DECISION STATS

Interview Steve Sarsfield Author The Data Governance Imperative

Here is an interview with Steve Sarsfield, data quality evangelist and author of Data Quality Imperative.

Ajay- Describe your early career to the present point. At what point did you decide to specialize or focus on data quality and data governance? What were the causes for it?

Steve- When I was growing up, not many normal people had aspirations of becoming data management professionals. Back in those days, we had aspirations to be NFL wide receivers, writers, and engineers,and lawyers. Data management careers tend to find you.

My career path has wandered through technical support, technical writer and managing editor, consulting,and product management for Lotus development. I’ve been working for the past nine years at a major data quality vendor – the longest job I’ve had to date. The good news is that this latest gig has given me a chance to meet with a LOT of people who have been implementing data quality and data governance projects.

When you get involved with the projects, you’ll begin to realize the power it has. You begin to love data governance for the efficiencies it brings, and for the impact it will have on your organization as it becomes more competitive.

Ajay- Some people think data quality is a boring job and data governance is an abstract philosophy. How would you interest a young high school /college student, with the right aptitude, in taking a business intelligence career and be focused on it.

Steve- In my opinion if you promote a geeky view of data governance the message will tend to fall flat. If there’s one thing I have written most about, it is about bridging the gap between technology and business.Those who succeed in this field now and in the future will be people who are a bit of a jack-of-all-trades.

You need to be a good technologist, critical thinker, marketer, and strategist, and you need to use those skills every day to succeed. Leadership skills are also important, especially if you are trying to bootstrap a data governance program at your corporation. Those job attributes are not boring, they are challenging and exciting.

In terms of being persuasive about getting involved in a data career, it’s clear that data is not likely to decrease in volume in the coming years, quite the contrary, so your job will have a reasonable amount of security. Nor will there be less of a need in the future for developing accurate business metrics from the data.

In my book, I talk about the fact that the decision of a corporation to move toward data governance is really a choice between optimism and fear. Your company must decide to either be haunted by a never-ending vision that there will only will be more data, more mergers and more complexity in the years to come, orthey will decide to take charge for a more hopeful future that will bring more opportunity, more efficiency and a more agile working environment. When you choose data governance as a career, you choose to provide that optimism for your employer.

Ajay-What are the salient points in your book Data Governance Imperative. Do you think data governance is an idea whose time has come.

Steve-The book is about the increasing importance of data to a business. As your company collects more and more data about customers, products, suppliers, transactions and billing, it becomes more difficult to accurately maintain that information without a centralized approach and a team devoted to the data management mission.

The book comes from discussions with folks in the business who are trying to get a data governance program started in their corporation. They are the data champions who “get it”, but are yet to convince their management that data is crucial to the success of the company.

The fact is, there are metrics you can follow, processes that you can put in place, conversations that you can have, and technology that you can implement in order to make your managers and co-workers see the importance of data governance. We know this because it has worked for so many companies who are far more advanced in managing their data than most.

The most evolved companies will have support from executive management and the entire company to define reusable processes for data governance and a center of excellence is formed around it. Much of the book is about garnering support and setting up the processes to prove enterprise data’s importance. Only when you do that will your company evolve its data governance strategy.

Ajay- Garbage Data In and Garbage Data Analysis Out. What percentage of a BI installation budget goes to input data quality at data entry center. What is the kind of budget you would like it to be.

Steve- I’m sure this varies depending upon many factors, including the number of sources, age and quality of the source data, etc. Anecdotally, the percentage of budget five years ago was near zero. You really only saw realization of the problem LATE in the project, after the first data warehouse loading occurred. What has happened over the years is that we’ve gotten a lot smarter about this, perhaps as a result of our past failures. In the past, if the data worked well in the source systems it was assumed that it would work in the target.

A lot of those projects failed because the team incorrectly scoped the project with regard to the data integration. Today we have the wisdom and experience to know that this is not true. In order to really assess our needs for data quality, we know we need to profile the data as one of the first tasks in the process. This will help us create a more accurate timeline and budget and ensure management that weknow what we’re doing with regard to data integration and business intelligence.

Ajay- Do you think Federal Governments can focus stimulus spending smarter with better input data quality?

