SPSS Inc.

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SPSS Inc.

233 South Wacker Drive, 11th Floor
Chicago, Illinois 60606-6307
U.S.A.
Telephone: (312) 651-3000
Toll Free: (800) 525-4980
Fax: (312) 651-3668
Web site: http://www.spss.com

Public Company
Incorporated: 1968
Employees: 1,263
Sales: $211 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: SPSS
NAIC: 511210 Software Publishers

Based in Chicago, SPSS Inc. is a leading global manufacturer of software used in data analysis, reporting, and modeling. Its products include CustomerCentric Data Analysis, Clementine Advance Analysis, Quantime, In2itive, SurveyCraft, and student versions of the company's SPSS Base and SYSTAT products. From more than 40 offices throughout the world, SPSS serves more than 250,000 customers in a wide range of fields including academia, banking, consumer packaged goods, finance, government, healthcare, insurance, retail, telecommunications, and market research. These clients use the company's applications to detect and hinder fraud, increase revenue, reduce costs, and operate more efficiently.

A Product is Born in the Late 1960s

The history of SPSS can be traced back to 1967, when Norman H. Nie, then a 22-year-old Ph.D. candidate at Stanford University, decided to develop his own solution after becoming "frustrated trying to use a computer to analyze data describing the political culture of five nations," according to the September 22, 2003, issue of the Chicago Tribune.

The application Nie was trying to use was created for biologists, not social scientists. With that in mind, Nie took detailed notes about what he needed in a software application and enlisted the help of Dale H. Bent, a fellow doctoral candidate whose background was in operations research, to design a file structure. Hadlai "Tex" Hull, who had recently received his MBA from Stanford, was tapped to write the code, and by 1968 the Statistical Package for the Social Sciences (SPSS) was born.

Nie and Hull left Stanford to pursue careers at the University of Chicago, and they brought their SPSS program along with them. However, their main focus was on academics and research—not on developing or selling software. Hull became head of the university's Computation Center. Nie joined its National Opinion Research Center and eventually was named chairman of the political science department.

Nie became a top authority on social science data and statistical analysis. His specialty was working with voting patterns, and he went on to author a well-known book on American politics called The Changing American Voter. Through the years, Nie would receive national awards for his books, and by the early 2000s he had become professor emeritus in the University of Chicago's political science department, as well as a research professor in political science at Stanford University's Graduate School of Business.

With help from a university librarian and the University of Chicago's support, Nie and Hull began selling SPSS to academicians at other universities. As they concentrated on their academic careers, SPSS grew by itself. The data analysis application became increasingly popular and by 1974 was earning revenues of $200,000 per year—without any marketing or promotional effort at all.

As the company Web site later explained: "The early success of SPSS was directly related to the quality and availability of the documentation that accompanied the software. McGraw-Hill published the first SPSS user's manual in 1970. Once the manual was available in college bookstores, demand for the program took off. Nie, Bent, and Hull received a royalty from sales of the manual but nothing from distribution of the program. In Nie's words, 'It was like Gillette selling razors at cost and getting its profits from the blades'."

SPSS became so successful that the IRS took notice in 1971, indicating that it considered SPSS a small software company. This determination in turn called into question the University of Chicago's status as a tax-exempt organization. Mainly for that reason, Nie and Hull incorporated their operation in 1975, and SPSS officially became an independent company. Dale Bent, who had played a role in the design of SPSS at Stanford, opted to accept an academic position at the University of Alberta in his native Canada instead of becoming involved with the new Chicago-based enterprise.

For several years, SPSS remained a part-time endeavor for Nie and Hull. "Initially, this was an ego trip," Hull explained in a September 2003 article in the Chicago Tribune. He noted: "It was fun to do, and it was neat when people knew your name at computer conferences. But there was no money in it."

While a competitor called SAS Institute was making strides during the late 1970s by partnering with the likes of IBM, SPSS remained focused on its base of academic users. The company sought to keep its software easy to use for those who were not computer savvy, and even paid fellow academicians to make upgrades. According to SPSS, the portable nature of its software enabled colleges and universities to use it on a variety of mainframe computer systems, including Burroughs large systems, the Control Data 6000 series, Digital Equipment Corporation (DEC) large systems, GE/Honeywell large systems, and the Univac 1108.

SPSS eventually was adopted by government and business users as well. In the mid-1970s SPSS software was employed by NASA to calculate the mean time between Space Shuttle part failures. The National Forest Service used SPSS to track bear encounters and injury reports in national parks. Within the business sector, SPSS became a tool for consumer marketing research and gained popularity among Anheuser-Busch, Procter & Gamble, and other consumer products companies.

According to company lore, while attending a company picnic in 1980, Nie and Hull looked about and were impressed with the growing number of people who were involved with SPSS and depending on the firm for their livelihood. The partners made the important decision to take the enterprise to a new level.

1980s: The PC Age

By the mid-1980s, the analysis software that Nie developed years before had achieved widespread adoption among university researchers. With the introduction of SPSS/PC+ in 1984, SPSS became the first software firm in its class to make applications available on individual PCs, as opposed to only large mainframes. That year, sales reached approximately $18 million.

