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IBM Acquires MDM Player Initiate Systems
After weeks of rampant speculation -- and just six days after Informatica and Siperian dashed to the altar -- IBM and Initiate finally tie the knot, adding yet another variety of master data management to Big Blue's arsenal, and extending its reach into the healthcare and public sectors.
Posted Feb 3, 2010
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The master data management (MDM) market has certainly seen its share of action recently. Much to the chagrin of headline writers everywhere, Informatica and Siperian may have initiated the trend with their $130 million marriage late last week, but IBM made a wedding announcement of its own today, surprising very few industry observers with the revelation that it had agreed to purchase Chicago-based Initiate Systems, a privately held MDM player with roots in the healthcare industry. Financial terms were not disclosed.

[Editors' Note: IBM's press release announcing the acquisition can be found here.]

Though IBM and Initiate may have chosen to keep mum on the price tag, the deal marks Big Blue's 30th acquisition in the information and business analytics sector, according to IBM executives during a conference call with media and analysts, and brought to $10 billion the total amount that IBM has invested in the sector since 2005.

According to Jill Dyché, partner and cofounder of Baseline Consulting, this particular acquisition was highly expected -- especially in the aftermath of Informatica's move last week. Dyché points out that there are several factors that distinguish the Informatica and IBM deals. "It really is, for IBM, a lot more about the acquisition of [Initiate's] customer base," Dyché says. "Whereas, for Informatica, [the deal] was about rounding out their functionality with Siperian." She adds that, despite IBM's claim that its product portfolio included a fully functional MDM offering, Initiate will likely bring additional features to the table -- namely its superior matching technology. 

The acquisition also allows IBM to further penetrate the healthcare vertical, where Initiate has a recognized strength. "The real gravy for IBM is the acquisition of an unbelievable [client] base of healthcare companies," Dyché says. During today's conference call, Arvind Krishna, IBM's general manager of Information Management, said that IBM has grown substantially in the healthcare and life sciences verticals over the past 11 quarters. He revealed that the company currently has more than 3,000 ongoing healthcare initiatives, at locations ranging from small hospitals to national healthcare providers. The IBM Healthcare branch, he said, comprises more than 4,000 employees, as well as a network of 1,800 business partners. 

After seven years of what Bill Conroy, Initiate's president and chief executive officer, called "hypergrowth," the company's MDM software is now in use at more than 2,400 healthcare sites and within 40 health information exchanges. Initiate, Conroy said, began to feel the limitations of its own success. "The MDM market was exploding on a global basis around us and customers were asking for increasing functionality and more-complete solutions," he said on the conference call. "We reached an inflection point: Could we as a small company keep up with this exploding market and the demands of our customers?" Ultimately, Initiate Systems made the deal with Big Blue to expand both its reach and its products. "Who better than IBM to allow us go global with our reach and who better than IBM to extend our solutions to our customers in a complete product offerings?" Conway asked rhetorically. "And who better than IBM to give our employees opportunities to grow personally."

In Gartner's 2009 Magic Quadrant for MDM for Customer Data, the research firm placed Initiate Systems in the Leaders quadrant for the first time, pointing to substantial recent growth. Analyst John Radcliffe noted that the company's revenue increased approximately 50 percent in 2008, calling Initiate the largest of the best-of-breed MDM specialists. Radcliffe lauded the company for its strong presence in healthcare-related markets, but said it could stand to improve its reach outside of North America.

"The big enterprise application vendors are finally revealing the dirty little secret of MDM," Dyché says. "MDM is very foundational and the vendor that owns the master data hub essentially owns enterprise data for the company." Dyché says that the two recent acquisitions are essentially an endorsement for MDM. She says that, over these last two weeks, she's already seen new client inquiries about MDM bubble up. "Now the value proposition for MDM has become a lot more clear," she adds. "Business executives and [technology] executives alike are standing up and taking notice and are saying, ‘What are we missing?' and ‘What aren't we doing that we should be doing?' "

Dyché says that she doesn't expect consolidation to end here, adding that a number of niche data management vendors are ripe for the picking. As Informatica and IBM go about integrating their new pieces, Dyché says the industry can expect to see the following:

  • Vendors rounding out professional services offerings as they absorb acquisitions. A new level of expertise needs to be deployed, Dyché says, to address a newly energized customer base.
  • Customers with spending budgets that are larger this year than last. People have more money to spend, she says, which means "the timing on these [deals] is fantastic."
  • Vendors starting to focus on the vertical markets and placing vertical-specific messages around their MDM strategies.
  • IBM treating healthcare not only as a prime market for MDM, but also for its data integration strategies in general.

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine.

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