IBM to acquire i2 and Algorithmics

IBM has announced plans to acquire British security analytics software company i2 and Canadian financial risk analytics software company Algorithmics.

IBM is at it again. Just one day apart, the megavendor announced plans to purchase two separate analytics software companies.

On Wednesday, IBM revealed plans to acquire Cambridge, England-based i2, which provides an intelligence and investigation management platform for law enforcement, government and private sector organizations and employs 350 people. Financial details of the acquisition, slated for completion before the end of the year, were not disclosed. i2 will be folded into the IBM Industry Solutions group.

And then on Thursday, IBM announced that it will acquire Toronto-based Algorithmics, which specializes in financial risk management and employs close to 900 people. The “definitive agreement” carried a $387 million price tag, according to Director of Business Analytics Development Gordon Burns, and will be folded into the Business Analytics group by the end of the year.

Both deals mark additional notches on IBM’s analytics belt, a pattern the technology company established and has been repeating for the past five years, according to Burns. Since its acquisition of Cognos in late 2007, IBM has continued its buying spree, picking up SPSS, Netezza, Unica and Coremetrics, to name a few.

Scott Crawford, managing director of research for Boulder, Colo.-based analyst firm Enterprise Management Associates Inc., believes the acquisitions are important, especially considering how both public and private sector organizations are starved for risk management and fraud detection analytics tools that can help dig into large data sets.

“The two companies typically target very different markets,” Crawford said, “but what they have in common is the technology to make the most of data that is often available to organizations but is either unused, underused or could be used far more effectively.”

For example, Coplink, one of i2’s well-known products and part of its i2 Clarity Platform, gives law enforcement agencies access to a repository of vast amounts of information, helping to hone the search process and churn up leads within minutes rather than days. While i2 is known for its infrastructure threat detection, cybersecurity and its use by military intelligence, Algorithmics specializes in finances. IBM wants to combine the newly acquired financial software with OpenPages, which it purchased in 2010, as well as its predictive analytics stack to broaden its risk management offerings.

Crawford, who has spent the last few months focused on the rise of data-driven security, believes the acquisitions illuminate an expansive field of issues that can be served by analytics, a trend that’s still on the upswing as organizations begin tapping into “big data.”

“The information is out there and there is a lot of it, but making the most of it is the emerging opportunity today,” he said.

Power of the niche
Dan Vesset, program vice president of IDC’s business analytics research based in Framingham, Mass., finds the type of software i2 and Algorithmics provides less interesting than the fact that they represent such specific markets.

“i2 and Algorithmics are niche … and this is partly the way forward,” said Vesset, noting i2 is a separate company than i2 Technologies, which was acquired by JDA Software in 2010. “Not just for IBM, but SAP and Oracle should look at more special line of business and industry-specific applications where the intellectual property has been packaged into the software.”

This isn’t IBM’s first dip into fraud detection or risk management, Vesset said. Several years ago, IBM expressed interest in the fraud detection space when it acquired SRD, which developed identity resolution software.

“There are a lot of similarities here, which is indicative of IBM going after the more complex problems of the world,” he said. “It’s not just reporting and dashboards.”

And, Vesset said, the acquisitions of i2 and Algorithmics are further evidence of IBM’s seriousness in its focus on analytics applications.

“Sometimes there’s criticism of what they mean by ‘applications,’” he added. “They don’t want to get into ERP applications, but instead, they’re looking at highly specialized analytics where the customer segment may not be huge, but where they may be able to dominate.”

The two acquisitions might help IBM do just that. According to press releases, i2’s software -- which helped track down Saddam Hussein – is currently being used by 12 of the world’s 20 largest retail banks and eight of the world’s 10 largest companies, while Algorithmics’ software is serving 25 of the top 30 banks.

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