IBM has announced its plans to acquire publicly-held Canadian BI vendor Cognos for $5bn, subject to Cognos shareholder and regulatory approvals.
The acquisition comes a month after SAP’s acquisition of Business Objects for $6.8bn and Oracle’s purchase of Hyperion solutions in March for $3.3bn, and holds strong implications for the BI market, widening the gap between Oracle, SAP and IBM and the other BI providers. Cognos was also the last large publicly held independent BI provider.
Andreas Bitterer, research vice-president at analyst Gartner, said there is now a very noticeable gap between Oracle, SAP, IBM and other BI providers.
The announcement comes as a surprise from IBM’s perspective because of its history of staying out of applications and focussing on middleware, Bitterer said. “But given the acquisitions around them, IBM could not just sit and wait,” he added.
The vendors fit well together in the BI space, with the only overlap occurring in data and integration products, which does not create a problem because it is an area where Cognos is relatively weak, Bitterer said.
“This is the end of the BI market as we know it,” Bitterer said. “SAS is the biggest independent out there but it is private so it is not so likely to be acquired,” he added. Although relations between SAS and Teradata are forming an “interesting alliance” that could indicate more is going on there, Bitterer added.
However Neil Macehiter, of analyst Macehiter Ward-Dutton, said “the BI product is not an application so it does fit with the IBM strategy; it being on the cusp of business applications and infrastructure”.
The acquisition supports IBM’s strategy of Information on Demand, announced February last year, which intends to combine IBM’s strength in ECM with business consulting services to increase the value of stored information.
Steve Mills, IBM senior vice president of software, said the shift in the market to endorsing business analysis and performance management software from historically centring on data warehousing, created a business need for IBM to “get out in front” in the performance management market.
Customers now want end-to-end capabilities that deal with heterogeneous data in real time, to cope with the increasing amounts of data, and the acquisition of Cognos gives IBM these capabilities, Mills explained.
Cognos president Rob Ashe said Cognos had not been for sale when the bid began, and actually “felt great” with the opportunities that lay ahead for Cognos because of the many acquisitions occurring in the BI market. However, after IBM had discussed prospects, it was decided the acquisition was too good an opportunity to pass up, Ashe said.
IBM acquiring Cognos will “accelerate more ability than any other partnership”, such as in both vendors’ global networks, Ashe added.
The vendors fit well together because they have taken their portfolios down similar routes, have a complimentary culture and a “shared vision,” Mills said.
Cognos’ capabilities will match IBM’s other middleware technology, creating a “strong synergistic effect,” and a strong return to stakeholders, added Mills. Cognos delivers on a common, open-standards-based SOA platform and this is complimentary to IBM’s open approach to software, added the firm.
Also, Cognos and IBM are similar, “having both been on the side of acquisitions for a long time,” Ashe pointed out. Cognos recently acquired Applix for $339 million and according to a report, Cognos marks the 23rd acquisition in support of IBM’s global Information on Demand strategy.
There is “virtually no product overlap” between the two companies, and this will “really allow us to focus on innovation,” Ashe said. This contrasts with SAP’s purchase of Business Objects, which caused SAP to have six overlapping planning applications.
The only overlap between the vendors occurs in their data and integration products, which does not create a problem because it is an area where Cognos is relatively weak, Bitterer said. “IBM has a history of acquiring vendors and doing a decent job over time,” added Machiter.
“All they are missing now is an automated enterprise search and discovery solution,” said Mike Davies, Ovum senior analyst.
“This is the end of the BI market as we know it,” Gartner's Bitterer said. “SAS is the biggest independent out there but it is private so it is not so likely to be acquired,” he added.
Although Bitterer did point out that relations between SAS and Teradata are forming an “interesting alliance” that could indicate more is going on there. MicroStrategy is unlikely to be acquired because of its “tricky” ownership structure with Michael Saylor owning 50 percent, Bitterer added.
The biggest challenge the acquisition throws up is what it means for IBM’s existing partners, such as Business Objects, analyst Macehiter said. But IBM is likely to show lots of “due diligence upfront” with the experience they have making acquisitions, said Machiter. The move has been in the pipeline for a long time but has been accelarted by SAP’s acquisition, he added.
