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IHS Acquires Dyadem

On April 27th, IHS acquired Dyadem as part of its strategy to expand its environment, health, and safety (EHS) and sustainability portfolio. Although IHS did not release any data on the financial details of the acquisition or Dyadem's recent revenue numbers, we do know that Dyadem and its 100 or so employees will bring capabilities in operational risk management, particularly with respect to product design, product quality, and manufacturing. (Dyadem is headquartered in Toronto; its placement on PROFIT Magazine's list of Canada's fastest growing companies indicates Dyadem grew 345% over the five years leading up to 2010, and Branham 300 estimates Dyadem's revenue as 19.7M in 2010).

At first glance, the acquisition looks similar to IHS' September 2010 acquisition of Syntex (Atrion was also acquired in the same timeframe), but the majority of Syntex's success is from incident management, while the majority of Dyadem's revenue is from enterprise risk assessment (for several categories of stakeholders), including regulatory compliance, quality, electronic management of change (MOC), and the ability to create a risk register or risk log.

We can also repeat the analysis we made after the September acquisitions:

Although we expect many smaller niche vendors to continue to do well here for some time, we believe the more EHS issues and concerns (such as operational risk, product safety, and compliance) become elevated and tied into reputation, risk, and sustainability, the more scrutiny IT investments will get and the higher expectations will be for those investments to support company-wide priorities.

Lowering Risk for Manufacturers

For this category of IT investment (EHS and sustainability), there's a significant amount of attention paid to lowering risk for the buyer, whether it's about compliance risk, brand and reputation risk, or even risk in delivering a successful IT implementation. We talk quite a bit about increasing confidence -- confidence that a manufacturer is in compliance and is lowering risk when possible through IT. It's critically important that vendors in this market be able to demonstrate their ability to manage risk.

IHS' Dyadem acquisition makes an even stronger connection to the increasing concerns manufacturers have over risk management. It's not that manufacturers have become more risk adverse or more paranoid; it's that managing global operations, extended supply chains, and complex product development teams have naturally added risk. There is some overlap of IHS and Dyadem customers, where Dyadem's risk register ties into IHS's EHS and product stewardship offerings to facilitate risk control plans and the appropriate preventative or corrective actions. Because of this focus on risk, we expect IHS to develop more partnerships and work more closely with those service providers that have expertise with manufacturing clients relating financial and operational risk.

Next Steps for IHS - Pulling It All Together

Given the fact that IHS has mademore than 40 acquisitions since 2000, we also expect the company to continue down that path. We'd like to see IHS apply some of the best practices we've seen from other vendors that have grown through acquisition over the years -- create an integration timeline, make it easy to distinguish different products and identify best use scenarios (by industry, process, or capability) where there's overlapping functionality, provide a gradual transition path for products that will be decommissioned, and work toward a single platform.

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