Steve- Believe it or not, I’m encouraged by the US Government’s plan on data quality. To varying degrees,Presidents Clinton, Bush and Obama have all supported plans for greater transparency and openness. To accomplish that, you have to govern data. In Washington, many government agencies now have a Chief Information Officer. The government is recruiting leading universities like MIT to work toward better data governance in government. The sheer number of databases even within a single US government agencywill be a huge challenge, but the direction is good.

This year’s MIT Information Quality Symposium, for example, had a very solid government track with speakers from the Army, Air Force, Department of Defense, EPA, HUD, and National Institute of Health to name just a few.

Other than the US, it gets even cloudier. There are governments ahead of the US, like UK and Germany, and those who still need to catch up.

Ajay- Name some actual anecdotes in which 1) bad data quality led to disaster 2) good data quality gave great insights

Steve- There are certainly plenty of typical examples I always like the unusual examples, like:

A major motorcycle manufacturer used data quality tools to pull out nicknames from their customer records. Many of the names they had acquired for their prospect list were from motorcycle events and contests where the entries were, shall we say, colorful. The name fields contained data like “John the Mad Dog Smith” or “Frank Motor-head Jones”. The client used the tool to separate the name from the nickname, making it a more valuable marketing list.

One major utility company used data quality tools to identify and record notations on meter-reader records that were important to keep for operational uses, but not in the customer billing record. Upon analysis of the data, the company noticed random text like “LDIY” and “MOR” along with the customer records. After somework with the business users, they figured out that LDIY meant “Large Dog in Yard” which was particularly important for meter readers. MOR meant “Meter in Right, which was also valuable. The readers were given their own notes field, so that they could maintain the integrity of the name and address while also keeping this valuable data. IT probably saved a lot of meter readers from dog bite situations.

Financial organizations have used data quality tools to separate items like “John and Judy Smith/221453789 ITF George Smith”. The organization wanted to consider this type of record as three separate records “John Smith” and “Judy Smith” and “George Smith” with obvious linkage between the individuals. This type of data is actually quite common on mainframe migrations.

A food manufacturer standardizes and cleanses ingredient names to get better control of manufacturing costs. In data from their worldwide manufacturing plants, an ingredient might be “carrots” “chopped frozen carrots” “frozen carrots, chopped” “chopped carrots, frozen” and so on. (Not to mention all the possible abbreviations for the words carrots, chopped and frozen.) Without standardization of these ingredients, there was really no way to tell how many carrots the company purchased worldwide.

There was no bargaining leverage with the carrot supplier, and all the other ingredient suppliers, until the data was fixed.In terms of disasters, I’d recommend the IAIDQ’s web site – IQ Trainwrecks.http://www.iqtrainwrecks.com/ The IAIDQ does a great job and I contribute when I can.

Ajay- What are the essential 5 things a CEO should ask his CTO to ensure good data quality in an enterprise.

Steve- What a great question. I can think of more than five, but let’s start with:

1) What is poor quality data costing us?
This should inspire your CTO to go out and seek problem areas in partnership with the business and ways to improve processes.

2) Do I have to make decisions on gut-feel, or should I trust the business intelligence you give our employees? What confidence level do you have in our BI?

The CEO should be confident in the metrics delivered with BI and he should make sure the CTO has the same concerns.

3) Are we in compliance with all laws regarding our governance of data?

CEOs are often culpable for non-compliance, so he/she should be concerned about any laws that govern the company’s industry. Even in unregulated industries, organizations must comply with spam laws and “do not mail” laws for marketing.

4) Are you working across business units to work towards data governance, or is data quality done in silos?

When possible data quality should be a process that is reusable and able to be implemented in similar manner across business units.

5) Do you have the access to data you need?

The CEO should understand if any office politics are getting in the way of ensuring data quality and this question opens the door to that discussion.

Ajay- What does Steve Sarsfield do when not writing blogs and books.

Steve-These days, when I’m not thinking about data or my blog, I’m thinking about my fantasy football team and the upcoming season. I’ve got a ticket to the New England Patriots opening game vs the Buffalo Bills and I’m looking forward to it. On the weekends, you may find me playing a game of mafia wars on Facebook or cooking up a big pot of chili for the family.

