Business Analytics » Acquisition

How to Build a Billion-Dollar European Software Company

Timo Elliott — Wed, 10 Feb 2010 13:32:35 +0000

Photo: Bernard Liautaud in the mid-90s

Courtesy of London Business School, here’s a great presentation by Bernard Liautaud, founder and eighteen-year CEO of BusinessObjects, explaining how he and his team created the first “European silicon valley startup”, growing the company from zero to a billion dollars in revenue, and then selling to SAP for $6.7bn. Bernard is now a General Partner of Balderton Capital, one of the largest venture capital funds in Europe.

IBM Acquires SPSS – A Big Deal, or Not?

Timo Elliott — Wed, 12 Aug 2009 14:40:13 +0000

IBM announced recently that it would purchase statistics vendor SPSS for approximately $1.2 billion. Various commentators have been saying this is a very big deal:

Bob Evans of InformationWeek: “I think IBM’s acquisition of SPSS will mark a seminal moment in that company’s evolution”
Merv Adrian: “With one stroke, IBM has signalled that it believes itself ready to redraw the BI map…. Why does it matter so much? Simple: Predictive Analytics is what’s next in BI”
And, of course, IBM’s own press release: “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,” said Ambuj Goyal, general manager, Information Management.”

I personally* think it’s probably a good move for SPSS and IBM, but I’m a little more skeptical. Yes, I believe that predictive analytic technology can provide great value, and that it’s an important part of the BI future. But here’s three reasons why the reality – inevitably – can’t quite live up the expectations.

Predictive analytics isn’t a miracle new technology

As I wrote back in 2007 (so no, this isn’t just sour grapes) in a post called Who Really Wants Predictive Analytics:

“…who wants to “drive looking out of the rear view mirror”?… Despite the obvious uses of this type of predictive analytics in organizations… it has not been implemented widely.”

The post generated a comment from Malcolm Ryder:

“So who wants predictive analytics? … *everyone* wants predictive analytics; a subset of everyone wants to pay for it; a subset of that payers’ group is willing to trust it; and a subset of that trusting group is willing to depend on it. And the difference between what makes predictive analytics successfully useful versus successfully marketable is a gap just as large as the miniscule percent of dependents versus the whopping percentage of enthusiasts…”

Predictive analytics, statistical modeling, data mining, etc. are extremely valuable technologies, and have had great business success in a wide variety of applications including fraud detection, cross-selling, and direct marketing.

But they’ve been around for decades, and readily available to anybody who wanted to use them. Even IBM has already sold the technology in the form of Intelligent Miner for many years (here’s a fun press release from 10 years ago, IBM Launches Major e-Business Initiative Emphasizing Business Intelligence).

And there are clear limitations to anything that claims to provide “true foresight”. Bill Inmon talked about the difficulties of Predicting the Future last month on the BeyeNetwork, and the Wall Street Journal published an article a couple of years ago called Now, It’s Business By Data, but Numbers Still Can’t Tell Future pointing out that even the most detailed statistical analysis has limitations since conditions may change, rendering the analysis misleading, and that while analysis can lead to incremental improvement in current markets, it can’t provide the creativity required to take the next big leap and adapt to tomorrow’s markets.

So why so much professed excitement now? It’s true that the advanced analytics market is growing faster than the rest of BI, and that IBM’s acquisition might accelerate it. But it’s also growing off a much smaller base, and according to IDC, the current growth differential isn’t that large: 12.1% growth for last year compared to the rest of BI growing at 10.3%.

If those rates stay the same, the market won’t be too shaken up in the near future. To put things in perspective, the advanced analytics makes up currently only 19.5% of the market, and in 10 years time, at the growth rates above, it would be 22.2% of the market. This is hardly “redrawing the map”.

As Neil Raden puts it in his blog post: SPSS Is Not the Story; IBM’s Vision for Analytics Is. IBM’s vision for BI started many years ago with the notion of “information warehouses” (although Digital Equipment Corporation was first with the idea, according to Rick Sherman), and took a big leap forward with the purchase of Cognos. SPSS is just an add-on to that strategy, not a “seminal moment”.

