IBM's move today to acquire Netezza should help it fill a critical hole in its business analytics portfolio.
Analysts say the move could prove to make IBM much more competitive against several firms, especially Oracle, in the fast growing market for data warehouse appliances.
"IBM is buying a winner, and a market and a name brand," said Wayne Eckerson, an analyst at TDWI Research. "Netezza was the first one out the gate to ship a purpose-built data warehouse appliance. They got traction in the marketplace already."
IBM today agreed to acquire Marlborough, Mass.-based Netezza for $1.7 billion, or $27 a share. The purchase price is more than eight times Netezza's 2009 revenue of about $200 million.
In a statement, IBM said the acquisition of Netezza will help it flesh out its business analytics portfolio as it moves to reach a goal of generating about $16 billion in annual revenue from business analytics products and services by 2015.
News of the planned purchase sent Netezza's stock soaring this morning, prompting analysts to conclude that the deal has broad shareholder approval.
James Kobielus, an analyst at Forrester Research, said the deal will help IBM become mor competitive at the low-end of the appliance market.
"IBM has a competitive vulnerability in the data warehouse appliance market," Kobielus said. "They are not a low-cost vendor. [IBM's] Smart Analytics product at the low end is about double the price of a Netezza Twinfin or Oracle Exadata [appliance]," he said.
Forrester's Business Intelligence and data analytics customers have been showing increasing interest in low-cost, robust integrated hardware/software data warehouse products, which are mostly sold today by Netezza and Oracle, he said. "This is very much a shot across Oracle's bow on the data warehousing front," Kobielus said.
The IBM acquisition is the latest in a series of moves by major firms to firm up business intelligence and data warehouse offerings.
Just last month, high-end data warehouse appliance vendor Teradata acquired Kickfire a startup maker of low-end analytics technologies. In July, meanwhile, EMC agreed to acquire Greenplum, a developer of high-end data warehousing software.
Analysts estimate that there are about two dozen makers of data warehouse appliances, several claiming more than 100 customers. Netezza has gained some 350 customers of low-cost, high-performance Twinfin data warehouse appliances since the company was founded by Jit Saxena, now the company's chairman, in 2000.
Netezza's early success with marquee customers such as Neiman Marcus, Time Warner, Estee Lauder and others spurred a rash of me-too technologies from startup firms, forcing a response from major vendors like Oracle, Teradata and IBM.
"Netezza had first mover advantage," Eckerson said. "They offered blindingly fast performance at a significant price discount" compared to the traditional data warehouse technologies early in this decade, he said, "It put all incumbent database vendors on notice."
Analyst Merv Adrian of IT Market Strategy said that while IBM's move is somewhat surprising, it has a "value proposition that will resonate with a lot of people. It's recognition by IBM that customers are looking for rapid time to value and for systems that can be implemented very quickly," he added.
The big challenge will be for IBM to ensure that Netezza's support for heterogeneous technologies remains intact, said Mike Schiff, a principal at MAS Strategies, a consulting firm that specializes in data warehousing.
Schiff noted that the numerous partnerships Netezza has struck with BI vendors like SAS Institute and Informatica has been a ke reason for its success.
A key question will be how the IBM acquisition will affect those agreements, he said. IBM makes many of the same technologies developed by those suppliers, and IBM's inclination may be to first pitch it own technologies alongside a Netezza appliance, he said.
Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan, or subscribe to Jaikumar's RSS feed . His e-mail address is email@example.com.