Today breaking news is that IBM announced a definitive agreement to acquire Cognos. Just last week I called IBM stubborn for not addressing BI seriously at its annual IBM Software Group analyst summit. Well for a good reason, IBM was avoiding the BI discussion as they have been working rigorously on the details on this announcement. This finishes the years of rumors and the fall of Business Objects, Cognos and Hyperion into the hands of large enterprise software providers. Making the announcement today is strategically an interesting time as Oracle launches its annual OpenWorld conference and highlights its progress with the acquisition of Hyperion. IBM is smart to act now or be left out of the strategically important BI and Performance Management market.
IBM plans to add Cognos to its Information Management division, which is a precarious position to place the company as this group is not well versed on the BI market, as I have previously written. Considering that it has placed brands like Tivoli, Rational, Lotus and WebSphere at the same level, IBM is spending a lot of money to place Cognos under Information Management, which is focused on middleware technology and infrastructure. There are some great synergies with Cognos BI and IBM Information Management group where they have a great place to have deeper integration but will impact Cognos current agreement with licensing competitive Informatica data integration technology.
The challenge will be for IBM to not diffuse the momentum Cognos has had with applications selling into finance and operational line-of-business areas. It has a much broader reach than IBM has had with Information Management, so it might need to rethink this structure as the battle for BI requires full attention to the details required by buyers.
IBM, who also reviewed the opportunity to acquire Business Objects, is now making its move with Cognos. SAP, which recognized the value and potential of Business Objects, says it will make its planned acquisition a subsidiary to ensure that it gets the opportunity to maximize impact in the market. As I have pointed out, this will be a rocky year for organizations as they work through the transition to new ownership over their software investments. Oracle, which made Hyperion part of its middleware technology division, is still working through the challenges in managing finance, operations and IT focused efforts in one division. All of these activities have impacted existing customers of these organizations and Cognos will be no different. This move by IBM will present challenges for Cognos customers, who are used to a certain type of service and support — support that has advanced Cognos' position in the market over the last decade. This will definitely have impact to the market in 2008.
IBM who obviously could not miss out on the software and services opportunity has made a reversal on their position about buying into the BI market. They will clearly go through a large learning curve to understand the full potential and nuisance of this technology segment. As well the applications that Cognos delivers for performance management will have some new twists for IBM who has historically refused they will get into the applications business like Infor, Oracle and SAP. The Cognos organization will now have to drive the value of their brand through a much larger organization like IBM which will have its challenges as other acquired companies will attest. My predictions for IBM is that they will in 2008 see they will need to re-organize their planned acquisition of Cognos and placement under Information Management into a separate brand or into a new unified brand that highlights Cognos and not buries it into the existing product portfolio. If you are a customer of Cognos, you better start voicing your opinion to IBM to ensure you are comfortable with the end result of IBM activities.
What’s next for BI market? Well, we have an interesting situation in which HP and Teradata now have to closely look at the other public traded BI provider MicroStrategy and data integration provider Informatica to determine if they want to play at the similar portfolio level like the larger enterprise software providers. Both HP and Teradata have deep partnering experience with these organizations. For now, IBM will be joining Infor, Microsoft, Oracle and SAP in the enterprise software battle for mind share and market share in BI and Performance Management. Let’s see how this one plays out for you and for other vendors that are quietly up for sale behind the scenes.
Let me know your thoughts.
