Last Updated Jul 29, 2009 11:07 AM EDT
SPSS technology is sort of the last mile of a kind of software, known as business intelligence, which is used by customers to analyze data and make more informed decisions. The poor economic environment, and prospects for a protracted and shallow recovery, is prompting customers to use sophisticated software to mine data about their customer relationships for anything that could give them a competitive advantage. Research firm IDC's Sue Feldman told me in May that some segments of this market are growing by more than 25 percent per year.
IBM already had a number of such tools in its software arsenal, including OmniFind, which behaves as sophisticated internal search engine, and Intelligent Miner, which looks for patterns in data archives; it also acquired business intelligence vendor Cognos in November 2007. While all those tools help executives understand the past, SPSS allows customers to use data to predict future behaviors, according to Mychelle Mollot, IBM's director of worldwide marketing, business intelligence & performance management. Mollot told me that the software gives customers "the ability to react to real-time information."
She cited retailers, financial services firms, police departments and telecom services vendors as examples of typical users. For instance, according to Mollot, a German telecommunications firm discovered that customers with unsatisfactory interactions early in their relationship with the vendor were more likely to switch than other customers, and was able to target those customers with specific incentives to smooth over the relationship. The correlation between a bad first impression and a lost customer is obvious, but combing data to identify specific customers with bad interactions is not a trivial matter.
Forrester Research's Boris Evelson called the acquisition a "bombshell" in a blog posting yesterday, not least of which because it strengthens IBM's business intelligence product line while also putting a severe crimp in SAP's. SPSS is a critical partner for SAP, which acquired Cognos's main rival, Business Objects, in October 2007. According to Evelson, "SAP missed the boat by not seizing the opportunity to acquire partner SPSS [itself]."
Worse for SAP, Evelson says that the remaining business intelligence vendors that might be up for grabs are either stubbornly independent (SAS Institute), virtual unknowns (KXEN, ThinkAnalytics) or too highly specialized (Unica, Fair Isaac, Accelrys). SAP will also be competing for acquisition targets with other generalist business intelligence vendors,including Microsoft, MicroStrategy, and Information Builders.
Evelson posted a fuller list of potential acquisition targets for SAP to comb over, but the fact remains that for the time being, SAP has lost a crucial part of its overall product offering to a rival, and it doesn't take sophisticated algorithms to see that this will be a serious roadblock going forward.
[Image source: Sha3eely via Flickr]