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November 27, 1997updated 01 Sep 2016 3:10pm

ARBOR MOVES CLOSER TO IBM AS THE COMPETITION GROWS

By CBR Staff Writer

Arbor is a big fan of piggyback economics. In its formative years, the company established its Essbase online analytical processing (OLAP) software on the back of the sales force of legendary data analysis software firm Comshare. But last year as the popularity of Arbor began to overshadow Comshare’s own products, the relationship soured. Now Arbor is expecting another, more potent partnership to take it beyond its specialist niche in data warehousing and into the mainstream. Having been the key definer of the market for multi-dimensional OLAP technology – specialist database software used for intensive data analysis – Arbor was signed up by IBM Corp in February to jointly develop DB2 OLAP server, a version of Arbor’s Essbase that allows analysis directly against data stored in IBM’s DB2 relational database. The relational/multi-dimensional hybrid is now at a test stage and will be able to handle data hosted by the mainframe, Unix, NT and AS/400 versions of DB2. More recent, in October, IBM pushed the alliance much further with a deal that allowed it to start reselling the Essbase product line itself through its sales force worldwide. In those two moves, Arbor established IBM in a market it had woefully neglected. And the moves should add substantially to Arbor’s already strong momentum. In the company’s first quarter to 30 June, revenues rose 74% to $16.1m and net profit jumped 46% to $1.7m. Its share price has also soared over the past six months, from a low of $17 in May to a high of over $50 in October.

Top dollar

Clearly investors think a take-over by IBM is a distinct possibility. But with a market capitalization of a hefty $561m, IBM would have to pay top dollar – at least a dozen times Arbor’s 1996 revenues of $47.4m. However, while the IBM involvement will extend the reach of Arbor’s products globally, there is a danger for Arbor customers: Essbase could become too closely associated with DB2 and support for other database system could be weakened. At the same time, the market for all kinds of data warehousing products is changing, say analysts. The threat to Arbor may no longer come from rival multi-dimensional competitor such as Oracle, Gentia and Applix, or from the new breed of relational OLAP vendors, companies like MicroStrategy, Cognos and Information Dimensions, whose products build multi-dimensional views of data directly against the relational database. Rather, the market for specialist standalone OLAP products may be undermined by financial applications software companies such as SAP, Baan and Oracle offering add-on analysis packages. These companies see demand from their customers for more vertical industry-oriented offerings and Arbor may have to adjust its business model to compete in that changed world. In the meantime, though, Arbor is not likely to have its rapid pace checked – either as an independent company or as part of IBM.

This article originally appeared in Computer Business Review

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