IBM Acquires SPSS, Adds Predictive Analytics to Tool Belt

By David Roe (@druadh20) Sep 3, 2009

When IBM (news, site) announced that they had come to an agreement on the terms of a deal that would see IBM buy out predictive analytics company SPSS for US$ 1.2 billion, some commentators suggested that there was still time for a competing bid.

However, at the close of business last Friday, SPSS announced that it had called a special meeting of shareholders for October 2, for what will be a definitive vote on the US$ 50 a share deal.

The acquisition, which IBM says will further expand its Information on Demand (IOD) software portfolio and business analytics capabilities, is being interpreted by Forrester Research as the first salvo in a battle for supremacy in the business intelligence market that will see a lot more acquisitions in the coming months.

The Forrester Research report, entitled Big Blue Gets Smarter:IBM Announces The Acquisition Of SPSS, written by Holger Kisker along with Ellen Daley and Madiha Ashour, says the acquisition will force Microsoft, Oracle and SAP into similar deals to maintain their place in the market.

Advanced Analytics Abilities

While the deal pales in comparison to the deal with Cognos 18 months ago in terms of size, it will bring 250,000 new customers to the table and a best-in class solution in the growth market of predictive analytics and decision support for IBM.

According to market research company IDC, IBM in 2008 held a 0.5% share of the US$ 1.5 billion worldwide advanced analytics market. Combined with SPSS, IBM will hold a 14.5% share of the market, trailing only SAS Institute Inc.'s 33% share.

Analytics And IBM

But why has IBM gone down this route in the first place. Again, according to Forrester there are three reasons:

Continued growth of its Information On Demand drive — its smallest business area — that has seen it buy out Ascential Software, FileNet and Cognos. IBM’s vision of a Smarter Planet combines instrumentation, interconnectivity and intelligence. Without SPSS, Forrester says, IBM would not be able to deliver on this.
Strategic move to counteract the acquisition of Sun Microsystems by Oracle and put itself ahead of the other big guns at a services level.
Improves market placement by putting itself in a better position than any other vendor to deliver integrated smart solutions in the future, from physical world awareness to decision support tools.

That IBM is focusing a lot of its energy as well as its financial power on achieving these objectives is clear considering the final price agreed to with SPSS is 30% higher than it initially offered.

The price also reflects the fact that it is also prepared to pay to keep its competitors from taking its slice of the pie — there were indications that IBM was not the only company that SPSS was in talks with in the six months prior to the deal being finalized.

What Does It All Mean?

But what does it all mean, if it means anything other than a simple commercial transaction aimed at bolstering areas where IBM is weak.

The Forrester report answers that too. On one hand it says, this going to be great for customers as they will benefit from IBMs support of standards and technologies, but on the other it could mean serious problems for vendors.

With this acquisition IBM will be in a position to offer end-to-end integrated solutions that will cover all business needs — including business intelligence.