IBM acquires SPSS

Still digesting Cognos, IBM is now investing in high end analytics -- Reuters says it splashed out $1.2 bn for the data mining and predictive analytics specialist SPSS. That is a remarkable sum, considering that it’s a 40% premium on the value of the stock and about 25 times the company's annual profit. The takeover is great news for veteran CEO Jack Noonan who joined the company in 1992 and is now approaching retirement age. This is especially true considering that the success of the open source R language is squeezing proprietary data mining vendors.

This isn't IBM's first foray into data mining. In 2000 BARC published a study showing that IBM's Intelligent Miner was one of the best products on the market from a functional point of view, right up there with SAS Enterprise Mining. Ultimately however, IBM never had a lot of success with Intelligent Miner. IBM has been moving out of the market step by step and now only offers a few specialized solutions. And when IBM announced the SPSS deal Intelligent Miner was only mentioned in passing as an execution engine for SPSS solutions.

Maybe the Cognos acquisition changed things for IBM. SPSS is a Cognos OEM-Partner providing advanced analysis features to Cognos. Cognos is more focused on reporting and basic analysis so the SPSS products show no real overlap. On the other hand Cognos has also made its forays into the data mining business, including its purchase of Forethought, part of a once fashionable but now forgotten desktop data mining strategy.

Data mining and advanced analytics companies have carved out an interesting niche for themselves. Bringing data mining to the masses in the form of simplified data mining has not been a very successful idea, probably because the concepts are just to complex for the average business user. And BI companies have worked for decades to replace custom modeling with pre-built applications, but have had little success. But both SPSS and SAS successfully sell applications such as analytic CRM and vertical solutions for the financial industry.

SAS is strong on data management and advanced analysis. IBM now has assets strengths in both areas. SAS is still stronger in specialized analytic applications, but SPSS has been successful in this area as well. Furthermore IBM is likely to emphasize pre-built applications – as they have for Cognos.

SAP Business Objects is another company that will have to adjust to this acquisition. It had a very close relationship with SPSS, because SAP -- like IBM Cognos -- does not have much to offer in this market segment. SAP will have to look around for a new partner, perhaps KXEN or another smaller vendor.