IBM's SPSS Deal May Spark BI Market Consolidation

IBM's planned acquisition of SPSS Inc. is likely to set off a new wave of consolidation in the business-intelligence market, as more software vendors look to beef up their predictive analytics capabilities, according to a Forrester Research report.

Forrester predicts that in the coming year, vendors will look to partner or acquire companies specializing in this area, including Accelrys Software, Angoss, FICO, KXEN, and Portrait Software. SAP, in particular, is likely to make a predictive analytics acquisition, the research firm says.

"Any BI vendor that fails to realign around a strong predictive focus will find itself on the sidelines of this new era of future-facing analytics," according to Tuesday's report, "Business Intelligence Polishes Its Crystal Ball," co-authored by James Kobielus, Boris Evelson, and Leslie Owens.

SAS Institute, a privately held company, is the clear market leader in predictive analytics, followed by SPSS. In a Dec. 2007 interview with InformationWeek, SAS CEO and co-founder Jim Goodnight said he wasn't interested in being acquired. SAS had "numerous opportunities in the last year [to be acquired] and a number of inquiries," Goodnight said in 2007, but he felt such a merger wasn't needed given SAS's strong revenue growth, and would negatively impact the company's culture.

It's unclear whether Goodnight still feels that way, but SAS continues to report strong revenues.

Two years ago, a big wave of consolidation hit the market for traditional BI tools, such as query and reporting. In Oct. 2007, SAP announced it would acquire Business Objects, and a month later, IBM said it would acquire Cognos. Now Forrester expects SAP to follow IBM's move in the predictive (also called advanced) analytics area, to mitigate the risk of depending on its existing partnership with SPSS.

Still, even with SPSS coming under the wings of a competitor, Forrester points out that SAP already has some relevant offerings, including the forecasting and market-basket analysis capabilities in SAP Business Warehouse, and some of the more advanced analytic and trend-projection capabilities in Crystal Reports and Xcelsius.

Oracle, which was also part of the consolidation wave two years ago (it acquired Hyperion for $3.3 billion), offers Oracle Data Mining within its 11g database for advanced analytics, plus some technology in that area acquired from Sigma Dynamics a few years ago. Oracle might try to integrate these offerings in its traditional BI suite, or acquire a third product or company in the advanced analytics area, the report says.

Customers' business needs will drive the software industry's focus on predictive analytics in coming months, according to Forrester. Reporting, querying, dashboards, and OLAP just don't provide enough predictive insight for today's market needs, and make it difficult to find anticipated patterns.

In addition, having separate systems for traditional BI and predictive analytics creates problems for customers. When products come from different vendors or are poorly integrated, some metadata has to be entered and maintained in different places, and data frequently must be moved from one database to another.

Of course, ownership of BI tools and predictive analytics by one company due to an acquisition or merger won't bring instant relief to these problems. "IBM will have its hands full integrating SPSS's solutions and professional service capabilities completely with its own diversified BI, data warehousing, and other analytics offerings," the report notes.

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