As I mentioned in my blog post last week when discussing Informatica’s acquisition of Siperian, there was a rumor that IBM was on the verge of acquiring Initiate Systems. Well today, February 3, 2010, that rumor became reality when IBM announced their intent to acquire Initiate. Financial details were not disclosed, but estimates value the deal anywhere between $300-$450 million.

In that blog post, I suggested the following reasons IBM might consider Initiate:

  • Initiate has an extremely strong presence in Healthcare with a growing presence in Public Sector. Both of these verticals are expecting major federal stimulus funding, with IT spending and data management as a high priority. Initiate could help IBM take ownership of these verticals.
  • By acquiring Initiate as a defensive move, IBM will eliminate the risk of another vendor (EMC, HP, Microsoft, SAP) from strengthening or entering the MDM market as a tough competitor.

While I wouldn’t expect IBM to validate my 2nd assumption, they did in their announcement validate my first. In their announcements, they stated “IBM has announced plans to acquire Initiate Systems, a market leader in data integrity solutions for information shared among Healthcare and Government organizations”.

Initiate Systems has proven itself as a well recognized and respected master data management solution for organizations throughout the healthcare system, be it a focus on patients, providers, physicians, payers, or other relevant Parties. Initiate has also created strong momentum in the public sector, especially around law enforcement and threat management use cases. This acquisition is a great way for IBM to make a strong, credible push into these two verticals.

But many important questions still remain for IBM and Initiate customers:

  • What should IBM’s existing InfoSphere MDM Server customers in these verticals do now? It’s unlikely that MDM Server will still be the primary “go to” MDM platform for Healthcare and Public Sector.
  • What should Initiate’s existing commercial customers do? While Initiate had a majority of their customers in the healthcare and public sector industries, they did make a major push for the past few years to also expand into what they called the Commercial sector, which pretty much meant all other industries and included high profile customers in high tech, services, retail, and others. Will the Initiate platform still be supported for these verticals, or will IBM push a migration to MDM Server?
  • Interestingly, one of Initiate’s highest profile tech clients is Microsoft — an MDM solutions provider too. Microsoft has been slowly ramping its own MDM strategy, with the acquisition of Stratature in 2007 and matching vendor Zoomix in 2008. Will Microsoft look to enter the operational MDM hubs market with an acquisition of its own, and if so…who’s left?
  • How will IBM reconcile and coordinate the product roadmaps of its multiple MDM solutions (MDM Server, MDM Server for PIM, Cognos Business Viewpoint (for hierarchy/dimension management) and now Initiate). Will MDM Server take any features/functionality from Initiate such as Initiate’s strong probabilistic match algorithms? And how and when will Initiate’s technology deliver seamless integration with IBM’s information management portfolio (data integration, data quality, data warehousing, business intelligence, entity analytics, data discovery, content management, etc)?

Beyond IBM/Initiate and Informatica/Siperian:

Although you wouldn’t know it following this past week’s activity, but there are actually more than two MDM vendors in this ever-changing market. What does this massive disruption mean?

With less unique MDM vendors on the market, some of the operational MDM vendors that have a smaller market presence such as D&B Purisma and TIBCO might find themselves on customer evaluation short lists, giving them an opportunity to compete head to head more often.

Smaller MDM vendors that don’t offer the same breadth and depth of operational/transactional MDM capabilities, but alternative paths to solving MDM business problems will be more visible as well. These include governance-driven MDM vendors such as Kalido and Orchestra Networks.

Open source has now also entered the conversation. Open source data management vendor, Talend, made a big splash last week with its announcement of the Talend Open Source MDM offering. But as we all know, there’s no such thing as FREE in the IT world, and aside from the reality that Talend is only giving away some of the MDM features, and charging for others, the real costs to MDM lie in the costly implementation and integration services effort, not just the software. In addition, the MDM technology Talend acquired from Amalto was more comparable in the market to the model management, governance-centric MDM offerings described above from Orchestra and Kalido, as opposed to operational MDM hubs from the bigger vendors. The Amalto technology lacked any significant data quality or matching capabilities, so I expect Talend has worked and will continue to bridge these gaps as best they can with their own DQ capabilities. I’ll be very interested to see where Talend takes this, but in my view open source data management technologies (data integration, data quality, etc.) has been more widely embraced on a departmental and project-based level, and that is exactly what MDM should NOT be. While Talend has had some success in bringing its data integration tools to an enterprise audience, it will need to convince CIOs that its offering is mature enough to handle the complex requirements of a cross-enterprise MDM business initiative. I’m not betting on it in the short term.

In the Informatica/Siperian blog linked above, I spent quite a bit of time discussing my opinions on what Oracle’s next steps should be, but I think the biggest open question is what’s on SAP’s mind after this week?

SAP, while holding decent market share against IBM and Oracle, has been well behind in its ability to execute on its promise to be a fully heterogeneous multi-domain MDM platform that served app environments that were not primarily SAP. While SAP has made significant improvements in this area in the past few releases, and the acquisition of Business Objects enabled SAP to deliver somewhat integrated high end data quality and data integration capabilities, they could really have used the massive injection of top notch, proven MDM technology that a Siperian or Initiate acquisition could have enabled. At this point (unless they acquire Informatica :)), the rest of the MDM vendors available on the market will not provide both the technology and credibility infusion that SAP could really use. It will be interested to see and hear SAP’s response over the coming weeks and months.

This week has been a fun ride, and in my mind only solidifies MDM’s increasing strategic importance in the enterprise. The consolidation of the major players should in no way limit pure play and start up innovation in this space though. On the contrary, this could help differentiated MDM-enabling technologies secure the necessary funding and support to develop and grow new approaches to this slowly maturing market.