Analysis: Analytics weakling IBM pumps up with SPSS buy

Did SAP and Oracle miss a smart opportunity?

IBM's $1.2 billion purchase of SPSS Corp. today will immediately turn IBM from pretender into contender in the high-end analytics and data mining market, say analysts, and could leave rivals such as SAP AG or Oracle Corp. ruing a missed opportunity.

It continues IBM's recent tradition of bolstering its Information On Demand lineup with massive purchases. IBM bought Cognos Inc. in late 2007 for $5 billion, allowing it to leap from fifth to third place in the overall $22 billion business analytics software market, according to a 2008 report from IDC Corp.

IBM's purchase of SPSS will have an even more dramatic effect. According to IDC, IBM had less than one-half a percent of the $1.5 billion global market in 2008 for advanced analytic tools -- a small, but key, segment of the overall business analytics market.

"IBM would probably be the first to admit that it took its focus off the predictive analytics/data mining market over the past several years," Forrester Research analyst James Kobielus wrote in a blog today. He said IBM "buried" its Intelligent Miner data-mining tools.

Buying SPSS, which had 14% of the predictive analytics/data mining market segment, will allow IBM to leap from 13th into second place, behind only SAS Institute Inc. SAS dominates the segment with a 33% market share.

It will also allow IBM to technically integrate its other business intelligence software with similar offerings from SPSS.

"The integration of predictive analytics with other analytic or operational technologies is still ahead of us, so there was a lot of value to be gained from SPSS beyond what it had standalone," wrote independent analyst Curt Monash in an e-mail. "IBM's ownership immediately makes SPSS a stronger competitor to SAS. Any advantage to the rest of IBM depends on the integration roadmap and execution."

SPSS founded in '68

Founded 41 years ago, Chicago-based SPSS originally created basic statistics-crunching software that was widely-used by several generations of undergraduate and graduate students in fields such as social sciences, marketing and business.

Evolving into a cutting-edge data-mining vendor, SPSS actually "coined the phrase 'predictive analytics,' with the rest of the industry then coming around to use it," according to Monash.

Kobielus expects IBM to phase out its faltering Intelligent Miner products and keep SPSS as a separate brand. One tricky aspect of the integration will be to resolve which text analytics software -- SPSS' or IBM's OmniFind software -- will prevail, he said.

"Another issue is how IBM will integrate the SPSS offerings into its still-evolving in-database analytics roadmap for InfoSphere Balanced Warehouse," Kobielus wrote. "Hopefully, IBM will maintain and extend SPSS' already extensive in-database analytics integration with a broad range of vendor data warehouses, including such Big Blue rivals as Oracle, Microsoft, Sybase, and Teradata."

Deal hurts SAP?

As for who is potentially hurt by the IBM-SPSS linkup, Kobielus points to one vendor: SAP.

Bolstered by its 2007 buy of Business Objects, SAP ranked second in the overall business analytics market, according to IDC. It also handily topped the $6.3 billion query, reporting and analysis tools segment in 2008, according to the research firm.

But SAP is even less of a player in the high-end predictive analytics/data mining segment than IBM was, according to IDC.

"Predictive analytics is an increasingly key component of a full-fledged BI solution stack," Kobielus wrote. SAP, which resells many SPSS apps, may "have missed the boat" by not grabbing its partner.

Monash, meanwhile, pointed to both SAP and Oracle. "It would have given them a competitive advantage against the other in the integration of predictive analytics with packaged operational apps. That's a missed opportunity for each."

As for whether there will be more mergers and acquisitions in the wake of the IBM-SPSS deal, Monash had a one-word answer.

"Always," he said.

Copyright © 2009 IDG Communications, Inc.

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