BI & DW Market Consolidation, Part 2. The hunters you'd expect

(This blog post is part of a series on the BI and DW market consolidation. See the first post to get caught up.)

Everyone forecasting M&A activity assumes that the enterprise “stack players” – Oracle, IBM, SAP and Microsoft – will be the hunters if there are any major business intelligence (BI), data warehouse (DW) or data integration (DI) acquisitions. (Note: I will continue to use BI as the umbrella term in the remainder of this post.)

All these firms have already been active acquirers but have generally acquired smaller BI firms targeting a specific technology to fill out their BI portfolios.

IBM made the largest BI acquisition of the pack when it picked up Ascential. Oracle has made a number of large software acquisitions that have primarily been in the enterprise applications market, such as PeopleSoft and Siebel. Their BI purchases have been on a much smaller scale. They also picked up some BI technology bundled in their enterprise application purchases with Siebel Analytics being the most notable example.

Will the larger pure-play BI firms stay independent or be acquired by the enterprise stack players? Rumors of Oracle or IBM purchasing Business Objects or Cognos have been widespread and have certainly had an impact on the rising stock price of both of these BI firms.

Oracle, SAP, IBM and Microsoft have some software combination of database, enterprise applications, middleware and BI in their enterprise software stacks, along with professional services. These offerings, coupled with a solid BI portfolio, address many of their customers’ business needs for corporate performance management, regulatory compliance, financial transparency and competitive intelligence. With the growth rate of many of these software categories slowing down and with constraints on professional services growth, expanding their business solutions by bundling BI solutions appear to be a very healthy business formula.

It would be surprising if enterprise stack players could resist acquiring the larger BI pure-plays with their market share (customers), talent (engineering and consulting people in particular) and growth potential.

It would be easier and cheaper for the enterprise stack players to continue to purchase smaller firms primarily for their technology. While they have been expanding their technology footprint by either buying smaller vendors or building the capability organically, they may be finding that strategy too slow to meet their customers’ needs or keep up with the competition.

I believe that acquiring the larger BI pure-play vendors would make a great strategic fit for the enterprise stack players for three reasons:

• the resulting quicker time-to-market for business solutions 
• attractive cash flow from the BI pure-play’s existing customers
• their internal talent pool
  

Granted, the BI pure-plays’ stock price was cheaper during the summer, so it has gotten more expensive, but the stock price of the enterprise stack players has also escalated.

And, as the last stock market bubble demonstrated, acquiring companies often do NOT buy at the bottom of an acquired company’s market capitalization, but generally buy after the stock price has risen (just like free agent sports stars getting top dollar after they have become stars rather than when were rookies).

Stay tuned for further posts on this series on BI and DW market consolidation.