Predictive should be aligned with business applications

Predictive analytics requires a lot of expertise to implement and interpret, and IBM intends to provide services to help organizations do this.

But even more so than other forms of business intelligence, the easiest way to make this powerful technology available to a wider audience is to embed predefined advanced analytics deeply into a business processes. This has been the approach of the advanced analytics market leader, SAS).

I helped launch a “data mining for the masses” product called BusinessObjects Data Miner many years ago. The product never took off as a standalone offer and was eventually canned. But I still believe that there’s a great opportunity to use advanced analytic technologies with traditional BI, to augment the analysis skills of users – and all of these techniques are much easier if you already have the business context defined:

Automatically detecting outliers in reports
Detecting trends and trend inflection points
Automatic clustering – for example, rather than arbitrarily creating age ranges like 10-20, 20-30, etc., algorithms can help determine the most appropriate ranges based on the data clusters (e.g. 12-16, 16-21, etc.)
Influencing variables – what other values might be driving the observed trend? e.g. which benefits seem to be most associated with employee satisfaction? (but note that “correlation is not causation”)

I predict that over the long term, organizations will tend to purchase this technology from an application vendor like SAP or Oracle rather than a platform-and-services vendor like IBM.

Predictive analytics is still a fragmented market

Some of the coverage implies that IBM scooped their competitors. But it’s the nature of the IT business that there’s a more or less permanent discussion about possible acquisitions, and any company up for sale naturally tries to get a few bidders. So I assume that the other large vendors in the space decided that the deal wasn’t right for them, in terms of strategy, price and opportunity cost, rather than being caught out by surprise.

It may just be that IBM needed more of a BI boost than the other large vendors — as Mary Hayes Weier put it in InformationWeek:

“IBM and its Cognos division had 10% of the total BI market in 2008 with revenues of $800 million, up 5% since the previous year. Compared with competitors, that’s sub-par performance. SAP, SAS, and Oracle — ranked No. 1, No. 2, and No. 4 — all had double-digit revenue gains, with the total BI market growing 10.6% to reach $7.8 billion, according to an IDC report released in June.”

If it is indeed about embedding powerful technology in applications, rather than trying to grab existing market share, there are other technologies available in the market.

SAP currently has a long-term agreement to offer SPSS PASW Modeler as part of the BusinessObjects Predictive Workbench product, but is also a long-term partner of IBM, and has stated that:

“SAP’s partnership with SPSS is working well and we do not expect IBM’s intended acquisition to have an impact on this relationship. We have a growing number of customers as a result of this agreement and we will continue to partner with IBM and evolve our predictive services portfolio to meet the needs of our customers.”

And that:

“[SAP’s] strategy is to provide predictive analysis features for all of us and not just expert statisticians and analysts who have traditionally used more complex tool sets. This requires new and innovative approaches in a market that is still evolving, and as the market leader in Business Intelligence we are committed to delivering the solutions our customers need to have clear line of sight, particularly in the current challenging business environment.

Some examples of our investments in the area of predictive and statistical analysis across our product portfolio include:

A wide number of methods available for forecasting across multiple applications.

Analysis Process Designer integrated in SAP Business Warehouse (BW) and our Customer Relationship Management (CRM) application.

A recent announcement of the intent to acquire SAF AG which offers simulation, analysis and forecasting. Already this solution is enabling our customers to improve their retail forecasting and replenishment. “

But as Boris Evelson of Forrester says,

“’[there are] Plenty of choices out there, here’s one sample short list: Accelrys, Angoss, Applied Predictive Technologies, DataInfoCom, Genalytics, KXEN, Megaputer, Partek, Psydex, ThinkAnalytics, Xeligence.”

SAS is the obvious prize in the market, but Dr. Jim Goodnight, the company’s founder, CEO, and controlling shareholder has so far not shown any interest in selling – and SAS’s out-of-the-mainstream corporate culture and sales model means that any acquisition by a publicly-traded company would probably be a painful process.

