Cognos Inc, of Ottawa, Canada, the software house with a patchy financial record over the past three years, has made a move towards improving its fiscal success. Cognos returned to modest mid-term profits of $756,000 in the six month period to the end of August against a loss last time of $831,000, but turnover was up only 2%. Since the middle of the last financial year the company has slimmed down its headcount by 15% and reduced operating expenses by 12%. The announcement of Axiant, a new graphical user interface-based development environment (CI No 2,268), under research for the past three years, at its Directions ’93 users conference in Orlando, Florida last week, was the pinnacle of a whole new market approach for the software house, in keeping with its vision of the future. Cognos’ new corporate structure now consists of four business units: Client/Server Tools, PowerHouse Products, Cognos/400 and Desktop Reporting Products.
End user support
Ron Zambonini, president and chief operating officer of Cognos sees this strategy as helping the company to focus on the specific needs of each market segment, In particular it sees the Client/Server Business Unit’s role as defining a new market for second generation application development and client-server tools through Axiant. Peter Klante, vice-president of the new unit said We are staking out the leadership position in the client-server marketplace. Cognos envisages companies of the future as requiring access to current, accurate information for them to be able to act in face of changing market conditions, with the processing of information shifting to distributed networks and end users participating increasingly in the analysis of data. Cognos wants to support the end user, while still enabling centralised management and control. Axiant should provide a clear path with a flexible and scalable architecture to enable the customers’ critical decision in the shift to client-server. This move to client-based development and Windows is going to squeeze Cognos’ profit margins and Cognos is aware that it has to compensate for this revenue loss. This time last year the company faced disappointing financial results and Mike Potter, Cognos’s chairman and chief executive put this down to progress being too slow in distribution channels. Cognos feels it has now developed a strong infrastructure and sales channels to match its already successful PowerHouse product base. With this end in mind Cognos will continue to emphasise direct sales, but at strategic accounts, which currently provide two-thirds of its revenue, while using an indirect approach through third party developers, resellers and value-added resellers, which provide a third of revenue.
By Abigail Waraker
When asked how Cognos sees itself surviving in a market with so many companies offering such similar products, Cognos said it felt that these indirect sales are the key to success of the future. Margins being low, sales volume must be increased in a more cost-effective way than through direct sales people targetting smaller accounts. Therefore Cognos is investing in value-added resellers. It currently has around 600 applications developed by independent software vendors, covering a full range of both generic and specialised business areas. Cognos intends that value-added resellers will play an integral part in the testing and perfecting of Axiant’s development environment. Key resellers are now being enrolled and current Cognos Partners are among Axiant’s beta test users. The value-added resellers in turn are putting a great deal of trust in the success of Cognos and Axiant. Cognos, however, feels that at this stage it has no real competition for Axiant and so believes that it can gain a market leadership position. Cognos hopes to reverse its current split of revenue so that around three-quarters comes from its resellers in the future as it sees this as one of the keys to competitive success in the future market. It believes the market will demand off-the-shelf products, a vision which is reflected in the company
‘s new structure. This shift is already beginning, and it hopes that the switch will maintain its company’s profit margins. It will be reorganising its licensing structure for Axiant by replacing run-time licences. Initially, resellers are getting the development version free in return for their contribution to development and testing, and will be required to pay Cognos a per-user fee on their finished applications.
Cognos/400
The fee per user will be charged for the added value that the user will receive, to make up for the loss from run-time licences. Cognos hopes that by the time Axiant is ready to ship next summer, its key customers will have their applications ready. Cognos is quick to emphasise the migration path possible from its existing PowerHouse tools to the new Axiant product and is therefore continuing to enhance the client-server version of PowerHouse 7, and sees an evolutionary migration path from this to Axiant. The majority of Cognos’ Unix market is client-server-based and Digital Equipment Corp VAX and Hewlett-Packard Co users are migrating to PowerHouse 7 now. Despite Cognos’ past emphasis on developing the Unix side of its PowerHouse business, and difficulties Cognos initially faced in breaking into the AS/400 market, it is committed to the AS/400, feeling that the IBM Corp mid-range computer is now mature. The Cognos/400 Business Unit is growing and represents 12% of the company’s total licence revenue. It has 1,000 licences worldwide on the AS/400, almost 40% of which are in the US, about 40% in Europe and the rest mainly in Canada. Axiant support for AS/400 will be available in the second phase of the roll-out in the third quarter of next year. Growth in the UK has been particularly successful. The UK subsidiary of Cognos is strong because of its successful third party sales channel, but the Cognos/400 business unit will continue to concentrate on direct sales because the IBM market is service-oriented.
