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.
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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.
There will be three outcomes from this, the report predicts:
- IBM's Smarter Planet strategy will force vendors and partners to become familiar with this strategy and -- more importantly -- demonstrate how they can bring value to that proposition.
- Other large software vendors will have to think out of the box if they want to avoid becoming ‘niche’ companies.
- Business Intelligence vendors are going to find it increasingly difficult to compete alone as the space for these products gets smaller.
Trend Of The Future?
However, before any vendors start donning the sackcloth, all of this is. . .well predictive and nothing is written in stone.
Phil Kemelor, Vice President of Strategic Consulting Services for analytics company Semphonic, and CMS Watch Analyst says that mergers and acquisitions are part of the analytics food-chain and a “desirable endgame for all companies.”
He argues that whether the SPSS acquisition starts a wave of acquisitions remains to be seen as it is not clear how the different companies will be able to bed together.
"As all of the firms in the web analytics space are fairly small . . .the concept of acquisition is always present and in fact a desirable end game for all companies," he told CMSWire.
He added that if it is the case that IBM's acquisition of SPSS will be used to further their business analytics practice, it could be that other business analytics consulting firms, such as Booz Allen and Accenture, might see a web analytics company as attractive.
Wonder if there’s any predictive analytics that can see what's really coming?