquired Inforsense in June], KXEN and ThinkAnalytics have been mentioned as targets by several commentators. SPSS stood out out as the clear leader in size and customer base; only Tibco’s Insightful offers similar strengths. So expect action, and soon.
IT Market Strategy sees Oracle as the least likely near-term player here. Despite its acquisitive habit, Oracle has at last begun to tout production sites for its Realtime Decisions 3.0 release (from the 2006 acquisition of Sigma Dynamics.) While it’s possible to see additional portfolio opportunities, one suspects some more commercial success will be expected by management before muscle is applied here. As for the others, it’s only a matter of time.