IBM to acquire predictive analytics specialist SPSS

IBM will pay $1.2 billion for its onetime analytics partner as it seeks to bolster its information management portfolio.

IBM said today that it plans to acquire predictive analytics specialist SPSS for $1.2 billion to bolster its Information on Demand portfolio.

The move is part of IBM's growing focus on business analytics technology to help companies make the most of the enormous volume of customer and other data they collect, according to the company.

"With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight -- but true foresight," Ambuj Goyal, general manager of information management at IBM, said in a statement. "Predictive analytics can help clients move beyond the 'sense and respond' mode -- which can leave blind spots for strategic information in today's fast-paced environment -- to 'predict and act' for improved business outcomes."

In June, IBM unveiled new industry-specific data analysis applications for financial performance, human resources and customer management. In April, the company had established an Analytics and Optimization consulting practice.

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 The proposed acquisition also comes less than two months after IBM formed a partnership with SPSS in which the company's statistical analysis capabilities will be embedded in future versions of Cognos BI and performance management software.

SPSS makes predictive analytics, statistical analysis and data mining software that aims to help companies discover customer behavior and other patterns often buried deep inside large data sets in order to predict likely future behavior.

John Hagerty, an analyst with AMR Research in Boston, said he was not surprised by IBM's plans to acquire SPSS, as the company had been talking up its plans to add predictive analytics technology to its arsenal for the last six months or so.

"We kind of scratched our heads about how they're going to do it," Hagerty said, as IBM's portfolio lacked predictive analytics capabilities. With SPSS soon to be part of IBM, "it really rounds out their portfolio," he added.

Jack Noonan, CEO of SPSS, said in a conference call with reporters that his company's acquisition by IBM would allow it to reach more customers and expand the adoption of predictive analytics software.

Once the acquisition is complete, IBM plans to continue investing in SPSS technology, according to Goyal, and he reassured SPSS customers that IBM will not discontinue any of the smaller vendor's products. IBM will also honor SPSS's many partnerships, he said, which include deals with SAP, Information Builders and MicroStrategy.

"IBM focuses on client value," Goyal said. "We will leverage every partner that Jack and his team have created." He said SPSS technology would be further integrated with IBM's existing data management stack but declined to elaborate because the acquisition isn't expected to close until the second half of the year.

Charles King, president and principal analyst of Concord, Mass.-based Pund-IT, said SPSS customers probably have little to worry about, as the "IBM software organization has a long history of supporting heterogeneous platforms." And considering the disproportionate toll the current recession has had on smaller companies, "I think in a sense SPSS customers should be gratified that the vendor has found a home with such a large and stable company," he said.

AMR's Hagerty said predictive analytics capabilities are not in huge demand right now, mainly because it is still considered a "specialty" technology. That could change, however, as the potential benefits of the technology become more widely known.

"I think predictive analytics is a specialty right now that has some people all hot and bothered, but a lot of people don't really understand it," Hagerty said. "People have to be shown what predictive analytics can do before they can really get their arms around it."

Goyal acknowledged as much in the conference call, discussing a number of potential use cases for predictive analytics. He said the technology could help healthcare providers, for example, predict which patients are most susceptible to certain diseases, allowing for earlier treatment. He also said predictive analytics could help make energy power grids "smarter" and more efficient.

Current SPSS customers include the Centers for Disease Control and Prevention, which uses the vendor's predictive analytics software to model the potential spread of infectious diseases, and Credit Suisse Group, which uses SPSS data mining technology to identify and predict behavior of profitable customers.

SPSS's main rival in the predictive analytics market is SAS Institute, which also sells more conventional business intelligence software.

IBM today also released a preconfigured data analytics platform called Smart Analytics System. The platform combines business intelligence and data warehousing software with IBM's server and storage hardware technology to enable rapid deployment, according to Bernie Spang, director of product strategy at IBM.

Pund-IT's King said: "I can see SPSS over time being incorporated into that."

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