IHS Shows Where STM Value Goes

Triggered by Michael Nielsen’s blog post about disruption of scientific publishing and value migration away from publishing companies, in this post I will briefly summarize acquisition activities of IHS, Inc. (IHS), one of the leading providers of science, technical and medical (STM) information, to examine whether these activities substantiate a broader STM market trend also described by research firm Outsell as “using technology to move up the value chain” (Bousfield & Outsell, Inc. 2009).

IHS provides information and services such as decision-making support for customers in four areas: energy, product lifecycle, security, and environment. IHS achieved $844 million in revenue in 2008 which equates to 3.6 per cent market share of the primary segment STM. With 22.6 per cent in 2008 IHS had the strongest total growth among the top ten companies of the segment. (Outsell, Inc. 2010).

“The data is obtained from public sources, third parties, and IHS’ own proprietary databases, and are then combined with proprietary and third-party technology to create graphical user interfaces and search and navigation tools. Year-to-date 2009 organic revenue growth was 4% overall and 10% for the subscription-based portion of the business. Acquisitions added a further 18%.“ (Bousfield & Outsell, Inc. 2009).

Early embracing the Internet IHS acquired at least 37 companies since 2004. According to the assumed trend mentioned above most of these companies are rather focused on technology than rest upon a classical (paid) content business model.

In 2005 IHS acquired the content and data services business of I2 Technologies Inc., a developer of client/server-based decision support software. John S. Herold, which provides in-depth analyses and key financial and operational data on more than 400 global oil and gas companies, was acquired by IHS in 2007. Herold’s annual product license agreements provide clients with enterprise-, division- or location-wide access to herold.com online research, databases and tools as well as onsite and webcast training, and analyst presentations.

Furthermore in 2007 IHS announced acquisitions of Jane’s Information Group (Jane’s), EnvironMax, Exploration Data Services (EDS) and The McCloskey Group.

Jane’s is a leading provider of information to the defence industry and governments while EnvironMax provides client/server and web based Environmental Management Information System (EMIS) software. EDS, specialized in mapping, exploration scanning, bookmarking and metadata capture of technical reports and data, is the major supplier of open file (public domain) oil & gas exploration data for Western Australia basins and the Timor Sea area. The acquisition of EDS complements to purchases of Geological Data Services and Geological Consulting Services IHS made earlier in 2007 (IHS, Inc. 2007a). The McCloskey Group, world leaders in coal information, keeps its customers informed via eight print and online publications, and annual conferences and consulting offerings (IHS, Inc. 2007b).

IHS continued its pushing strategy in 2008 with the acquisition of two environmental information companies, Dolphin Software, Inc. and Environmental Software Providers (ESP). Dolphin provides Material Safety Data Sheet (MSDS) management, chemical inventory management and environmental reporting services. ESP’s services include greenhouse gas management, air, water, and waste management and internal and regulatory compliance assurance.

Later in 2008 IHS acquired a 50 per cent stake in Lloyd’s Register-Fairplay Ltd., a maritime information company, and JFA International, a provider of an analysis and decision support tool, which supports oil industry business development, planning, portfolio management and communication (IHS, Inc. 2008).

Reservoir Visualization Inc., a provider of exploration and reservoir management consulting services, was acquired in July 2008 and IHS completed the year by acquiring Documental Solutions, Divestco USA Inc. and Global Insight.

Documental Solutions provides the leading market analysis tool for strategic planners, business developers and analysts within the commercial defence industry. Its assets will be integrated with and managed through Jane’s Information Group. Divestco is a developer of geological data and application software, and Global Insight offers comprehensive financial, and political coverage and, according to IHS chairman and chief executive officer Jerre Stead, is recognized as the most consistently accurate economic forecasting company in the world.

In 2009 IHS acquired the remaining 49.9 percent of Lloyd’s Register-Fairplay whose information products and services are unique to the shipping industry. After about one year without acquisition activities IHS in September 2009 bought LogTech, which caters for the oil and gas industry with a comprehensive suite of services, data and software designed to manage exploration risk and optimize production.

In the same month IHS reported that it had acquired Environmental Support Solutions, a leading provider of Environmental, Health and Safety (EHS) and Crisis Management sustainability software. After IHS also bought Prómiere, a bundling of service and tool offerings for management decisions in the electronics industry, IHS’ latest acquisition so far was directed at Emerging Energy Research (EER) in February 2010. EER offers clients advisory and consulting services as well as market studies about emerging technologies.

In some areas IHS also responded to the increasing demand for more open ways to purchase and use data. “Data is becoming an enterprise solution that needs to be vetted through a series of in-house and third party tools to get maximum benefit” said Tim Crago, Valtus vice president and general manager. IHS and Valtus are cooperating to distribute Valtus Orthophotos while realigning to an open access distribution model.

Summarizing it can be said that the majority of companies acquired by IHS in the last five years are technology companies with competencies in software, management and workflow solutions. Significant investments also have been made in ‘raw’ data and data services as well as consulting. On the other hand IHS’ motivation to invest in ‘long’ text content was very limited.

IHS’ M&A strategy and its success underpin the assumption of a trend toward a data and service centric STM information industry. Nielsen’s claim that value is migrating away from media and publishing companies toward technology companies, as well as Outsell’s assertion that publishers are moving up the value chain by investing in technology is widely supported by IHS’ activities.

Considering also the rising significance of open APIs and public domain data, these trends are unlikely to be reversed, and value will be increasingly generated by mining, processing, filtering, aggregating and enriching of abundant data. Revenues will be derived from dynamic and highly customised information subscription services rather than from classical paid content models (Brown & Boulderstone 2008).

Whether these trends apply only for data intensive, fact focused and time sensitive sectors such as STM, or eventually, with ongoing disruption of paid content and advertisement business models, will affect all publishers remains to be seen.

References:

Bousfield, D. & Outsell, Inc., 2009. Scientific, Technical & Medical Information: 2009 Market Forecast and Trends Report, Outsell, Inc.

Brown, D. & Boulderstone, R., 2008. The Impact of Electronic Publishing : The Future for Publishers and Librarians, Müchen: K.G. Saur. Available at: http://books.google.de/books?hl=de&lr=&id=lpr0EV0JvzwC&oi=fnd&pg=PR15&dq=%22The+Impact+of+Electronic+Publishing+%22+autor:David+autor:J+autor:Brown&ots=0_KAZ1MN3N&sig=jg_RdLEHMo2wjcYDH-Lz1vTIrOk#v=onepage&q=&f=false.

IHS, Inc., 2007. IHS Acquires Exploration Data Services Assets. Available at: http://www.ihs.com/News/Press-Releases/2007/IHSacquiresEDS.htm [Accessed March 7, 2010].

IHS, Inc., 2008. IHS Acquires JFA International, an Energy Industry Services Firm. Available at: http://www.ihs.com/News/Press-Releases/2008/IHSJFA.htm [Accessed March 7, 2010].

IHS, Inc., 2007. IHS Online Pressroom: IHS Acquires McCloskey Group, a Leading Coal Markets Research Firm. Available at: http://press.ihs.com/article_display.cfm?article_id=4118 [Accessed March 7, 2010].

Outsell, Inc., 2010. Outsell Inc. :: Company Profile – IHS, Inc. Available at: https://www.outsellinc.com/data/companies/profile/4987 [Accessed March 7, 2010].

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