IBM buying SPSS, but why now?

IBM is spending $1.2b to buy Chicago-based SPSS, one of the three major statistics and data mining software companies. The cash offer is a 42% premium to its previous close and 2.6x anticipated revenues.

Most academics know SPSS for its eponymous statistics software that is the standard for psychologists and other social scientists. Its main rivals in this area are SAS Institute — used by high-end data miners — and StataCorp, the favorite of economists. On a personal note, I dumped SPSS in 1996 when they abandoned the Mac (causing me to establish the MacStats web page), switching to Stata which I found more intuitive and easier to use.

SPSS has been following SAS into the data analytics segment for business since that’s a much bigger market than selling scientists statistics software. Personally, I think SAS is a tough competitor since they created this market and with 2008 revenues of $2.2b, are 5x as big as SPSS. More importantly, the privately held Cary, NC company has an admirable corporate culture that Google once studied to understand how to motivate and empower technical professionals.

IBM has a mixed record on software. They have a very successful software arm, and so (unlike Intel spending $884m to buy WindRiver) they understand the creation and sale of software. On the other hand, IBM’s largest software acquisition, spending $3.5b in 1995 to buy Lotus Development (instead of Apple) that turned out to be a declining business.

SPSS will have formidable competitors. SAS has rejected acquisition feelers with CEO/founder Jim Goodnight growling that “IBM and SAP acquire because they're so stagnant they're unable to grow themselves.”

More seriously, SPSS has a major open source competitor that’s gaining favor here among Silicon Valley dataminers (including at Google). The R software package was begun in 1996 as an open source knock-off to S from Bell Labs, and with nearly 2000 donated extensions, has the most vibrant third party community of any data analytics package. The popularity of the R platform has exploded in the past 4 or 5 years, and certainly SPSS must be feeling the competition.

So is this another example of IBM (as with Lotus) buying a software business too late? Or (also as with Lotus) is the value of integrating and aggregating the SPSS solutions with its other software and services create a value for the SPSS software that would not be available to a stand-alone company?