In 1985, Nie appointed a seasoned software industry executive, John Grillos, as president and chief operating officer at SPSS. Focused on expanding the company's reach, Grillos oversaw new marketing initiatives for SPSS software. Shortly after Grillos joined the company, the work force at SPSS had grown from 160 to 220, and the company was realizing $25 million in annual sales. SPSS had evolved into a leader in its industry segment, competing mainly with North Carolina-based SAS Institute. The company next introduced SPSS/PC+ Graphics. Resulting from a partnership with Microsoft, the software gave users the ability to display data with presentation quality graphics via an interface with Microsoft's Chart tool.

In the fall of 1986, Pansophic Systems Inc., a systems software company based in Oak Brook, Illinois, agreed to acquire SPSS for $32 million. SPSS released new versions of its SPSS-X mainframe software, which retailed for anywhere between $3,000 and $10,000, and SPSS-PC+, which retailed for about $795. In addition, the company unveiled a forecasting program called SPSS-X Trends, priced between $1,500 and $3,000. These products pushed 1988 revenues to $33 million. In addition to higher sales volume, SPSS had extended its geographic presence, making its products available in some 90 countries. SPSS ended the 1980s by signing an agreement with JV Dialogue to market its software in the Soviet Union.

1990s: The Windows Age

Jack Noonan was named the company's SPSS president and CEO in 1992, when sales reached approximately $38 million. Noonan arrived at SPSS with considerable experience in the industry. Prior to joining SPSS, Noonan had served as president and CEO of database software developer Microrim Corporation from 1990 to 1991. Before that, he was vice-president of the Candle Corporation's Product Group, which produced IBM mainframe system software, from 1985 to 1990. While Noonan assumed his new responsibilities, Nie continued as chairman of SPSS, and Hull remained actively involved in developing the company's software.

Among Noonan's first initiatives was the founding of a sales team that would push into new markets, including the government and business sectors. Among the products the company introduced at this time was the first statistical software compatible with Microsoft Windows.

The mid-1990s brought some concerted efforts at expansion. In May 1993, SPSS reincorporated in Delaware under the same name and made an initial public offering of stock on the NASDAQ exchange. Also during this time, the company made an acquisition (of SYSTAT Inc.), and released software compatible with Microsoft Windows 95.

Company Perspectives:

Two themes have dominated the evolution of SPSS Inc. as a company: SPSS technology has made difficult analytical tasks easier through advances in usability and data access, enabling more people to benefit from the use of quantitative techniques in making decisions; and the company's domain expertise has centered on analyzing data about people, their opinions, attitudes, and behavior. The Company's mission to 'drive the widespread use of data in decision-making' derives directly from these two themes.

SPSS's acquisition efforts continued at a rapid pace in 1996, when revenues reached $84 million. That year, the company acquired BMDP Statistical Software Inc., Jandel Scientific Software, and Clear Software. Its SPSS 6.1 for Windows package received favorable reviews from the likes of PC Week, which called it "easy to use and significantly faster than other recently released Windows packages," despite low marks for having poor menu labels and a boring on-line tutorial. In addition, the company released Neural Connection, a decision support application that incorporated neural network technology to help users find order in chaotic data sets.

Late 1990s and Beyond

During the late 1990s and early 2000s, SPSS wanted to become a bigger player within the business intelligence software market, which was experiencing strong growth. Along with its competitors, SPSS sought to provide universal products capable of warehousing large corporate databases and performing data mining functions like linear regression and multivariate analysis. In the past, such data operations had required the involvement of professional statisticians. However, modern software applications were delivering this analytic power to everyday professionals.

Noonan led SPSS toward this goal. According to the company, SPSS introduced "technologies such as data mining, a business intelligence suite for the IBM eServer iSeries, Web analytics, sophisticated analytical components, a Web interface for online analytical processing (OLAP) technology and text mining. These technologies were introduced by SPSS Inc. to better capitalize on the expanding need for understanding ever-increasing volumes of data, and to support the company's mission to drive the widespread use of data in decision-making."

Many of the new technologies introduced by SPSS were obtained when it acquired other software companies. In 1997, when revenues reached $110.6 million, the company acquired Quantime Ltd., a market research software company, as well as In2itive Technologies Corp. Other acquisitions followed when data mining software company Integral Solutions Ltd. was obtained in 1998 for $7.1 million. The acquisition gave SPSS ownership of the highly sophisticated Clementine data analysis software.

Sales reached $121 million in 1998, and the company launched SPSS Data Entry, a new survey design and collection application for Windows 95 and NT. The company ended the 1990s by acquiring Vento Software Inc. and forming an agreement with Harcourt College Publishers to bundle its software with statistics and marketing research textbooks.

SPSS entered the new millennium by earning a host of honors. Besides a place on Forbes' 200 Best Small Companies list, Working Mother recognized the firm on its 100 Best Companies for Working Mothers list. Several software industry publications, including Software Magazine, also included SPSS in different "best of" industry rankings.