Biography-

Steve Sarsfield is a Data governance business expert, speaker, author of The Data Governance Initiative ( at http://www.itgovernance.co.uk/products/2446 ) and blogger at http://data-governance.blogspot.com/. Product marketing professional at a major data quality vendor and author of the book “The Data Governance Imperative”.He was Guest speaker at MIT Information Quality Symposium (July 2007 and July 2008), at the International Association for Information and Data Quality (IAIDQ) Symposium (December 2006) and at SAP CRM 2006 summit.

Tennessee Rain

Clear rain falls with a straight steady hum

On green Tennessee woods like a muted drum

The skies as if painted by a great gray brush

All around silence as in heavenly hush

Long ago long miles ahead

I left my home to earn my bread

Dusty lanes domestic remind with a nostalgic pang

Creating almost a deep throat tasteful tang

Tennessee rain so beautiful and forlorn

So exciting and yet reminds me I’m alone

Interview Dr Usama Fayyad Founder Open Insights LLC

Here is an interview with Dr Usama Fayyad, founder of Open Insights LLC (www.open-insights.com). Prior to this he was Yahoo’s Chief Data Officer. In his prior role as Chief Data Officer of Yahoo! he built the data teams and infrastructure to manage the 25 terabytes of data per day that resulted from the company’s operations.

Ajay- Describe your career in science. How would you motivate young people today to take science careers rather than other careers
Dr Fayyad- My career started out in science and engineering. My original plan was to be in research and to become a university professor. Indeed, my first few jobs were strictly in basic Research. After doing summer internships at place like GM Research Labs and JPL, my first full-time position was at the NASA – Jet Propulsion Laboratory, California Institute of Technology.

I started in research in Artificial Intelligence for autonomous monitoring and control and in Machine Learning and data mining. The first major success was with Caltech Astronomers on using machine learning classification techniques to automatically recognize objects in a large sky survey (POSS-II – the 2nd Palomar Observatory Sky Survey). The Survey consists of taking high resolution images of the entire northern sky. The images, when digitized, contain over 2 billion sky objects. The main problem is to recognize if an object is a star of galaxy. For “faint objects” – which constitute the majority of objects, this was an exceedingly hard problem that people wrestled with for 30 years. I was surprised how well the algorithms could do at solving it.

This was a real example of data sets where the dimensionality is so high that algorithms are better suited at solving it than humans – even well-trained astronomers. Our methods had over 94% accuracy on faint objects that no one could reliably classify before at better than 75% accuracy. This additional accuracy made all the difference in enabling all sort of new science, discoveries and theories about formation of large scale structure in the Universe.
The success of this work and its wide recognition in scientific and engineering communities let to the creation of a new group – I founded and managed the Machine Learning Systems group at JPL which went on to address hard problems in object recognition in scientific data – mostly from remote sensing instruments – like Magellan images of the planet Venus (we recognized and classified over a million small volcanoes on the planet in collaboration with geologists at Brown University) and Earth Observing System data, including Atmospherics and storm data.
At the time, Microsoft was interested in figuring out data mining applications in the corporate world and after a long recruiting cycle they got me to join the newly formed Microsoft Research as a Senior Researcher in late 1995. My work there focus on algorithms, database systems, and basic science issues in the newly formed field of Data Mining and Knowledge Discovery. We had just finished publishing a nice edited collection of chapters in a book that became very popular, and I had agreed to become the founding Editor-in-Chief of a brand new journal called: Data Mining and Knowledge Discovery. This journal today is the premier scientific journal in the field. My research work at Microsoft led to several applications – especially in databases. I founded the Data Mining & Exploration group at MSR and later a product group in SQL Server that built and shipped the first integrated data mining product in a large-scale commercial DBMS – SQL Server 2000 (analysis Services). We created extensions to the SQL language (that we called DMX) and tried to make data mining mainstream. I really enjoyed the life of doing basic research as well as having a real product group that built and shipped components in a major DBMS.
That’s when I learned that the real challenging problems in the real-world where really not in data mining but in getting the data ready and available for analysis – Data Warehousing was a field littered with failures and data stores that were write-only (meaning data never came out!) — I used to call these Data Tombs at the time and I likened them to the pyramids in Ancient Egypt: great engineering feats to build, but really just tombs.