It’s clear, however, that IBM has now set the bar for the others, and we will probably see more acquisitions and integrations in the coming year…

SAP Acquires SkyData for Agility and Mobility

sapweb20 — Mon, 15 Jun 2009 12:38:50 +0000

On May 25th 2009, SAP acquired innovative startup Skydata, a new type of business mobile “mashup” application that provides fast and easy access to all your business data on RIM, Windows Mobile and Apple iPhone devices.

The company is part of SAP’s long-term strategy to support the new “business users” who need to access information from multiple systems easily and intuitively.

As SkyData company founder and CEO, Kevin Nix, puts it:

“The problem is not that we don’t have data – we have a lot of data. The issue is access. SkyData is the first mobile business application that integrates all of this information together. The business information I need, when I need it. That’s SkyData.”

SkyData offers SkyData connects CRM, back office, newsfeeds, social networking and business profiling information so that any of this information is a quick click away during a phone call, email, text message or calendar event.

It unifies personal and business networks ranging from Outlook address books, Google and Yahoo contacts, Facebook, LinkedIn, Plaxo and Jigsaw business networks, and finally formal CRM applications such as Salesforce.com, SugarCRM, Microsoft and NetSuite. The SkyData application runs on most RIM Blackberry, Windows Mobile, and Apple iPhone devices on AT&T, Verizon, T-Mobile USA and Sprint networks.

According to Brad Reed of Network World,

“One of the application’s key features is that it keeps data within the cloud to be pushed out to devices, rather than requiring employees to log on to a Web browser to extract it. In other words, SkyData is a distributed Web application that brings data to the user, rather than having the user get the data themselves.

“The result will be an increase in more collaborative computing that will allow more users to make direct decisions in corporate projects, and not have to rely on typical top-down approaches where only project managers get to call the shots.”

SkyData was featured at DEMO 2008:

“It’s the holy grail of mobile computing: distribute corporate data to mobile devices on demand. A simple goal bounded by complex and expensive, IT-intensive projects and a diverse array of mobile devices. SkyData Systems has altered that dynamic, moving data into the cloud and making it available to any device in a fast, affordable and self-managed service. In effect, SkyData is doing for corporate data stores what RIM did for business email: make it easily accessible anywhere it’s needed.”

Here’s an overview of the main SkyData features, from the now-retired web site.

Search Across all your Enterprise Applications

Michael Hickins of BNET has written about SAP’s plans.

“SAP is determined to hold onto its large enterprise customers by offering them on-demand software that complements their existing on-premise SAP implementations. That’s something Salesforce.com can’t promise, even though such links could be achieved with custom integration work.”

“According to [Shailesh Rao, the senior vice president of SAP’s large enterprise on-demand software division], SkyData technology provides a “very unique way of aggregating data regardless of what form it’s in,” and said that SAP will integrate use that technology to change how it delivers software to smartphones.”

One thing SkyData has to offer in this area is mobile enterprise search. For example, at minute 4:00 of the DEMO video above:

“At this point, SkyData is doing a structured search across all of my personal and business contacts and related information, so I don’t have to go to 29 different places. The information is right there, and it’s tied to this opportunity.”

And the SkyData search box will do a scan of structured and unstructured data across all your applications:

“It’s not just Google search – databases, newsfeeds, profiles, and I get a complete list”

This obviously fits in with SAP’s long-term strategy around information integration and access, including the SAP BusinessObjects portfolio and SAP Netweaver.

Links:

Skydata Integrates Everything, Put it On a Smartphone

SkyData to Offer Unified Personal & Business Networks

SAP Getting Agile and Mobile

SAP’s New Cloud Platform

sapweb20 — Sat, 21 Feb 2009 16:22:51 +0000

SAP has purchased a cloud computing company, Coghead, a “next generation platform for building web applications.”

The vendor was struggling in the current economic climate, SAP Ventures had previously invested in the company, and the company already offered integration with SAP environments. “SAP is one of the premier tech companies in the world and we’re really happy this transaction took place,” said Coghead CEO Paul McNamara in an interview with InformationWeek.

