IBM's Ascential Buy Expands Data Integration Offerings

The $1.1 billion all-cash transaction, expected to close next quarter, also gives Big Blue a cash-rich organization whose products--re-engineered for a services-oriented architecture world--will help IBM grab an even-greater share of a rapidly expanding market.

"This acquisition is all about growth," said Jeff Jones, director of information management strategy at IBM, Armonk, N.Y. "Today, 40 percent of all IT budgets are spent on integration, and [research firm] IDC says the data integration market will reach $13.6 billion by 2008. Given that kind of demand, we thought we should get our portfolio fleshed out more rapidly."

With Westboro, Mass.-based Ascential, IBM picks up a company that saw 46 percent year-over-year revenue growth in 2004 and gains new products aimed at the needs of data warehouses. Its software handles metadata management, data profiling, data cleansing and high-speed, high-volume data migrations--capabilities that are especially useful when crafting business-intelligence systems.

In contrast, IBM's WebSphere Information Integrator focuses on realtime, federated queries, which allow users to glean data from different data sources, as well as on event-driven data.

"Ascential's is a more mature set of warehouse services than IBM's," said Don Geier, CTO of MSI Systems Integrators, an IBM integration partner in Omaha, Neb. "Plus, Ascential has kept its products in step with changes in the delivery of information so that customers can present their information as services. That fits perfectly with IBM's on-demand strategy."

Now the question remains: What happens to the rest of the data integration market? Oracle, SAP and Microsoft either already offer or are planning to offer products with similar capabilities. That leaves Informatica, Redwood City, Calif., as the last data integration pure-play of any significance.

In his report to investors, Merrill Lynch analyst Edward Maguire wrote: "On the positive side, Ascential's decision to accept a buyout offer from IBM will benefit Informatica's stance as the leading 'pure-play' data integration vendor. Ascential is known for its aggressive pricing in the field, and IBM's size and clout could help restore pricing power to the market."

Informatica declined to answer questions about its rival's acquisition.

Still, given the consolidation now characterizing this market, many people are wondering if Informatica, which lost $104 million last year, could be the next target.

"I predict Informatica will get a buyer," said Judith Hurwitz, president of research and consulting firm Hurwitz and Associates. "If I were a betting person, I'd bet the buying company would be Oracle, since that's where their CEO [Sohaib Abbasi] came from."