Related Topics:
			Business Research: ERP, Finance Vendor Research: A3, AcornSystems, Adaptive Planning, Alight, Applix, Business Objects, Business Objects – ALG Software, Cartesis, Clarity Systems, Coda, Cognos, Epicor, FRx Software, Hyperion, IFS, Infor – Extensity/Systems Union, Intacct, KCI Computing, Lawson, Longview Solutions, Microsoft, Mincom, Oracle, OutlookSoft, PrecisionPoint Software, PROPHIX, Sage, SAP
			Printer friendly version Email this article Send feedback to editor

Summary
Cognos will acquire Applix in a transaction expected to be completed by the end of this year. Ventana Research thinks the addition will enable Cognos to strengthen its product line in financial performance management (FPM). We think the company will be in a position to offer finance professionals a “finance appliance” that marries Cognos’ finance applications with Applix’s TM1, a memory-resident, multidimensional database. This combination could give finance users a dedicated server capable of quickly performing analytic, optimization and reporting tasks related to planning, budgeting, consolidation and closing, and enable operations-related analysis in the areas of pricing optimization and customer profitability.

Assessment
Cognos will acquire Applix for approximately $300 million (about five times trailing revenue). Applix is best known for TM1, its in-memory, multidimensional database used for planning, performance management and analysis. (Trivia buffs will recall that a decade ago Hyperion Software offered its applications on an earlier version of TM1 before its merger with Arbor Software in 1998, after which it switched to Essbase.) Applix counts approximately 3,000 customers worldwide in midsize and large organizations and has experienced sales and professional services organizations focused on performance management.

Cognos’ objective with the purchase is to advance its position in the financial performance management market. It began to address this market in earnest when it acquired Adaytum (now Cognos Planning) in 2003 and further strengthened its FPM applications by buying Frango in 2004. Cognos sees TM1 serving as an integrated multidimensional data source that finance organizations can use as a single data and analytics platform for planning and consolidation activities, as well as for operational intelligence applications. The value of an in-memory, multidimensional database is its ability to handle quickly complex, dynamic analytics such as rapidly understanding the implications of daily shifts in prices of raw materials, supporting product mix optimization under multiple scenarios and spotting customer churn patterns. It also can support an array of performance management analyses, reporting tools and dashboards. And it facilitates administrative functions such as generating forward- and backward-looking pro-forma analysis before and after corporate reorganizations. In addition to the products, Cognos will be picking up a customer base composed largely of midsize companies and a sales and marketing team focused on finance departments. 

We see the acquisition ultimately adding an important option for companies rolling out the Cognos Planning and/or Controller products: the ability to run these applications on a dedicated, high-performance financial database on which they can perform analytic, performance management and reporting processes related to planning, consolidation and financial management. Although ideally the “best practice” would be for a corporation to have a single or limited set of infrastructure elements, the reality is that many finance organizations prefer autonomy. In this respect, the addition of a TM1 option for customers may prove attractive to those departments.

Market Impact
The FPM market has been subject to rapid consolidation over the past several years and particularly in the last 12 months. Business Objects, Oracle and SAP all have sought to strengthen their product offerings through acquisitions in this key business area. In our view, this shift in the competitive landscape to include larger companies that can invest heavily in promoting their financial applications poses a challenge to Cognos’ strategy of increasing revenues by focusing on this market. But we think the acquisition of Applix gives Cognos a potentially important point of differentiation and therefore a way to sustain its competitiveness as bigger players increase their focus on FPM.

Recommendation
The combination of Applix and Cognos should have no meaningful impact on existing users of Cognos Planning or Consolidation, and we see no reason why it should alter any company’s plan to purchase or roll out these applications. If the acquisition is completed, existing users of Applix’s software are likely to see TM1 supported and enhanced because it will be a core part of Cognos’ product line. For companies using Applix’s planning and consolidation applications we expect Cognos to offer ongoing support for their existing software, but we think it is realistic to assume that this will not be a priority. Ventana Research recommends that users of Planning and Consolidation monitor Cognos’ progress in integrating TM1 to determine if their organization would benefit from it.