Coghead will cease operations, and SAP will not be supporting existing customers, but will integrate many of Coghead’s employees.

A Platform For the Future

Coghead provided a Platform-as-a-Service (PaaS) that allowed its customers to build applications over the web, using an Adobe-Flex-based environment, hosted in Amazon’s Elastic Compute Cloud (EC2) Web service. It called the platform “the fastest and most efficient way to build and deliver applications in the cloud.”

As TechCrunch said in their early coverage of Coghead: “Every company in Silicon Valley wants to become a platform for other companies to build cool stuff on top of.” Customers had praised the platform for its flexibility, using language typically not associated with more mature application development environments from SAP and others:

Coghead works the way we work “We need applications that work the way we work, not the way a software vendor thinks we should work. Packaged software often ends up delivering more than we need in some areas and less than we want in others.” - Paul Fu, VP and CIO, Morrison Express
Coghead was the difference “Coghead wasn’t just the difference between creating my app directly myself or doing it by remote control through I.T. It was the difference between getting it done and launching it instead of watching the grass grow while it percolated high enough for I.T. to attack.” - Ron Dion, Housing Authority of the County of Alameda (HACA)
A revolution in business process applications “From the moment we made the leap to using Coghead actions, we knew that a revolution in business process applications was right in front of us.” - Govind Davis, MCF Tech
Say hello to software that works the way you need it to “Coghead provides a unique way to look at software, one that allows for total user control in design and functionality of your application. Say goodbye to one size fits all, say hello to software that works the way you need it to.” – Mark Palmer, PeopleWerx
Coghead is going to change the way developers create applications “I believe Coghead is going to change the way developers create applications and how business is done in the software application industry … The open architecture and flexible platform allows developers, consultants and programmers to build applications as they want it … I think there are a number of companies in this space but Coghead is a leader in this aspect.” – Derek Tay, Consultant, Photographer, Derek Tay Productions

Coghead Highlights

Example products page built with Coghead	Example opportunities screen
Drag and drop forms editing	Widgets, Data Structures & Functions
Create Workflows using the Action Editor	Custom Alerts with Variables

For more details on the Coghead platform and features:

Platform – In-depth look at the Coghead technology stack
Features – Comprehensive list of product features and capabilities
Screenshots – Visual tour of the Coghead user interface, editors and admin tools

The SAP Advantage: Cloud Computing with Enterprise Backup

The Coghead platform is now part of SAP’s product portfolio. According to Vishal Sikka, SAP CTO:

“Coghead was a true pioneer in platform-as-a-service and cloud computing in general. Coghead’s IP and expertise will help SAP in various aspects of our Software-as-a-Service (SaaS) technology and application initiatives. I have always seen delivery of application capabilities from cloud as a key component of the total capability we need to deliver to our customers.”

There has been no formal announcement as to how or whether SAP will be selling the product in the future. The existing Coghead service will continue through April, and customers are scrambling to download their data and find alternatives for their hosted applications.

Lack of long-term security is one of the often-cited dangers of cloud computing. As a prescient commentator said in 2007, as a comment to a Techcrunch note on Coghill: “I build a business on coghead then coghead goes bust – guess what happens to my business?”

SAP is now in the position of being able to combine flexible, easy cloud application development with the kind of robust backup expected from mature application vendors – it will be interesting to see what it does with this opportunity.

So: it’s SAP, for $6.8bn!

Timo Elliott — Sun, 07 Oct 2007 21:40:51 +0000

After years of rumors, the news is finally here: it’s SAP for 4.8 billion euros. This will be the biggest acquisition SAP has ever done, and the biggest in the BI industry.

In an interesting twist, it’s almost a Business Objects acquisition — it is proposed that the company be run as a “stand-alone” entity managed by current Business Objects CEO John Schwarz, and the team that looks after previous SAP acquisitions of OutlookSoft and Pilot will be reporting to him. And there are potentially other existing BI-related SAP technologies that might also fit nicely with the new organization.