In 2000 I decided to leave the world of Research at Microsoft to do my first venture-backed start-up company – digiMine. The company wanted to solve the problem of managing the data and performing data mining and analysis over data sets, and we targeted a model of hosted data warehouses and mining applications as an ASP – one of the first Software as a Service (SaaS) firms in that arena. This began my transition from the world of research and science to business and technology. We focused on on-line data and web analytics since the data volumes their were about 10x the size of transactional databases and most companies did not know how to deal with all that data. The business grew fast and so did the company – reaching 120 employees in about 1 year.

After 3 years of doing high-growth start-up and raising some $50 million in venture capital for the company, I was beginning to feel the itch again to do technical work.
In June 2003, we had a chance to spin-off part of the business that was focused on difficult high-end data mining problems. This opportunity was exactly what I needed and we formed DMX Group as a spinoff company that had a solid business from its first day. At DMX Group I got to work on some of the hardest data mining problems in predicting sales of automobiles, churn of wireless users, financial scoring and credit risk analysis, and many related deep business Intelligence problems.

Our client list included many of the Fortune 500 companies. One of these clients was Yahoo! — After 6 months of working with Yahoo! As a client they decided to acquire DMX Group and use the people to build a serious data team for Yahoo! We negotiated a deal that got about half the employees into Yahoo! And we spun-off the rest of DMX Group to continue focusing on consulting work in data mining and BI. I thus became the industry’s first Chief Data Officer.

The original plan was to spend 2 years or so to help Yahoo! Form the right data teams and build the data processing and targeting technology to deliver high value from its inventory of ads.
Yahoo! Proved to be a wonderful experience and I learned so much about the Internet. I also learned that even someone like me who worked on Internet data from the early days of MSN (in 1996) and who ran a web analytics firm still did not scratch the service on the depth of the area. I learned a lot about the Internet from Jerry Yaang (Yahoo! Co-founder) and much about advertising/media business from Dan Rosensweig (COO) and mTerry Semel (then CEO) and lots about technology management and strategic deal-making from Farzad (Zod) Nazem who was the CTO. As Executive VP at Yahoo!

I built one of the industry’s largest and best data teams and we were able to to process over 25 terabytes of data per year and power several hundred million Dollars of new revenue for Yahoo! Resulting from these data systems. A year after joining Yahoo! I was asked to form a new Research Lab to study much of what we did not understand about the Internet. This was yet another return of basic research into my life. I founded Yahoo! Research to invent the new sciences of the Internet, and I wanted them to be focused on only 4 areas (the idea of focus came from my exposure to Caltech and its philosophy in picking few areas of excellence). The goal was the become the best research lab in the world in these new focused areas. Surprisingly we did it within 2 years. I hired Prabhakar Raghavan to run Research and he did a phenomenal job in building out the Research organization. The four areas we chose were: Search and information navigation, Community Systems, Micro-economics of the Web, and Computational Advertising. We were able to attract the top talent in the world to lead or work on these emerging areas. Yahoo! Research was a success in basic research but also in influencing product. The chief scientists for all the major areas of company products all came from Yahoo! Research and all owned the product development agenda and plans: Raghu Ramakrishnan (CS for Audience), Andrew Tomkins (CS for Search), Anrei Broder (CS for Monetization) and Preston McCaffee (CS for Marketplaces/Exchanges). I consider this an unprecendented achievement in the world of Research in general: excellence in basic research and huge impact on company products, all within 3-4 years.
I have recently left Yahoo! And started Open Insights (www.open-insights.com) to focus on data strategy and helping enterprises realize the value of data, develop the right data strategies, and create new business models. Sort of an ‘outsourced version” of my Chief Data Officer job at Yahoo!
Finally, on my advice to young people: it is not just about science careers, I would call it engineering careers. My advice to any young person in fact, whether they plan to become a business person, a medical doctor, and artist, a lawyer, or a scientist – basic training in engineering and abstract problem solving will be a huge assets. Some of the best lawyers, doctors, and even CEO’s started out with engineering training.
For those young people who want to become scientists, my advice is always look for real-world applications where the research can be conducted in their context. The reason for that is technical and sociological. From a technical perspective, the reality of an application and the fact that things have to work force a regiment of technical discipline and make sure that the new ideas are tested and challenged. Socially, working on a real application forces interactions with people who care about the problem and provides continuous feedback which is really crucial in guiding good work (even if scientists deny this, social pressure is a big factor) – it also ensures that your work will be relevant and will evolve in relevant directions. I always tell people who are seeking basic research: “some of the deepest fundamental science problems can often be found lurking in the most mundane of applications”. So embrace applied work but always look for the abstract deep problems – that summarizes my advice.
Ajay- What are the challenges of running data mining for a big big website.
Dr Fayyad- There are many challenges. Most algorithms will not work due to scale. Also, most of the problems have an unusually high dimensionality – so simple tricks like sampling won’t work. You need to be very clever on how to sample and how to reduce dimensionality by applying the right variable transformations.

