Netezza buy further defines IBM's analytics bent

IBM's purchase of Netezza is the latest in a long line of moves to bolster Big Blue's analytics offerings

IBM's $US1.7 billion planned acquisition of data warehouse vendor Netezza is more evidence of IBM's relentless intent to define and perhaps even create a new IT market, which its executives call business analytics.

In a May investor briefing, IBM Chairman, President and CEO Sam Palmisano emphasized that the field of business analytics would be a growth area for the company in the years to come. The company expects analytics to generate $16 billion of revenue by 2015. The area generated $US9.4 billion in 2009 for IBM.

But what is analytics and how is it different from a seemingly similar, though more widely used term, business intelligence, or BI?

At IBM, "the term analytics is used in a very broad sense. BI is just one of the capabilities. Data warehouse, information integration," are all also part of analytics, explained Arvind Krishna, who is an IBM information management general manager, during a conference call Monday about the purchase.

In the same conference call, Jim Baum, President and CEO of Netezza, offered an example of analytics in action. One Netezza customer, trucking firm Conway Freight, uses the Netezza appliances to allocate payloads across their fleet, Baum said. Conway has many deliveries that take up less room than a single truckbed, so the appliances can generate the optimal way of allocating the deliveries across many trucks, weighing such factors as delivery schedules, road conditions and other aspects.

"This is a good example of a company that uses data that they collect to develop an analytical view of the best way to route those trucks," Baum said. "It creates a predictive solution. It's a desired outcome and an optimized path to get there, as opposed to BI, which tends to be focused on reports and dashboards that are often based on views of historical data."

Forrester analyst James Kobielus warned not to place too much significance on the term "business analytics" itself, noting that it is IBM's way of branding a number of products and services having to deal with various aspects of data analysis.

"Don't get too hung up on the term," he advised. He did suggest that the term itself may be a more accurate description than say, BI, insofar as that it describes what the tools and services do, namely help organization analyze their data. "I like analytics because you can break it into [subcategoires], such as basic analytics, or advanced analytics," he said.

Whatever the merits of the term itself, IBM has spent more than $US12 billion over the last four years to acquire 23 analytics-related companies. In 2007, IBM purchased business intelligence software provider Cognos for $5 billion. In 2009, IBM purchased data mining statistical software giant SPSS, for $1.2 billion.

More recently, IBM purchased Web analytics software and services provider Coremetrics in June for an undisclosed sum.

Of course, organizations have long analyzed their operations and results to isolate what works and what doesn't. "What is new is a convergence of analytics and technology that didn't exist before," said Shaun Barry, an IBM global solutions executive, in an earlier interview with the IDG News Service. "But now it can be embedded as part of business processes and operations. You can operationalize and embed all this analytics as part of what you do."

IBM has dedicated more than 6,000 consultants to helping organizations carry out just such a task. And the company has tallied some early successes, particularly in areas traditionally unexamined by such analytical treatment. Using the company's SPSS software, the Memphis police force can better distribute officers across the areas that need the most coverage.

The New York State Department of Taxation and Finance is testing an IBM analytics-based system from Global Business Services that can identify the tax returns that are most probably fraudulent. The state predicts it can generate an additional $US100 million revenue over three years using this software to root out elusive scofflaws.

For IBM, the Marlborough, Massschusetts-based Netezza, offers a technology that can expand the use of analytics beyond the typical user-base of enterprise analysts using complex data warehouse tools. For many data warehouse and BI vendors, the new sales frontiers are the vast majority of organizational managers who would like to use BI but don't have the opportunity to do so, because either they aren't sufficiently trained or the supporting BI staff is too small to handle all requests.

With this in mind, Netezza offers a line of data warehouse appliances, called TwinFin, that the company has claimed are fast and easy to deploy.

"We really focus on bringing the power of analytics directly in the hands of every department within an enterprise," Baum said. "A big part of our strategy has been to make these products easier to use and deploy."

"From a competitive standpoint, the most noteworthy fact about Netezza's offerings is that fact that they sell for a starting price of $20,000 per usable terabyte, which is an order-of-magnitude cheaper than integrated [data warehouse] hardware/software solutions cost just a few years ago," wrote Kobielus, in a research note about the purchase.

IBM has its own line of data warehouse offerings, ISAS (IBM Smart Analytics System) though the two platforms should not be competitive. Products like ISAS are more flexible though require more IT maintenance, Krishna said. As a result, IBM uses ISAS as a basis for customized customer-specific systems, Kobielus said.

And for Netezza, "We expect IBM to waste no time leveraging and aligning those and other Netezza offerings with its best-of-breed SPSS and Cognos analytics portfolios," Kobielus wrote.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is

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Tags business intelligencesoftwareapplicationsdata miningNetezza

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Joab Jackson

IDG News Service
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