In 2001, SPSS' revenues totaled $176.6 million. However, a weakening domestic economy and declines in foreign currency impacted earnings. In response, SPSS cut 90 jobs that April, amounting to 7 percent of its work force. The jobs were mainly sales positions and included 10 positions in the company's Chicago office.

Several important developments occurred in 2001. In February, SPSS acquired ShowCase Corporation, a manufacturer of middle market business intelligence software. In May, it released a version of its Data Entry software specifically designed for Sun Solaris and Linux platforms. At about the same time, the company launched its new CustomerCentric Solutions division to market its CustomerCentric customer relationship management software in high-service, custom deals exceeding $1 million.

In July, SPSS forged a strategic alliance with e-business software company Siebel Systems Inc. when it became a Strategic Software Partner in the Siebel Alliance Program. The alliance essentially involved efforts to integrate Siebel's eBusiness Applications with SPSS programs like Clementine and CustomerCentric.

In October 2001, SPSS forged a strategic alliance with America Online's Digital Marketing Services (DMS) subsidiary. According to Standard & Poor's, the alliance was worth $42 million over four years. DMS explained that under the alliance, SPSS "acquired the exclusive rights to distribute a survey sample generated through OpinionPlace.com."

In 2002, sales reached $209.3 million and employees numbered 1,263. That year, SPSS finalized a deal initiated in 2001 to acquire NetGenesis Corporation in a stock swap valued at $44.6 million. NetGenesis produced analytical applications for Web data, and was expected to add $15 million-$20 million to SPSS' annual revenues.

Key Dates:

1968:
Norman H. Nie, Dale H. Bent, and Hadlai "Tex" Hull develop a software program and begin selling it from the University of Chicago.: 1971:
The IRS determines that SPSS is not just a program but a software company, jeopardizing the University of Chicago's status as a tax-exempt organization.: 1974:
SPSS has sales of $200,000, with no marketing or promotional efforts.: 1975:
Nie and Hull incorporate SPSS in Illinois.: 1984:
SPSS becomes the first in its class to make applications available on individual PCs, as opposed to only large mainframes; sales reach approximately $18 million.: 1986:
Pansophic Systems Inc. signs a letter of intent to acquire SPSS for $32 million.: 1993:
SPSS is reincorporated in Delaware and is taken public on the NASDAQ exchange.: 1994:
SPSS embarks upon an expansion strategy and acquires eight companies in the coming five years.: 1997:
SPSS adds to its offerings new products for the business intelligence software market.: 2003:
Company eyes audio and video mining as a new market niche.

Commenting on the acquisition in the October 29, 2001, issue of Canadian Corporate News, Noonan said: "We are making investments that enable us to strengthen and develop our core competencies so that we emerge from this economic downturn as a stronger organization. Current market conditions are providing us with unique opportunities to accomplish this objective. Our merger with NetGenesis is a perfect example. Where before we could only dream of adding NetGenesis web-oriented capability to our multi-channel analytical CRM framework, today we are making it a reality."

SPSS also acquired text mining software manufacturer Lexiquest SA in 2002, along with Netexs LLC, which had developed a Web interface for OLAP technology. The following year, SPSS acquired DataDistilleries BV, a Netherlands-based applications developer, founded in 1995 at the Dutch National Research Center for Mathematics and Computer Science.

The early 2000s at SPSS were characterized by a focus on so-called predictive analytics, which, according to company literature "connects data to effective action by drawing reliable conclusions about current conditions and future events." In 2003, SPSS introduced Predictive Web Analytics, a new product that combined the Clementine data-mining program with its NetGenesis Web analysis software. With prices starting at $135,000, the new program made it possible for users to see patterns in Web data and design more effective, relevant Web sites. An automated predictive analytics application for marketers called PredictiveMarketing also debuted that year, and the company held an informational summit in Stockholm to promote the technology and the products.

Looking toward the future, SPSS had its eye on audio and video mining as a new niche. As Noonan explained in the September 22, 2003, issue of the Chicago Tribune, "Market research firms are especially interested in video mining. When you get feedback from focus groups, it is data and text, but if you could add in the body language, what their eyes do, that adds a lot to what's not said." The company had several products in the pipeline, but it also faced financial and legal challenges. While sales remained good, earnings declined. Moreover, allegations heard in U.S. District Court that the company had deceived stockholders by issuing misleading financial information, caused SPSS stock prices to slip, and a late filing with the Securities Exchange Commission raised some red flags at NASDAQ. Nevertheless, management remained optimistic about restoring earnings and stockholder confidence to prior levels, given, in particular, new leadership in the sales department and new markets for predictive analytics.

Principal Subsidiaries

SPSS UK Ltd.; SPSS GmbH Software (Germany); SPSS Schweiz AG (Switzerland); SPSS France SA; SPSS Argentina SA; SPSS Finland Oy; SPSS Hong Kong Ltd.; SPSS Mexico SA de CV; SPSS Japan Inc.

Principal Competitors

Cognos Inc.; Computer Associates International Inc.; IBM Corporation; Microsoft Corporation; Oracle Corporation; People-Soft Inc.; SAS Institute Inc.; Siebel Systems Inc.