The variety of problems is huge, and the fact that the Internet is evolving and growing rapidly, means that the problems are not fixed or stationary. A solution that works well today will likely fail in a few months – so you need to always innovate and always look at new approaches. Also, you need to build automated tools to help detect changes and address them as soon as they arise.

Problems with 1000 10,000 or millions of variables are very common in web challenges. Finally, whatever you do needs to work fast or else you will not be able to keep up with the data flux. Imagine falling behind on processing 25 Terabytes of data per day. If you fall behind by two days, you will never be able to catch up again! Not within any reasonable budget constraint. So you try never to go down.
Ajay- What are the 5 most important things that the data miner should avoid in doing analysis.

Dr Fayyad-I never thought about this in terms of top 5, but here are the big ones that come to mind, not necessarily in any order
a.       The algorithms knows nothing about the data, and the knowledge of the domain is in the head of the domain experts. As I always say, an ounce of knowledge is worth a ton of data – so seek and model what the experts know or your results will look silly
b.      Don’t let an algorithm fish blindly when you have lots of data. Use what you know to reduce the dimensionality quickly. The curse of dimensionality is never to be under-estimated
c.       Resist the temptation to cheat: selecting training and test sets can easily fool you into thinking you have something that works. Test it honestly against new data, never “peek” at the test data – what you see will force you to cheat without knowing it.
d.      Business rules typically dominate data mining accuracy, so be sure to incorporate the business and legal constraints into your mining.
e.       I have never seen a large database in my life that came from a static distribution that was sampled independently. Real databases grow to be big through lots of systematic changes and biases, and they are collected over years from changing underlying distribution: segmentation is a pre-requisite to any analysis. Most algorithms assume that data is IID (independent and identically distributed)

Ajay- Do you think softwares like Hadoop and MapReduce will change the online database permanently. What further developments do you see in this area.

Dr Fayyad- I think they will (and have) changed the landscape dramatically, but they do not address everything. Many problems lend themselves naturally to Map-Reduce and many new approaches are enabled by Map-Reduce. However, there are many problems where M-R does not do much. I see a lot of problems being addressed by a large grid nowadays when they don’t need it. This is often a huge waste of computational resources. We need to learn how to deal with a mix of tools and platforms. I think M-R will be with us for a long time and will be a staple tool – but not a universal one.
Ajay- I look forward to the day when I have just a low priced netbook and fast internet connection, and upload a Gigabyte of data and run advanced analytics on the browser. How far or soon do you think it is possible?
Dr Fayyad- Well, I thnk the day is already here. In fact, much of our web search today is conducted exactly in that model. A lot of web analysis, and much of scientific analysis is done like this today.
Ajay- Describe some of the conferences you are currently involved with and the research areas that excites you the most.
Dr Fayyad- I am still very involved in knowledge discovery and data mining conferences (especially the KDD series), machine learning, some statistics, and some conferences on search and internet. Most exciting conferences for me are ones that cover a mix of topics but that address real problems. Examples include understanding how social networks evolve and behave, understanding dimensionality reductions (like random projections in very high-D spaces) and generally any work that gives us insight into why a particular technique works better and where the open challenges are.
Ajay- What are the next breakthrough areas in data mining. Can we have a Google or Yahoo in fields of business intelligence as well given their huge market potential and uncertain ROI.
Dr Fayyad- We already have some large and healthy businesses in BI and quite a huge industry in consulting. If you are asking particularly about the tools market then I think that market is very limited. The users of analysis tools are always going to be small in number. However, once the BI and Data Mining tools are embedded in vertical applications, then the number of users will be tremendous. That’s where you will see success.
Consider the examples of Google or Yahoo! – and now Microsoft with BING search engine. Search engines today would not be good without machine learning/data mining technology. In fact MLR (Machine Learned Ranking) is at the core of the ranking methodology that decides which search results bubble to the top of the list. The typical web query is 2.6 keywords long and has about a billion matches. What matters are the top 10. The function that determines these is a relevance ranking algrorithm that uses machine learning to tune a formula that considers hundreds or thousands of variables about each document. So in many ways, you have a great example of this technology being used by hundreds of millions of people every day – without knowing it!
Success will be in applications where the technology becomes invisible – much like the internal combustion engine in your car or the electric motor in your coffee grinder or power supply fan. I think once people start building verticalized solutions that embed data mining and BI, we will hit success. This already has happened in web search, in direct marketing, in advertising targeting, in credit scoring, in fraud detection, and so on…

