Initiate Systems Acquired By IBM

Today, IBM announced that it is acquiring Initiate Systems.

This was widely rumored last week, but the announcement of Informatica’s acquisition of Siperian took my mind off this temporarily.

On the face of it, it makes all the sense in the world. IBM knows a good product when it sees it, and Initiate has been doing well in the MDM world lately, particularly in the healthcare vertical, where it grew up, and in the public sector vertical. IBM’s press release explicitly mentions Initiate as a leader in “data integrity software for information sharing” among healthcare and government organizations. I thought it was interesting that the IBM release didn’t mention the terms “master data management” or “MDM” even once.

I was a little surprised that IBM’s release made no mention of the financial terms, since IBM is a public company, but I’m sure it will only be a matter of time before those details become available to those who know where to look or whom to ask.

It wasn’t a surprise to see the IBM release mention the stimulus funding being invested around the globe. When I first saw the rumors last week, I immediately thought – IBM is buying Initiate to be better prepared for the various e-Healthcare initiatives that are coming down the pike.

Where things may get a bit tricky is explaining the multiple MDM platforms from IBM to potential customers, and managing several different development roadmaps and product portfolios. There’s the IBM InfoSphere MDM Server (the former DWL product) and there’s also IBM InfoSphere MDM Server for Product Information Management (the former Trigo product). And now there’s the Initiate product too.

While the acquisition does make sense, there is an “embarrassment of riches” factor. IBM will, of course, develop a sales playbook explaining what situations at what type of customer are a good fit for each product.

I think the lingering feeling I have with Initiate Systems is that it may be headed for a “golden ghetto” at IBM – never to reach its full potential as a solution across many different industries, and eventually to handle many different domains of master data. IBM may (and rightly so, in its mind) pigeonhole it into the healthcare and government verticals.

But Initiate’s had some good success outside those two industries. In the Financial Services vertical, they’ve got customers like Capital One Financial, Countrywide Financial (now Bank of America), eSure Insurance, and Wells Fargo. In the Hospitality industry, they’ve got Choice Hotels. In manufacturing, they’ve got Mitsubishi Motors Australia. In the Logistics vertical, they’ve got Federal Express. In the retail sector, Barnes & Noble, CVS, Longs Drug Stores and SuperValu are all customers. And in the high tech space, they’ve got Dell, Ingenix, Intuit, LocatePLUS, Microsoft and National Instruments.

Unfortunately, they didn’t achieve enough critical mass in any of these other verticals to compete with the strong momentum they’d developed in healthcare and government.

As I said last week, these are interesting times in the MDM world. The recent M&A activity, the healthy demand from large and medium sized corporations, the large number of consultants from other areas claiming to now have experience in MDM – these are all signals to me of a large and fast-growing market. So the New Year, for those of us in the MDM space, is off to a good start.

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