IBM has raised the stakes in the business intelligence market by bringing SPSS into the fold - a move that is sending a clear message to rivals SAP and Oracle that it is serious about changing the landscape with predictive analytics.
IBM has made a surprise swoop on predictive analytics vendor SPSS in a bid to bolster its Information On Demand strategy and fire a business intelligence (BI) warning shot at rivals SAP and Oracle.
IBM has made a $1.2bn cash bid for SPSS, long presumed to be a likely target for one of of the bigger vendors, following a consolidation in the market that saw Oracle buy Hyperion, SAP buy Business Objects and IBM itself buy Cognos.
“We and IBM view this as a highly-complementary move from both a technology and a market position perspective,” says SPSS CEO Jack Noonan. “We are excited about this agreement and the positive prospects that SPSS and IBM can achieve together in continuing to lead an industry that we helped shape. The depth and breadth of IBM's resources, its customer and market reach can only enhance our ability to address the growing market for predictive analytics.
“In joining with IBM, we will advance predictive analytics as a competitive advantage for companies and organisations worldwide. We see this as a transformative event that will accelerate the adoption of predictive analytics. Between now and the acquisition close, we will continue to support our customers and partners in normal fashion. Existing contracts will remain in effect; account relationships and support infrastructure will remain unchanged.”
Moving beyond 'sense and respond'
IBM said it believes SPSS will provide new solutions for specific industries, such as customer acquisition for financial service companies, patient care for the health care industry, crime prevention for the public sector, and ideal store location for retailers. "With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight but true foresight," says Ambuj Goyal, general manager of IBM's Information Management.
"Predictive analytics can help clients move beyond the 'sense and respond' mode, which can leave blind spots for strategic information in today's fast-paced environment, to 'predict and act' for improved business outcomes.
“Today's main focus is how IBM's $6bn worth of R&D is coming together to deliver analytics to our clients. We continue to do this through both organic means and through acquisitions. SPSS is one such acquisition. Their products are all in the predictive analytics space. We OEM'd some of their technology as part of Cognos and now we have it in-house.”
Following the acquisition, IBM will integrate SPSS into its Information Management software portfolio. IBM Global Services also recently created a business analytics and optimisation consulting division, which the company expects will make use of SPSS products. “We're driving a plan for double-digit growth," says Steve Mills, senior vice president and group executive of IBM's software group. "We would expect to add to existing sales. There is no lack of customer interest.”
Out of the blue
While the takeover bid came out of the blue, analysts reckon it is a smart move on IBM's part and one that probably thwarts similar ambitions on the part of the likes of SAP. “Fundamentally, one can’t help think that SAP missed the boat by not seizing the opportunity to acquire partner SPSS, whose Clementine technology it OEMs, has integrated with its BI technology and sells as SAP BusinessObjects Predictive Workbench,” notes Forrester Research's senior analyst James Kobielus.
“For IBM’s competitive standing in the data management market, this acquisition represents one of the last missing pieces of its Information On Demand (IOD) portfolio. By acquiring SPSS, IBM has acquired a substantial predictive analytics (PA)/data management (DM) brand with a very loyal set of long-time customers who have built their customer churn, supply chain optimisation and other predictive models on its best-of-breed platform.”
He added that the SPSS move should reassure those who thought that IBM's attention might be wandering. “IBM would probably be the first to admit that it took its focus off the PA/DM market over the past several years as it build out the BI, data warehousing and other pieces of its IOD portfolio. IBM had never really exited the PA/DM market, but casual observers might have thought otherwise.”
The move will also change the business intelligence competitive landscape, he argues. “PA/DM is an increasingly key component of a full-fledged BI solution stack. However, the remaining field of vendors with stand-alone, horizontally applicable PA/DM vendors consists primarily of vendors who are large but proudly and stubbornly independent, especially SAS Institute; high-quality but much less widely adopted - e.g. KXEN, ThinkAnalytics - or specialised on customer, financial, scientific or other specialised analytics - e.g. Unica, Fair Isaac, and Accelrys.
Ovum's Tony Baer added that the takeover would put Oracle and SAP on the back foot. “This acquisition prevents Oracle and SAP from getting their hands on the technology to buttress their BI analytics stories. They are left pursuing niche players such as InforSense, ThinkAnalytics or KXEN,” he said, adding that SPSS was a better target for IBM than SAS. “SAS is the leader of the advanced analytics field. However, SAS's proprietary programming language and database technologies are so entrenched that even if it were for sale it would pose an integration and cultural hurdle for IBM or any other prospective acquirer. Irrespectively, as a private company with a founder and CEO who has voiced no intention of retiring, SAS is likely to remain independent for some time.”
Buying in to the value of deeper analytics
James Governor, co-founder of analyst firm Redmonk also picked up on the shifting nature of the competitive landscape, suggesting that SAS might be well pleased with this development. “Dr Jim Goodnight, the founder of SPSS's biggest competitor - the bigger and more commercially oriented SAS Institute - must be feeling great today,” he says. “IBM just strongly validated its model. So while SAS will find itself competing more directly with IBM, it will also have IBM effectively marketing big data analysis.
“I expect IBM Global Services will also continue to partner with SAS. IBM has a major marketing job on its hands convincing the world of the value of statistics and deeper analytics driven decision making, but since when did IBM not like a major marketing job?"
Certainly SAS is not displeased by the SPSS takeover. “It comes as no surprise to us that that SPSS has gone to IBM,” says Ian Manocha, managing director of SAS UK. “The deal shows that SPSS was unable to successfully cross the chasm from being a desktop tools provider to an extensible framework, therefore, it needed to sell itself to IBM.
“We are proud to be the only independent player in this very hot space. Our customers tell us they want a fully integrated suite that they can apply across their eEnterprise independent of hardware, database and middleware; rather than a set of hastily cobbled together tools from different acquisitions aligned to a major player's propriety architecture.”
For its part, SAP seems phlegmatic about developments. “I don't expect the SPSS acquisition by IBM to have an impact on our relationship with SPSS, “says Leo Apotheker, CEO of SAP. “We are addressing the predictive analytics market requirement via partnership with SPSS. This partnership is working very well. SAP and IBM already are successfully partnering in many, many areas. So the fact that IBM might acquire SBSS could actually simplify our overall offering, and therefore, might be better news than what many people expect.”
Wider industry shift
Beyond the marketing rhetoric though, Redmonk's Governor sees a wider industry shift taking place. “The technology industry, by nature, turns niche activities into mainstream ones,” he notes. “Even Thomas J Watson, the founder of IBM, is fabled to have claimed the world would never need more than five computers. Remember Bill Gates claiming he wanted to put a PC in every home - oh how we laughed!
“Well it seems the latest technology that is going to be pushed into mainstream business life is statistics and deep data analysis. Back in 2006, BusinessWeek heralded the age of the "Quant" in article entitled Math Will Rock Your World. With the SPSS deal that era may be arriving.
IBM Fires Warning Shot with SPSS Takeover
The author of this article obviously went to great lengths to research the subject matter.
However the conclusions are wrong. IBM’s acquisition of SPSS is a direct threat to SAS. SAS and SPSS in the early days of data mining and predictive analytics were competing head to head. Now IBM’s Intelligent Miner will be bolstered sufficiently with SPSS technology to compete head on with the SAS Enterprise Miner.
Jim Goodnight is not juming for joy. He should begin to feel a twinge of anxiety that IBM has finally smartened up and has acquired technology that will bring them head to head with SAS.