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Why IBM's Spending $1.7 Billion on Obscure Analytics Firm Netezza

IBM Netezza

IBM is about to fork over around $1.7 billion to buy Netezza Corporation. It's a big analytics firm, but you've probably never heard of it. What exactly is Big Blue up to, and why is it interested in this company at all?

Netezza is being offered $27 per share by IBM, which equates to $1.7 billion after adjustments needed for cash value—it's a huge pile of money, and it's still requiring approval from Netezza's shareholders (since Netezza stock is trading at around $24 at the time of writing, this represents a pretty decent premium).

Netezza should help IBM's existing customers "gain faster insights into their business information with increased performance at lower cost." It seems Netezza's secret trick is that its business data warehouse can deliver "complex analytic queries" some "10 to 100 times faster" than "traditional systems." Speed and efficiency and scalability are its watchwords, and the general idea is if you shoehorn a Netezza system into your business IT system, it'll quickly deliver deep and highly configurable business analytic data to all the different divisions of your company.

The press release notes that in a recent global study by IBM, 83% of company Chief Information Officers "identified analytics as a top priority." You may think that's a no-brainer comment from a CIO, whose very job is all about improving communication inside and outside an enterprise, but it's timely—with increasing emphasis on real-time data and shared information through cloud-based shared systems businesses are almost being forced to examine their internal business data in more and deeper ways.

But what's the benefit to IBM? The company already works with Netezza, which tailors its services to suit IBM's systems. When it buys Netezza outright, IBM will be able to sell a boots and braces solution to its customers: Basically this means machines that businesses will use, the software they use to manage the business, cloud services to aid distributed working, and the analytics software that they'll use to work out exactly how well the business is running. It's also enabling a more service-type relationship with clients, so IBM's revenues get a nice, smooth boost versus the swings and roundabouts of simple product sales.

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