In the midst of a back-to-school shopping season for technology firms looking to shore up their portfolios before market valuations rise again, IBM in July offered $1.2 billion to acquire SPSS Inc., a predictive analytics specialist founded more than 30 years ago.
At first blush, the deal may have appeared redundant to those who recalled that IBM spent nearly $5 billion in late 2007 to acquire business intelligence and analytics software provider Cognos. But the two product sets are distinct and complementary, said Mychelle Mollot, director of worldwide marketing for business intelligence & performance management in IBM’s software group.
“Right now, the BI software that we provide — the query, reporting, and analysis component of the Cognos software — gives people a great view at that historical perspective. But SPSS completes the time horizon by giving people the ability to look at what could happen in the future if these patterns continue or if they were to tweak the business model in various ways.”
Analysts agree. Having executed a number of acquisitions to build out its information management portfolio, including the Cognos deal and less flashy pickups such as data integration-focused Ascential and unstructured-content specialist FileNet, IBM still lacked “a high-powered analytics engine,” wrote John Hagerty of AMR Research in analyzing the deal.
With the proposed SPSS purchase and the prior Cognos deal, IBM is betting big on a future in which metrics will drive business decisions, and Big Blue isn’t alone, according to Jereme LeBlanc, principal of TM Capital, a corporate M&A adviser. In a research note published after the deal was announced, LeBlanc said the SPSS acquisition would vault IBM into a stronger competitive position against the likes of Oracle and SAP, both of which have moved aggressively into the BI market in recent years.
Hagerty, meanwhile, said the IBM-SPSS tie-up “may also disrupt some emerging relationships, most notably a reselling partnership with SAP BusinessObjects for predictive analytics.” However, he tempered that analysis by adding, “With the dwindling number of independent software vendors out there, ‘co-opetition’ is becoming the rule rather than the exception.”
SAS Institute has also had a relationship with IBM, which SAS expects to continue. In a blog posting, Anne Milley, SAS’ director of technology product marketing, said, “Our partnership with IBM is sponsored within their hardware group, and this new IBM acquisition is being handled through their software group. The collaboration we have with IBM Global Services and the Hardware Group will continue, and this is in the best interest of customers.”
If the deal closes toward the end of the second half of the year, as IBM predicts, the company will announce a go-to-market strategy for industry offerings based on the SPSS software.
“There are certain industries where [predictive analytics is] really critical,” Mollot said, including those in which fraud is an issue or market trends change rapidly, such as retail. “My belief is that virtually all of [IBM’s target industries] will be able to utilize the technology, but we will prioritize [solution development] based on the ones that have the most critical needs.”