Big blue acquires Cognos

The announcement by IBM Corp. to acquire Cognos Inc. was made amid assurances the business intelligence vendor’s customer base will be little affected, given distinct portfolios.

The Armonk, N.Y.-based company will pay US$5 billion for the Ottawa-based company and the deal is expected to close in the first quarter of 2008, subject to shareholder and regulatory approvals.

Drivers behind the acquisition included the fact that customers would have “virtually no product overlap to deal with” and hence little portfolio rationalization, said Cognos president and CEO, Rob Ashe.

Besides that advantage, Ashe said both companies have complementary cultures around their customer base, innovation and people, making the union a “natural fit.”

IBM’s senior vice-president of software, Steve Mills, reiterated the partnership, calling it an “obvious move” and said Cognos’ status as a platform-agnostic independent business intelligence vendor won’t change either. “Strategically, architecturally, both companies have been on the same track for a long time and that will continue,” he said.

The Cognos product brand will continue to exist, said Mills, given its familiarity to the Cognos customer base.

Regarding the issue of integration between front-end Cognos tools and IBM’s Information on Demand software, Mills dismissed the idea that users will encounter migration issues, saying the technologies work well together, and in the future, the companies will strive to further better that “fit and finish.”

“That doesn’t require wiring down Cognos to any IBM technology. We don’t take away from customers what they already have,” he said, adding IBM will continue to follow a federated model with its technology.

The majority of Cognos technologies were built on a set of open standards with a lot of products well integrated with WebSphere and with other IBM products in general said Ray Wang, principal analyst with Cambridge, Mass.-based Forrester Research.

“It’s been going on for quite some time,” he said, adding for that reason, he predicted Cognos would be a primary choice.

IBM’s partnerships with other BI vendors will proceed as usual, said Mills, adding the company is looking to preserve those connections.

It’s likely IBM will continue to operate from a services integration standpoint to meet customer needs post-Cognos acquisition, despite having had partnerships with other business intelligence vendors, said Joel Martin, vice-president of enterprise software research with Toronto-based IDC Canada.

If a customer has a non-Cognos BI solution, said Martin, “IBM will continue to support that but it is also in a good position to bring in complementary analytics and business performance management tools from the Cognos acquisition that the company may not already have installed.”

But Martin added this situation might still create a little friction and competition.

The acquisition is important to users who are responding to a “shift toward a real-time prospective approach to business analysis, business optimization, decision making, performance management” and are looking for comprehensive technologies to deal with that, said IBM’s Mills.

The acquisition, adds IDC’s Martin, “rounds out IBMs’ role as an integrator and trusted advisor to companies.”

According to Ashe, Cognos, a long-time partner to IBM, “was not for sale” prior to this process, nor did it have the urge to sell itself given the consolidation of other BI vendors.

“In fact, we saw this as a great opportunity because of the dislocation in the marketplace,” said Ashe.

Oracle bought Hyperion earlier this year, while SAP bought Business Objects, leaving SAS Institute as the one remaining large vendor in the space.

The acquisition might be filling a “deficiency” in IBM’s portfolio, however, Cognos won’t bring the much-sought analytics and vertical-specific applications that drive business transformation said Gaurav Verma, global product marketing manager for Cary, NC.-based SAS.

SAS’s position hasn’t changed, nor is it concerned, amid the recent consolidations in the market, he added.

In fact, this is good news for vendors like SAS as these acquisitions validate the importance of the marketplace, said SAS’s vice-president of marketing, Cameron Dow.

But IDC’s Martin disagrees that Cognos’ offerings are lacking, as is evident by the company’s roadmap, but “more importantly, it made a decision to go out and really focus on performance management aspects, which is what the CEOs and CFOs are really responding to these days.”

At any rate, SAS is “not really in play for an acquisition” anyway given that it is privately held, said Martin. But, he said, it’s in a “good spot” because it’s not beholden to any one database or SOA application.

“That independence is going to be their differentiating factor,” said Martin.

Jake Freivald, vice-president of corporate marketing with New York-based Information Builders, echoed the same, saying that acquired large BI vendors end up belonging to “someone’s stack.”

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