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November 17, 1997 (Vol. 19, Issue 46)
Merger frenzy in data warehousing fueled by desire to buy vs. develop
By Paul Krill
Given the choice between developing homegrown technologies and purchasing what someone else has already done, many
software companies of late are opting for mergers or acquisitions to quickly boost profiles in the fast-growing decision support
market.
Case in point: When Microsoft wanted to become a player, it purchased online analytical processing (OLAP) technology from
Israeli-based Panorama Software Systems in 1996. Microsoft did not disclose what they paid for this purchase.
"Why do you make any acquisitions instead of building technology yourself?" said Doug Leland, lead product manager for
Microsoft's SQL Server database. "One, you see technology out there and it happens to be in a market area that you'd like to
enter."
The other reason to acquire is "obviously, to get a jump on the market," Leland said.
Microsoft is expected to release a product based on Panorama technology sometime next year.
Informix in 1995 made a similar acquisition. The database company bought Stanford Technology Group and its MetaCube
OLAP software. Again, the terms of the agreement were not disclosed.
Also in acquisition mode in 1995 was database giant Oracle, which bought IRI Software's OLAP business, which included its
Express software product, for $100 million.
This acquisition and merger frenzy will continue, analysts said.
"You've got a lot of large companies that really want a piece of the action here," said analyst Howard Dresner, vice president
and research director for the Gartner Group a consultancy based in Stamford, Conn.
And there still are a number of vendors in this market that will be absorbed by other players, Dresner said.
One acquisition he anticipates is IBM purchasing its partner Arbor Software. By buying Arbor, IBM would gain control of
Arbor's Essbase OLAP engine, a product that is being linked to the IBM DB2 database, Dresner said.
IBM declined comment on whether it has any such plans to acquire Arbor Software, and has dismissed the idea as just
another merger rumor.
The decision support/data warehousing market -- including tools, databases, and related software -- is expected to have an
annual growth rate of 30.1 percent during the next five years, according to International Data Corp., a market research
company, in Framingham, Mass.
This will increase the marketplace from $1.9 billion in 1996 to $7.1 billion in 2001.
In addition to more mergers and acquisitions taking place, vendors will continue partnering to bundle decision-support
products with their own, said Henry Morris, IDC director of data warehousing and applications.
Oracle's agreement to use Sagent Technology's data-cleansing software in the Oracle Data Mart Suite is one example,
according to Morris.
"[Users] probably don't know that Sagent's inside" the package, Morris said.
Not to be outdone by the major vendors, many smaller companies recently have merged or bought the rights to
decision-support offerings developed elsewhere.
For example, IQ Software last month purchased query and meta data tools from Intersolv for an amount ranging from
$500,000 to $1 million.
Also, Cognos last year paid $8 million for Right Information Systems, with the goal of adding Right's 4Thought data
forecasting and regression tool to the CognoSuite of business intelligence offerings, according to officials at that company.
"You've got the OLAP piece, you've got the reporting piece," already in the suite, said Dean Martinetti, regional manager at
Cognos, in Pleasanton, Calif. "Another natural piece would be the forecasting."
Cognos expects to integrate 4Thought into the suite in February.
Mergers, however, do not always go smoothly. They can have their tribulations, too.
When Oracle purchased IRI in 1995, a high level of turnover ensued at the former IRI OLAP software group, according to
Oracle's Dave Menninger, senior product marketing director for the OLAP products division in Waltham, Mass., and a
carryover employee from IRI.
Although there was no turmoil on the product development side, many salespeople were concerned about who they would
report to and what their compensation would be, said Menninger.
But in retrospect, the deal has worked out, providing greater access to OLAP customers, said Menninger.
"I didn't expect that a multibillion-dollar organization could be as nimble and entrepreneurial as Oracle is," Menninger said.
Mergers and product acquisitions
Data warehousing/decision-support market
Companies Year Merger/acquisition
Apertus-Carleton 1997 Acquisition
Cognos-Right Information Systems 1997 Merger
IQ Software-Intersolv 1997 Acquisition
Microsoft-Panorama Software Systems 1996 Acquisition
Oracle-IRI Software 1995 Acquisition
Informix-Stanford Technology Group 1995 Merger
Vmark Software-Unidata 1997 Merger
Source: vendors
Copyright (c) InfoWorld Publishing Company 1997
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