“Tuck-in” or “Sent-out” Acquisitions: IBM purchases Data Mirror
Back to the Basics of Data Warehousing
June 30, 2007Are your customers on drugs?
August 9, 2007
Yesterday IBM (NYSE: IBM) announced
it is acquiring DataMirror Corporation
(TSX: DMC) based in
approximately C$170 million (approximately $161 million USD). DataMirror is a
provider of real-time change data capture (CDC) technology with over 2,200
customers and $46.5 million in revenue last year. The official press release
stated that "IBM intends to: Integrate DataMirror with IBM’s Information
Management Software unit…(and) Employ DataMirror software to support IBM
Information Server…" The deal is
the twenty-first acquisition to support IBM’s Information on Demand business
initiative.
roadmap, but we have already run into a little disagreement between analysts
and IBM on whether there is product overlap and how much DataMirror will be
integrated into the IBM Information Server.
these subjects when they’re talking to the press. An excellent blog that
addresses this in more detail (or more bluntly) is Vincent McBurney’s (a Solution
Architect for IBM’s products) "DataMirror
on the Wall who is the prettiest Information Server of all."
Information Server provides CDC and real-time access, as does DataMirror. Maybe
DataMirror’s capability is better or maybe not (of course why would IBM buy it
if it is not.)
of Kalido stated in his post "Mirror,
mirror on the wall, who is most blue of them all?" "For IBM the
acquisition adds some solid technology to its data warehouse offering and its ‘on
demand’ strategy, in this case replacing Powerpoint promises with something
that actually works." Ouch, that hurts (but agrees with Vincent’s
assessment.
analysts’ data integration ratings, so it is best-in-class and IBM is only
purchasing DataMirror to enhance it even more. That’s a great positive to
customers (and stockholders too.) The broader issue is that this is another
example of what one of IBM’s competitors calls a "tuck-in" acquisition strategy.
neo-titans such as Business Objects and Cognos (until they are bought by the
titans, another post another day…) have been using the "tuck-in"
acquisition strategy to gather product functionality to incorporate into their
product suites. The titans and neo-titans have built out product suites for
business intelligence (BI) or integration capabilities through organic
(internally) development and through acquisition. These suites (or platforms)
keep expanding to be more and more comprehensive and robust. These suites are
very particularly appealing to large customers with "heavyweight"
data integration or business intelligence challenges. And the suites give the
titans the edge when it comes to analysts’ ratings and software evaluation
bake-offs.
there are potentially other customers (or prospects) that would see it as half
empty. What could possibly be negative about this approach? Some would argue there is no free lunch and
that with that functionality come complexity and cost.
DataMirror, are successful in selling their products is that their products are
"lightweight" in comparison to the titans’ software suites. You might
infer lightweight to be a bad thing, but its interpretation is in the eye of
the beholder (or purchaser.) For large enterprises dealing with heavyweight, or
very complex and large applications, then lightweight is a negative, i.e. not
as much functionality or scalability. The heavyweight application users prefer
the software suites or platforms so they can get everything they need in one
place.
medium business) market and many applications within large enterprises (this
may be a surprise to many software marketers!) These folks often prefer the
more lightweight applications meaning a smaller, i.e. more targeted, software
footprint and capability. Why pay for, implement infrastructure for, train for
and have people with expertise in a software suite when you only need a small
portion of its capability? The heavyweight users want the best and most full-featured
tools, while the lightweight users want the tools to match what they need. Data Mirror didn’t get 2,200 users because
their product was as capable as a heavyweight software suite, but rather
because it wasn’t.
smaller firms for tuck-in capabilities you have got to wonder if that means
there is a whole market that is being "sent-out" to look for other
vendors and products? Is this the opening for new and innovative software firms
to enter the market (and then feed the titans when they become acquired?) Is
this the opening for open source software in the business intelligence,
integration and business application markets?
3 Comments
The product overlap is there but it’s negligible (especially for a company the size of IBM!) As with the Unicorn metadata acquisition they have a product that doesn’t sell well and they don’t have the time or people to fix it, so they are buying a product that is popular and can merge well with the existing suite.
Every product on the Information Server, apart from Federation Server, began its life as a flagship product from a small specilised vendor. There is excellent innovation, motivation and responsiveness from these small vendors. Plenty of the founders and visionaries from those companies have stayed with IBM so there is a place for innovators there.
I think open source ETL and BI vendors are already doing well for lower volume implementations. Pentaho and Talend get a lot of press coverage and SnapLogic for internet data integration. The latter was started by Informatica co-founder Gaurov Dhillon and they can carve out a niche on internet deployment.
Vincent,
Thanks for your terrific insight and observations.
I agree with your assessment that the IBM acquisitions have enabled it to get many innovators and other talent onboard besides simply obtaining their acquisitions’ products. This has been how the software titans, including IBM, Oracle and Microsoft, have picked up innovative products and the innovators who created them. All these companies can be great places to work and thrive. Many of these innovators then can help their products grow with the software titans’ resources and, of course, increase sales with the titan’s much larger sales force and distribution channels.
However, the software titans do not have a lock on innovation. There is a considerable amount of innovation and their visionaries are at smaller software firms (most everyone is small compared to the titans) or start-ups. That’s were many visionaries would prefer to get it done. These entrepreneurs take the vision from concept to product to customer implementations while taking the risks and investing their soul along with sometimes investors’ capital. Of course, it’s a lot safer when your company has billions of dollars of revenue but that also implies, at least to some entrepreneurs, a lot of meetings and politics with middle managers who are people, again from the entrepreneur viewpoint, who never really take real risks or innovate. Entrepreneurs are sometimes seen as mavericks or people who can’t get along in a large corporate environment.
You can incubate innovators in a software titans but I’ll suggest that smaller or start-up software firms will continue to be the feeder system for the software titans when it comes to at least a portion of the true innovation in the market.
Regards,
Rick
Do you believe regulators could halt this acquisition? I mean, the acquisition would definitely hurt competition, most notably Vision Solutions, since it provides the same type of products for the Systems i. If the DataMirror software is to be integrated into IBM platform, perhaps the judge can have an understanding similar to the Microsoft IExplore case, where it ruled that the blending of the browser into the OS damaged competition among browsers.
Regards,
Guilherme Lima