Cognos Buys More Pipe for IBM

 
 
By Darryl K. Taft  |  Posted 2007-11-12 Email Print this article Print
 
 
 
 
 
 
 

With Cognos, IBM now is the conduit that begins with DB2 in the database, courses through Ascential at the transformation phase and ends with Cognos' reporting.

Analysts and industry watchers seem to have green lighted IBMs proposed deal to acquire Cognos for $5 billion, except for a few caveats about the consolidating market, customer management and technology agnosticism.

IBM announced plans to acquire Cognos, a leading business intelligence software maker for $5 billion on Nov. 12, further consolidating the BI market following SAPs acquisition of Business Objects last month and Oracles acquisition of Hyperion Solutions last March.
Guy Creese, an analyst with Burton Group, said IBMs acquisition of Cognos fits in with IBMs information management initiative and "they get a company with $1 billion in revenue."
Creese said that by gaining access to the Cognos customer base, IBM also gains "entree into companies that have already committed to BI. And with IBM using information as a service, they want to own that whole conduit." The conduit or "pipe" Creese is talking about is the data pipeline that runs from the database, which IBM owns through DB2, to the transformation phase, which IBM owns through Ascential, to the reporting, which IBM will own through Cognos. "So the idea is when you go to IBM [or Oracle or Microsoft] you buy a piece of information infrastructure that theyve connected all together," Creese said. "You just add the data. You historically had to go to three different vendors for this, but that has changed over time."
Meanwhile, said Creese, "the part theyre not talking about is that the dance floor is quickly getting empty. After Cognos, SAS is the only big BI player left, but they are privately held. IBM realized if they didnt buy Cognos they wouldnt have a whole lot of options." Boris Evelson, an analyst with Forrester, said: "Now that IBM is acquiring Cognos, will HP follow the same fate and acquire smaller Information Builders, Microstrategy or Actuate? Theres also still SAS that would give HP a complete BI stack, but as we know, acquiring the worlds largest privately held company can be a financial and cultural fit nightmare." Evelson said he believes both IBMs acquisition of Cognos and SAPs acquisition of Business Objects are defensive moves, "since both companies have been telling us for years that they prefer to grow their BI portfolios organically, with smaller tuck-in acquisition. "However, organic growth is not happening fast enough, and giving in to sideway pressures from Oracle [with two top of the line BI products from Siebel and Hyperion] and upward pressures from Microsoft [after the Proclarity acquisition and with significant Performance Point market momentum], IBM and SAP had no choice but to react." Steve Mills, IBM senior vice president and general manager of the IBM Software Group, said IBM does not do "defensive" acquisitions and that the company has had a long relationship with Cognos and decided to acquire the company because of changing market forces. Creese said a look at Cognos financial statement shows that "they make more in support and service than licensing, which is worrisome because they make more in maintenance of existing customers as opposed to getting new customers." He said IBM, as a services company, likes the services aspect of the deal, "but I fear they may not go after new business aggressively." Want your BI tools delivering the right data? Then register for Ziff Davis Enterprises Nov. 14 Virtual Tradeshow on business intelligence. During a press conference on the deal, Rob Ashe, president and CEO of Cognos, said, "on the business and customer side, we couldnt be more excited about how IBM plans to approach this marketplace and thats all about growth ... Well be able to do a lot more than we could on our own given IBMs global reach." In addition, Ashe said the deal provides leverage for Cognos customers because there is practically no product overlap. That also enables Cognos to "focus on innovation, not having to deal with product overlap or rationalization." Creese said Cognos customers gain from "knowing how the game is going to be played out." He said when SAP acquired Business Objects, observers were wondering what would happen next. Dana Gardner, an analyst at InterArbor Solutions, said: "The thought on the street was that Cognos had to get bought soon, given the business intelligence consolidation land grab of late." Page 2: Cognos Buys More Pipe for IBM



 
 
 
 
Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.
 
 
 
 
 
 
 

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