BI & DW Market Consolidation, Part 1

Almost every day it seems that another corporate acquisition is announced. The December 19, 2006 “Top Story” on BusinessWeek.com “Deals of the Year, in a Year of Deals” by Steve Rosenbush confirms that merger and acquisition (M&A) activity is at record levels:

“A near-perfect set of conditions is set to drive mergers and acquisitions to a global record in 2006, and dealmakers are optimistic that 2007 could be even stronger. Deal volume for the full year won't be available until 2007, but market researcher Dealogic says global volume could well exceed the record of $3.3 trillion set in 2000, the height of the tech bubble. It already has surpassed $3.7 trillion, and likely will top $3.8 trillion by Dec. 31. That would be a 28% gain over last year.”

Software M&A has always been a part of the industry landscape. Lately, however, it seems that larger high-tech firms have been gobbling up software vendors every week.

The business intelligence (BI), data warehousing (DW) and data integration (DI) market (I’ll refer to these markets collectively as the BI market for the rest of this blog) have experienced a particularly high level of activity in recent years with all of the major vendors expanding their product offerings though M&A activity. (And afterwards they integrate their new products into ever increasing suite bundles.) Business Objects buying Crystal, Hyperion acquiring Brio and IBM purchasing Ascential are just the tip of the software M&A acquisition. It often seems like enterprise software companies are playing a continuous game of acquisition PAC-MAN.

A few weeks ago I dusted off the crystal ball and suggested that Hewlett-Packard (HPQ) should strategically move into the BI market through acquisitions. They announced last week the purchase of a BI/DW consulting firm and my guess is that is the start of a set of HPQ BI acquisitions. (Disclosure: I have heard NO rumors substantiating this guess….it just makes sense from a business perspective.) 

It is obvious and pretty much guaranteed that software M&A activity will continue. High-tech firms will acquire software firms for their technology, customers and talent (software engineers, consulting and sales). Press releases will be issued almost daily that a “big fish” company is pleased to be acquiring a “smaller fish” vendor for its great product(s) and customers.

But you may never have heard of many or most of the acquired companies. Some have very niche products or have only a few customers. What types of M&A activities will actually impact the larger BI players? Who will be the hunters and who will be the prey?

Let’s categorize the hunters:

1. The usual suspects are prowling
2. “Outside-the-box” players enter the fray
3. Private Equity expands its horizons
4. Mergers of equals

Stay tuned; I’ll explore each category in subsequent blog posts.

 

Comments

[Robert]

Well, there's a new technology out there that is going to have a big impact on the statistical software industry and the business intelligence software industry.

You can see it as a file attachment to the August 31 entry at
www.my.opera.com/datahelper

It's a brand new statistical programming language.

Robert