Ajay- What do you do to relax. What publications would you recommend for staying up to date for the data mining people especially the younger analysts.
Dr Fayyad- My favorite activity is sleep when I can get it J. But more seriously, I enjoy reading books, playing chess, skiing (on water or snow – downhill or x-country), or any activities with my kids. I swim a lot and that gives me much time to think and sort things out.
I think for keeping up with the technical advances in data mining: the KDD conferences, some of the applied analytics conferences, the WWW conferences, and the data mining journals. The ACM SIGKDD publishes a nice newsletter called SIGKDD explorations. It is free with a very low membership fee and it has a lot of announcements and survey papers on new topics and important areas (www.kdd.org). Also, a good list to keep up with is an email list called KDNuggets edited by Gregory Piatetsky-Shapiro.

Biography (www.fayyad.com/usama )-

Usama Fayyad founded Open Insights (www.open-insights.com) to deliver on the vision of bridging the gap between data and insights and to help companies develop strategies and solutions not only to turn data into working business assets, but to turn the insights available from the growing amounts of data into critical components of an enterprise’s strategy for approaching markets, dealing with competitors, and acquire and retain customers.

In his prior role as Chief Data Officer of Yahoo! he built the data teams and infrastructure to manage the 25 terabytes of data per day that resulted from the company’s operations. He also built up the targeting systems and the data strategy for how to utilize data to enhance revenue and to create new revenue sources for the company.

In addition, he was the founding executive for Yahoo! Research, a scientific research organization that became the top research place in the world working on inventing the new sciences of the Internet.

Friday Poem: Live Music in Austin

Ok the events in the following poem really happened when I visited Austin, Texas for a business visit, and thanks to the Austin Post ( a new media Austin based site) for publishing it.

austin_post

And you can read the rest at http://www.austinpost.org/content/live-music-sixth-street-austin-poetry

If you like poetry, live music, Austin ….

Buying SAS Institute

At risk of annoying a lot of friendly people, I am going to ask an old question and try and answer it quantitatively.

Who can buy SAS institute?

Graph from-http://www.sas.com/news/preleases/2008Financials.html

SAS_revenue_lores

As you can see from the graph (note the post 2001-2004 period) – which is a nice smoothed curve, textbook normal distribution on the left side, SAS Institute grew during the tough economic year of 2008 to show slowed but firm revenue growth. However if you use the same price/revenue multiple as for the SPSS acquisition ( 1.2 billion/ 300 million (2008) revenues) – that would put a price of 9.2 USD billion on SAS Institute.

Who has that kind of money? Well it seems the usual suspects are-

1) HP- from http://h30261.www3.hp.com/phoenix.zhtml?c=71087&p=irol-IRHome

and

Click to access HewlettPackard_2008_AR.pdf

Cash and cash equivalents on 12.851 Billion USD as on April 30, 2009.