It will apparently take a couple of quarters before transaction can be closed.

Cognos Buys Applix

Timo Elliott — Wed, 05 Sep 2007 13:24:11 +0000

Only minutes after I post an entry on the acceleration of consolidation in the BI market, I see that Cognos has purchased Applix. The interesting part is TM1, which uses memory-centric BI technology that has been around for as long as I can remember, but which didn’t really come into its own until 64-bit platforms became available. The other vendor closely associated with the technology is Qliktech, but both SAP and FAST claim to have a memory-centric angle.

Cognos has been struggling a little recently, and this will give them a new angle, although apart from TM1 there’s clearly going to be a lot of overlap with their existing products.

Oracle Buys Hyperion

Timo Elliott — Fri, 02 Mar 2007 08:56:30 +0000

After the months (years?) of consolidation rumors, finally something happened…. Thoughts:

Less change than you might expect

It doesn’t change the BI market share picture much, based on the latest IDC numbers, from 2005 (2006 figures presumably due out soon, not expecting any huge changes in the relative positions). Hyperion is currently #5, and Oracle is #6, and combined they would become #4, ahead of Microsoft but behind Business Objects, SAS, and Cognos.

EPM: Back to the future

A decade ago, Oracle Express / Oracle Financial Analyzer was the only real competitor to Hyperion Essbase for financial planning and budgeting. It was powerful but aging technology even before Oracle purchased it from IRI in 1995, and they stopped updating it in 2002. Oracle proposed Enterprise Planning and Budgeting (EPB) in 2004, but with completely different underlying technology. Customers howled, and many of them presumably turned to solutions like Essbase.

So In the financial planning and budgeting area, purchasing Hyperion just puts Oracle back to it might have been if it had provided a credible upgrade at the time — except, of course, there’s now clear product overlap with Express/EPB.

Ironically though, Essbase is now an aging solution itself, and will be inevitably perceived as less independent after the acquisition. And the market is moving to support the “CFO 2.0″, with fast innovation and opportunities for other vendors (e.g. Business Objects) to explain the value they can bring to the performance management/planning space.

Core BI: Ouch

Things don’t look good for Oracle/Hyperion core BI customers. Oracle already had lots of overlapping solutions, and this makes it much, much worse. It seems clear that the Oracle BI tools are to be retained, rather than Hyperion’s. Larry essentially justified the Siebel purchase by saying that Siebel Analytics was the “crown jewel of the acquisition“, and in 2Q of this year, Larry went on to say:

“In our business intelligence area, that area is really on fire for us. If you recall, we bought the Siebel analytics product, and that has become our base platform”

So what happens to the ex-Brio products that are now inconveniently integrated with the rest of Hyperions solutions? I’m sure Oracle will do a credible job trying to keep customers, but there’s only so much they can do:

Existing customer deployments will be stalled trying to figure out which technology to invest in
Innovation will be stalled while the various R&D teams reorganize
Lots of Hyperion employees will decide that they don’t want to work for Oracle, and move to the remaining independents or smaller startups. The headhunters are surely speed-dialing as I write this…

Stuck with their “natural share”

Oracle has been claiming to be “serious about BI” for at least 15 years, and for 15 years they haven’t been able to break out of their “natural market share”, consisting of Oracle customers that aren’t that serious about BI, and who don’t evaluate the more powerful independent tools. I don’t believe that this acquisition will fundamentally change the equation.

Independent BI is here to stay — and thrive

There’s a clear value proposition for vendors who are focused only on BI and independent of databases, applications, middlewares, etc. Oracle made it clear that this is about them and SAP, not the customer needs — maybe it will help a few more companies choose independent companies that have their BI interests at heart.

There’s now one fewer vendor that qualifies, and the remaining independents can presumably look forward to getting some of the business from a potentially (probably?) dead-ended Brio customer base.

Good luck, Howard and Frank!

After jumping ship from Gartner to Hyperion, Howard Dresner and Frank Buytendijk will now be Oracle employees. I’m looking forward to reading their reactions…