The $5 billion deal marks ongoing consolidation in the Tier One business intelligence market; a "significant change" in IBM's direction, one analyst notes.
Posted Nov 12, 2007
IBM has agreed to acquire longtime business partner and business intelligence (BI) software pioneer Cognos for $5 billion in cash, in a deal that is expected to close in Q1 2008. Cognos is the third major BI vendor to be acquired this year, following Oracle's $3.3 billion buyout of Hyperion in February and SAP's October acquisition of Business Objects for $6.8 billion. These deals leave MicroStrategy and SAS as the last remaining standalone Tier One BI players.
IBM plans to fold Cognos, which has 4,000 employees and 25,000 customers, into the IBM Information Management Software division, where current Cognos President and CEO Rob Ashe will report to IBM GM Ambuj Goyal.
IBM's announcement came on the first day of Oracle OpenWorld, which may be intentional, according to Claudia Imhoff, an analyst with Intelligent Solutions. "I doubt it was a coincidence. Oracle got Hyperion, SAP got Business Objects, and IBM had to respond to these substantial purchases."
In the world of e-business, tit-for-tat acquisitions are nothing new, but IBM's acquisition of Cognos goes beyond the usual competitive posturing because it draws IBM into a virgin market for Big Blue: applications. "This is the first real application provider that IBM has purchased, and it does rock the boat," Imhoff says. "IBM has been an open and embracing partner with apps vendors, but that will change pretty substantially."
For its part, IBM didn't frame the Cognos acquisition as revolutionary in this way, classing it instead as a building block in IBM's Information On Demand strategy. But the deal certainly puts IBM into head-on competition with the world's two largest applications vendors, Oracle and SAP, rather than with the application infrastructure giants (BEA Systems and Hewlett-Packard) who are IBM's typical foils. On the other hand, IBM has long employed a very expansive definition of middleware, according to which applications such as BI are swallowed by infrastructure rather than continuing as standalone apps.
The key question is whether Information On Demand will extend beyond what IBM calls the "under the covers" aspects of BI and application infrastructure to assimilate front-and-center application categories such as CRM. IBM's promotional email alert for the Cognos acquisition noted that real-time access to information could help companies in "capturing new revenue opportunities, improving customer service, fighting crime, or avoiding disasters." The first two of these cited categories are traditionally considered part of the CRM vision, which implies a possible overlap between the back-office BI component of Information On Demand and front-office software. Given how IBM is blurring these previously discrete categories it is worth wondering if, on a long enough timeline, all apps will simply become infrastructure.
Whatever the long-term implications of IBM's foray into applications might be, the acquisition of Cognos doesn't necessarily shake up the CRM world today. Cognos had no particular CRM technology partners of note, and does not bring IBM any CRM-relevant technology beyond a basic capability in customer analytics. Intelligent Solutions' Imhoff notes most of the advanced customer analytics work is being done by SAS and Teradata, not Cognos.
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