IBM's Proposed Acquisition of SPSS Puts Oracle, SAP, SAS on Notice

IBM’s proposed $1.2 billion acquisition of SPSS is the most significant piece in the puzzle—at least since the Cognos purchase in 2007—in the vendor’s push to give customers the tools they need to not only collect data but also to use it to their business advantage.

It also puts software rivals such as Oracle, SAP and SAS Institute on notice that IBM is pulling together a substantial package of solutions in this area, and probably is a precursor to a host of similar acquisitions by other vendors, according to analysts.

“We anticipate that this will serve as a precedent for comparable software deals over the coming quarters,” Jereme LeBlanc, principal of TM Capital, said in a report July 28, just after IBM made its announcement.

IBM announced its intent to buy its longtime partner, which offers predictive analytics software and data mining tools, at an event in its Hawthorne, N.Y., offices in which it rolled out its Smart Analytics System designed for deep analytic workloads.

It’s part of IBM’s larger IOD (Information on Demand) initiative, which entails giving businesses the tools they need to access, analyze and act on data in order to gain a competitive edge over rivals.

Big Blue has bought a number of software companies over the past couple of years that fit into the IOD strategy—including Princeton Softech, DataMirror and Language Analysis Systems—but its 2007 acquisition of BI (business intelligence) software maker Cognos was the most significant of the earlier purchases. SPSS is the next key addition.

“Today's main focus is how IBM's $6 billion worth of R&D is coming together to deliver analytics to our clients,” Ambuj Goyal, general manger of IBM Information Management software, said at then IBM event. “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.”

The acquisition will set up IBM as a key competitor to Oracle, SAP and SAS in the predictive analytics space. Both Oracle, with its 2007 purchase of Hyperion, and SAP, which bought Business Objects the same year, have tightly integrated BI capabilities into their offerings. In addition, Oracle offers predictive analytics capabilities thanks to its purchase of Sigma Dynamics in 2006. Also, SAS has been the top maker of predictive analytics and data mining tools.

However, all that said, IBM’s proposed move with SPSS puts it at the forefront of this burgeoning space, according to analysts.

“We view the move as highly strategic for IBM and believe that there was a ‘scarcity premium’ place on the business,” LeBlanc said, pointing out that SAS and SPSS dominated the high end of the predictive analysis space, with a host of smaller companies offering specialized approaches. “As such, we view this move as a shot across the bow of SAS as IBM continues to leverage the Cognos acquisition to steal market share within the broader [BI] and corporate performance sector.”

The Cognos purchase established IBM as a leader in the traditional BI space, he said. With SPSS, IBM will be able to offer a full solution that LeBlanc said “will enviably position the company in this sector for the foreseeable future.”

Forrester Research analyst James Kobielus agreed.

“For IBM’s competitive standing in the data management market, this acquisition represents one of the last missing pieces of its [IOD] portfolio,” Kobielus said in a blog post.