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Global CIO: IBM's Game-Changing Plunge Into Predictive Analytics

Jul 30, 2009 (04:07 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=218800196


When IBM agreed two days ago to acquire predictive-analytics specialist SPSS, it marked the 27th acquisition IBM has made in the broadly defined sector of BI and analytics. Ho-hum, just another deal for the highly acquisitive IBM, right?

Well, as the kids like to say, not so much.

I think IBM's acquisition of SPSS will mark a seminal moment in that company's evolution, and that it will also accelerate -- perhaps even greatly accelerate -- the broader evolution of the IT industry from one fixated on boxes and code that run internal operations to one that's focused on providing insight and expertise that helps customers grow. It's going to force IT companies of all stripes to stop spending way too much of their time thinking about the transaction that occurs when they make a sale and instead begin concentrating on driving interactions for customers.

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Yeah yeah yeah, I know, every company does this already -- they all sell solutions, not products. Their joint motto is win-win. The customer's happiness is more important than their own quarterly performance against quotas. Riiight.

But back here on Planet Earth, the days of IT as efficiency machine and of CIO as efficiency expert are winding rapidly to a close. The primacy of being able to generate history lessons more quickly than ever before is waning. The expectation that it's sufficient for IT systems to serve as fairly passive repositories of what has already happened is being extinguished.

And IBM's acquisition of SPSS is the big straw stirring that very potent drink, as my insightful colleague Mary Hayes Weier points out in her news analysis of the acquisition.

Look at this comment from IBM general manager for Information Management Ambuj Goyal: "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." If IBM and its new SPSS infusion can hold up their end of that promise, they will truly reset the bar for how the IT game is played. Here are eight reasons why:




1) "Traditional business intelligence applications (reporting, ad-hoc querying, OLAP) are great at answering questions like "what happened," "why it happened," etc., but they do not help you with answer to questions like "what may happen," said Forrester analyst Boris Evelson in his insightful breakdown of the deal's implications. Question: would your CEO be happy or unhappy if your company could begin to anticipate what's around the corner and be as prepared as possible for it? Would your CEO be happy or unhappy if customers started saying things like, "You guys have really stepped it up -- you've begun to anticipate my needs and that's enormously valuable to me."

2) As Forrester's Evelson and also his colleague James Kobielus articulate in detail, the IBM purchase of SPSS is rocking the not only the world of predictive analytics and data mining, but also the broader and more-established world of BI. And both analysts predict that other players in the important but more-passive world of BI will have to get much more aggressive on the predictive-analytics front. So over the next several months, we're going to see lots of new combinations of companies and products and technologies -- check out the analyses from Evelson and Kobielus for comprehensive lists of the hunters and the hunted.

3) In particular, SAP was called out as becoming more exposed by IBM's acquisition of SPSS, which is (well, that will shortly become "was") an SAP partner. Here's how Kobelius sized up the situation: "Who loses from IBM's acquisition of SPSS? Fundamentally, one can't help think that SAP missed the boat by not seizing the opportunity to acquire partner SPSS, whose Clementine technology it OEMs, has integrated with its BI technology, and sells as SAP BusinessObjects Predictive Workbench." Ouch! But SAP didn't get to be the world's biggest provider of integrated global enterprise apps by being a pouter, and it is sure to take some very swift and aggressive action to head off this incursion by IBM deep into what could have been one of its core growth markets. There's a little bit of time for SAP and others to make their moves because the IBM-SPSS deal is not expected to be complete until the end of the year. On the flip side, the end of the year is only five months away.

4) That means Oracle will have to enhance its predictive-analytics capabilities. And so will Microsoft, and MicroStrategy, and Information Builders, and every other BI-specialist company that doesn't want to get branded as backward-looking instead of forward-looking.

5) And then there's the wild-card in this deck: SAS. It's been talking sophisticated predictive analytics for quite some time and delivering world-class products and is a powerhouse in some of the exact industries IBM/SPSS is targeting, including retail and telecom providers. And SAS is a privately held company so it doesn't have to factor into its plans the pressure from financial analysts that will surely play a part in the actions of the others. SAS might decide it's time for it to raise its profile accordingly and take a much more vocal role in this emergent and fascinating market in order to take its place among the big dogs in this romp.

6) IBM's creation of its own Business Analytics and Optimization Consulting group will serve as a megaphone for not just its own capabilities but also for this dynamic but not widely understood market sector. It's going to take a while before some people understand the distinctions between predictive analytics and, say, demand forecasting.

7) Wireless and mobile enterprise apps will become more urgent than ever before in a world driven by what's coming and what's likely. Companies who buy predictive analytics software are going to be the same ones who allow their own customers to engage with them on whatever terms those customers want -- and that is increasingly mobile. So I think we're going to see this deal trigger an acceleration in the development of more and better mobile solutions for a wide range of enterprise apps, and won't that be nice for CIOs who so far have had to cobble together a mish-mash of various incomplete and limited solutions.

8) And most important of all, once CIOs get a real taste of what predictive analytics can do, they're not going to be willing to settle for the same-old same-old in other product categories. As they begin to get a sense of the power and potential they can harness by being able to anticipate -- to predict and analyze -- future customer behavior, they're going to expect other IT companies to show and tell how their products can help with this forward-looking view out the windshield instead of the traditional scenery of the rear-view mirror. They will force IT vendors of all stripes to explain to them how those vendors' products will help generate growth, help enhance customer intimacy, and help their companies shorten the lag time between customers wanting/needing something and customers getting something.




But along the way to that happy state there will surely be some gyrations. A while back, I was sitting next to SAS CTO Keith Collins at dinner and he was explaining how his company's latest suite of predictive analytics was pushing SAS into some unprecedented engagements with customers. As a large retail customer began to grasp the implications of what real predictive analytics could deliver, Collins said, the retailer began to scope out some massive changes in everything from its supply chain to its merchandising plans to its financials and marketing.

Collins said the customer looked at him and said, "Wow, it's really great that you guys know all about this because we're going to need your help figuring out how to redo everything based on what your new predictive analytics are showing us. You've gotta tell us how we transform ourselves from the company we've been, plodding along and looking over our shoulders, to the company we need to be, with a strong sense of what the future is likely to bring."

At that point, Collins said, he had to step in and begin to manage some expectations, explaining to this very big customer that while SAS would be delighted to do all it could capably do to help this customer, those change-management plans would have to come from a company specializing in change management. And Collins said the SAS team connected the customer with some of SAS's partners specializing in just that type of consulting service -- but it was also a sharp reminder to the SAS team that these new future-peering tools would be taking the company into unprecedented areas.

That's going to be the case with every company that, in the next 6-12 months, sets itself up as a predictive-analytics expert. And CIOs will need to bear in mind that the new perspectives that these tools can potentially offer will require new approaches and possibly new partners, and so those CIOs headed down this path will likely need to bring aboard some new levels of expertise as well.

The IBM-SPSS deal is going to make the next six months very interesting in this business. I won't go so far as to call the whole phenomenon Future Shock, but it's not going to be quite like anything we've been through before. As the saying goes, today's history and tomorrow's a mystery -- but perhaps soon, a little bit less of a mystery.

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at bevans@techweb.com.

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