AI capabilities a target for merger and acquisition activity

Merger and acquisition activity among analytics vendors has picked up in recent months.

After more than a year between Salesforce's $15.7 billion acquisition of Tableau in June 2010 and Tibco's purchase of IBI (formerly Information Builders) for an undisclosed amount in October 2020, recent months have been a busy time for merger and acquisition activity.

Qlik acquired Blendr.io on the same day Tibco bought IBI. Talend was acquired by private equity firm Thoma Bravo in March 2021. Logi Analytics was acquired by ERP vendor Insightsoftware in April 2021 and subsequently purchased Izenda just eight days later. And ThoughtSpot, after going nine years without acquiring another company, has acquired two so far in 2021.

The question now isn't when the next merger and acquisition activity will take place among analytics vendors, but rather who will be the target.

During a virtual roundtable discussion on June 2 hosted by longtime independent analytics vendor MicroStrategy, a group of analysts made their predictions. And while only one named a specific vendor, each of the four profiled the type of vendor they think will be acquisition targets in the coming months.

And those with significant augmented intelligence capabilities will be in the crosshairs.

"You're going to see a lot of stuff around AI and analytics start to converge," said R "Ray" Wang, founder, chairman and principal analyst at Constellation Research. "Tooling around that is important."

While Wang didn't say that DataRobot, an enterprise AI vendor based in Boston, will be the next vendor to get acquired, he said DataRobot fits the profile of companies that could be targets for acquisitions given the capabilities it provides and the capabilities analytics vendors will be looking to add to their platforms.

I think larger companies are going to look to acquire an ML platform that's evolving into an AI platform to gain that capability.

"DataRobot is a great example of a type of company where we'll see a lot of acquisitions as people try to compete with them," Wang said. "I think that's going to be one of those people will be chasing, or at least trying to get similar types of features."

Similarly, Mike Gualtieri, vice president and principal analyst at Forrester Research, said vendors specializing in enterprise AI will be targets for merger and acquisition activity.

Many vendors offer machine learning capabilities, which result in models developed largely by data scientists. In the next phase of business intelligence, AI will feature prominently, but instead of resulting in a model, the result of AI development is a business application, and vendors will need to acquire the expertise to develop those applications.

"What we're seeing is an evolution of ML platforms to AI platforms, and AI platforms' scope is much broader," Gualtieri said. "I think larger companies are going to look to acquire an ML platform that's evolving into an AI platform to gain that capability."

Beyond AI capabilities, as organizations accumulate more data and attempt to enable more employees to work with data, data governance will be critical toward keeping organizations compliant with all regulatory guidelines while simultaneously empowering more potential users.

As a result, vendors specializing in data governance could be targets for merger and acquisition activity, according to David Menninger, senior vice president and research director at Ventana Research.

While he didn't mention any vendors by name, among those specializing in data governance are Alation, Collibra and Informatica.

"We're going to need to see stronger governance capabilities throughout the analytics process," Menninger said. "I'll call them tuck-in acquisitions or supplemental capabilities, but they'll acquire some governance technologies to make processes trustworthy and make them automated."

Regarding which companies might be the ones doing the acquiring, Wang said it could be any of them.

A slew of AI vendors were founded a decade or so ago, but they lack access to data sources, according to Wang. Those vendors, therefore, are ripe for acquisition by companies that can combine the capabilities of the AI vendors with complementary capabilities.

"Will it be the large digital giants with huge networks and large business graphs, will a software vendor aggregate a large portfolio of tools and run the network, or will a services provider buy a few tools along the way to improve their delivery options?" Wang told TechTarget in a separate interview. "All are possible."

Likewise, Menninger said just about any tech vendor could be an acquirer.

Large tech companies have funds on hand to make acquisitions, while among analytics vendors companies like Qlik, which is owned by private equity firm Thoma Bravo, have the backing of their parent companies, Menninger noted.

Others -- such as Databricks, for example -- recently completed a significant funding round that gives them the capital to make an acquisition, and still others like Alteryx, Domo and Snowflake are publicly traded and can use stock to make acquisitions, he continued.

"Many of these vendors across the different categories have already demonstrated an appetite for acquisitions, but most of the recent activity is more about 'tuck-in' acquisitions that help round out an analytics vendor's portfolio rather than massive acquisitions such as Salesforce's acquisition of Tableau or Google's acquisition of Looker," Menninger told TechTarget.

Analytics vendors have been aggressive so far in 2021. With data critical to helping organizations of all kinds navigate the pandemic, analytics vendors have been rapidly expanding their capabilities to meet the needs of their customers.

Whether more AI power, increased governance prowess, or even performance management tools as Robert Tischler, managing director and senior analyst at BARC, noted during the virtual roundtable, analytics vendors are looking to expand rather than retract.

And that means more merger and acquisition activity looms.