IBM as a company is far bigger than its closest rivals Microsoft, Oracle and SAP in terms of total revenue (although Microsoft is bigger in terms of software sales alone). The company has for a number of years successfully followed a strategy of growth by acquisition to offer a wide range of products and services including hardware, infrastructure, software, consultancy, system integration and outsourcing services. Its business intelligence (BI) offerings are based around its DB2 database with data warehousing and data mining for analysis. It also offers data quality and integration through its acquisitions of Ascential, an extract, transform and load (ETL) leader and, more recently, DataMirror, a data change capture and integration niche vendor. However, while Microsoft closed the gaping hole in its front-end BI functionality and analysis with the acquisition of ProClarity, IBM continued to offer its partner Cognos’s products in that area. That strategy clearly could no longer be maintained following the Oracle-Hyperion and SAP-Business Objects moves.
Cognos recently unified its product architecture to make the most of service-oriented architecture (SOA) and to build scalability and seamless integration across its product range. The company had been through the painful phase of customer migrations to the newly architected Cognos 8, and reported good financial results in its last quarter. The long-term strategy was to re-brand Cognos as a performance management company with a string of product releases for financial consolidation and vertical market performance management solutions. The acquisition of Celequest earlier this year provided Cognos with an easy-to-implement dashboard and a BI appliance, Cognos Now!, that is targeted at the mid-market. Furthermore, the Applix buy added the highly versatile TM1 in-memory analytics engine to its product portfolio and capabilities, but left the company with another integration requirement. That will now be left to IBM to do as part of the bigger integration picture.
IBM and Cognos make a good pair; the two companies have a long history of working together and have a close working culture. This bodes well for the organizational integration of Cognos with IBM. The combination of Cognos’s BI and IBM’s professional services will enable IBM to offer BI deployment services on a truly global scale. Very few vendors are positioned to compete with IBM on this front without the help of partners.
As far as the products go, the acquisition is highly complementary and will enable IBM to add to its extensive information management stack. In particular, there may be a push towards analytical master data management (MDM), which is one of the flavors of the moment, with IBM’s Multiform MDM positioned well to complement Cognos BI. Cognos is a much better fit with IBM than Business Objects is with SAP (with fewer overlapping products). The fit is also a lot better than Hyperion and Oracle with Oracle owning multiple solutions in this area. However, Oracle’s acquisition of Hyperion brought it around 12,000 customers, only a third of whom were existing Oracle customers. Cognos brings with it around 25,000 customers, and although it is not clear how many are also IBM customers, the number is likely to be high.
This spate of acquisitions leaves SAS as the biggest remaining independent BI vendor of its size. It will no doubt benefit from this distinction when customers opt for SAS products to avoid being locked into the big four’s stacks. On the other hand, SAS could find it hard to compete with the incumbent enterprise application vendors such as SAP and Oracle, which will fiercely market their embedded BI-ware. SAS could be a takeover target too, but it is a huge privately owned company with an extensive range of BI and performance management products. Not many companies could afford to buy SAS, and it could start to exercise its own mighty purchasing power to extend its range of products.
Customers, in the meantime, will be left with fewer choices and forced to make more investment in the dominant players’ technology. On the positive side, once the solutions are integrated, customers are likely to see more scalability and easier integration capabilities with other products from the big four vendors. The BI market has proven to be highly versatile in the past, and new and innovative vendors are bound to come up with disruptive solutions soon.
Source: OpinionWire by Butler Group (www.butlergroup.com)
