On March 15, 2005, IBM announced it had agreed to buy Ascential Software Corp. for approximately $1.1 billion. If you work in business intelligence (BI), or even generally stay aware of business, you already know this. The deal has closed. Ascential will become a business unit in IBM's Information Management software division, where it will be integrated with WebSphere Information Integrator. It's quite possible that some road maps have been laid out by now as well. While my column may be lousy for reporting "hard" news, I want to outline some of the serious long-term ramifications of this deal.

I believe this is completely in line with the direction I stated in my August 2003 Business Intelligence Best Practices Newsletter #7 as follows: "We're not yet at the complete commoditization of business intelligence product suites, but we're close. With commoditization comes consolidation, and that is what we are experiencing now. It is not innovative in a free market for 10 companies to be working on the same set of enhancements to their products. Two or three will do. We still have yet to see who the two or three will be, but it makes complete sense to view any new business intelligence purchases in context of a framework. There are only a handful of frameworks left that make sense for business intelligence."

It was never in doubt that IBM would be on the list of lead vendors in the frameworks and an ultimate survivor in BI. I had also stated in the newsletter that "IBM has a relationship with ETI (ETL) and Business Objects (data access), and frequently recommended them in their consulting proposals. It will be interesting to see what becomes of ETI. IBM could also pursue MicroStrategy or Cognos and become an immediate top BI software player." Well, now we know at least one of the BI companies they pursued and that the vendor in IBM's ETL (extract, transform and load) strategy will be IBM itself.

It was made clear that IBM will be focused on the top end of the BI marketplace. This is where the integration of product sets and the vendor behind them can address the needs of high volume, real-time integration - potentially of both structured and unstructured data.

However, many end user BI needs are more basic than this. They would like a product that is easy to learn and also easy to use and manage. Microsoft and Oracle bundled ETL products into their database offerings a few years ago. It is not clear if IBM will pursue a similar strategy with Ascential, but given the relatively high cost and function of Ascential, that is by no means a foregone conclusion.

While no vendor is ready to concede the high-end, big dollar deal yet, this is an opportunity for Microsoft and Oracle to quietly buttress their footprint in midsize and small businesses. Both have new releases of their BI  product set to come to market. Though Microsoft is doing a rewrite of their ETL tool, functionally, both ETL tools are undergoing manageable organic expansions based on their customer needs. Will Microsoft and Oracle stay here, or will they too decide their underlying database engines provide the foundation for buying one of the independent BI software players and challenging IBM at the higher end? Then again, there's always independent Teradata (with market share) and emergent appliances with compelling technical cases for top-end foundations, all of whom could look interesting to Microsoft and Oracle (and SAP) if they concur that a full BI suite from a single vendor is necessary.

Of course, everyone believes Informatica is the ETL vendor in play to these titans at this point. From a positioning and market penetration standpoint, the pickings for ETL become slim after that. The moves made by the major data access vendors Hyperion and Business Objects in 2003 could turn out to be just a preliminary step toward their eventual home if the market continues down the one BI vendor path.

It is quite possible that the Ascential purchase signals a further division between large and midsize BI vendors. There may be frameworks more suitable to each with cost-effectiveness being key at the lower end and high-volume integration key at the upper end.

Because BI will be a hot area for IT investment in 2005 and beyond, this merger should benefit its investors and, most likely, the customers, of which there are already 550 joint customers. This merger, however, does not signal the end of BI mergers and acquisitions, but rather the beginning as the market continues to move toward its eventual frameworks.

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