2) Oracle- Oracle would be hard pressed to integrate both Sun and SAS in the same year, but may have financial leverage to do both.

from http://www.oracle.com/corporate/investor_relations/earnings/4q09-pressrelease-june.pdf

Fiscal year 2009
GAAP revenues were up 4% to $23.3 billion, while annual GAAP net income was up 1% to $5.6
billion. Total GAAP new software license revenues for the year were down 5% to $7.1 billion.
GAAP software license updates and product support revenues were up 14% to $11.8 billion.
GAAP operating income was up 6% to $8.3 billion, and GAAP operating margins were up 80
basis points to 36% in fiscal year 2009.

3) IBM -from ftp://ftp.software.ibm.com/annualreport/2008/2008_ibm_financials.pdf

Cash on hand was 12.7 Billion USD as on 31 Dec 2008, and the company repurchased it’s own stock in 2008

In the current economic environment growth can come through acquisitions of newer clients ( not much) or new companies. IBM has capabilities to acquire BOTH SPSS and SAS Institute and merge the strong R and D facilities.

IBM 2008

4) SAP – from http://www.sap.com/germany/about/investor/reports/gb2008/en/our-results/finances.html

various sources of loan capital:

profit after income taxes for 2008 was slightly lower than for the previous year, we increased cash flows from operating activities 12% to € 2,158 million (2007: € 1,932 million) through efficient management of working capital.

To finance the acquisition of Business Objects, we entered into an agreement for a credit facility that was originally for € 5 billion and is repayable by December 31, 2009 (amount outstanding on December 31, 2008: € 2.3 billion). We did not draw the full € 5 billion available under the facility because we paid part of the purchase price from available cash.

To increase financial flexibility, in November 2004 we obtained a € 1 billion syndicated credit facility through an international group of banks. We already had other lines of credit in place; the new line was arranged to provide additional financial flexibility. As in the previous year, we did not draw on this facility during the year.

At the end of 2008, the other, bilateral lines of credit available to SAP AG totaled approximately € 597 million (2007: € 599 million). We did not draw on these facilities during 2008 or 2007. Several subsidiaries in the SAP Group had credit lines in their local currency. These totaled € 52 million (2007: € 44 million), for which SAP AG was guarantor. At the end of the year, the subsidiaries had drawn € 21 million under these facilities (2007: € 27 million).

Given these cash positions it seems that almost everyone can buy SAS Institute if and this is a big IF- someone sells it. Microsoft which some years allegedly tried and lost at acquiring Yahoo ( only to realize huge savings!) and SAS, would be also another suitor for SAS- and Google also has the financial and operating synergies with the best text mining capabilities could also act as a white knight in merging it’s Google Applications and Enterprise solutions ( especially the cloud based OS and cloud based productivity suite) with SAS Institute. I personally would favor a Google- SAS Institute joint venture on enterprise software solely based on the common history and shared values ( Note Google has dual ownership stock including class A and class B shares)

Who is John Galt ?

Another option could be using the Google Way and for SAS Institute to go for dual ownership IPO, with class A shares for the common public and class B shares for the founders and executives. A substantial endowment to colleges and universities can also be expected in the future, given the philanthropic tradition of SAS Institute owners and executives. Also could SAS try and buy SPSS- it would lead to synergies in both software ( with the SPSS GUI) as well as new clients. At the very minimum it would boost the valuation of other stock in this sector as well make SPSS more realistic valued.

So who will buy SAS Institute?

I don’ know 🙂 and I am just brushing off my half a decade old financial valuation skills here

What is the true value of SPSS

A brief study of the charts at http://tr.im/vDA4 ( CourtesyGoogle Finance) would suggest IBM is getting a bargain for SPSS Inc.

And Oracle, Microsoft and other companies ( even the privately held SAS Institute) can do well to step in and take it away or at the very minimum make the valuation even more steep for IBM to hold on to.

SPSS reported in 2007 Total Revenue of $291million with a Net Income of $33.73million and in 2008 Total Revenue of $302.91million with a Net Income of $36.05million. Shares of SPSS Inc. (Public, NASDAQ:SPSS) increased from about $35 per share before the announcement to $49.50 per share after the announcement.

Citation-

http://shareholdersfoundation.com/caseinvestigation/spss-inc-takeover-subject-investor-investigations

SPSS.