IBM Cognos buy unlikely to impact market

IBM's planned purchase of BI vendor Cognos is unlikely to have major impact on the market says analyst

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By  Mark Sutton Published  November 22, 2007

IBM announced its intention to purchase business intelligence vendor Cognos last week, which following on from SAP's announcement that it will buy Business Objects, and Oracle's acquisition of Hyperion, leaves more than half of the business intelligence (BI) market in the hands of the big name vendors. itp.net spoke to Andreas Bitterer, VP Research at Gartner on the implications for the market and for IBM's future strategy.

Bitterer said: "The IBM/Cognos deal is an expected move in the ongoing consolidation of the BI software market. IBM could not afford to stay without a BI story when every other mega-vendor has started to acquire BI technology."

Little disruption is expected for customers of either Cognos or rival Business Objects (BO), according to Bitterer, as product lines won't change drastically in the near future, and the technologies have been acquired to round out vendor portfolios, rather than to shelve them.

The analyst said that the acquisitions may create some opportunities for the smaller independent BI vendors, but only if they are able to position themselves carefully.

"The potential has always been there, but limited marketing and reach for small vendors have often limited their success. In order to be heard over the loud BI noise from the market gorillas, smaller BI companies need to be very smart in positioning themselves and generate visibility in a crowded market," he said.

The strategy of keeping Cognos and BO as near-independent businesses would also enable them to remain responsive to mid-market customers, although Bitterer noted that any long-term impact will be hard to predict, especially as both deals have yet to close.

One interesting aspect of the deals is that IBM already had a close working relationship with BO, including product bundling and reselling of BO solutions, with a large number of consulting staff with BO expertise.

On top of that, on 19th October, after SAP had made its move for BO, IBM announced a strategic partnership with BO which involved joint development and distribution of integrated data warehousing and business intelligence solutions, and further product bundling with DB2 and DB2 warehouse products.

Although the long-term prospects for this relationship are unclear, with Cognos solutions possibly replacing BO solutions that are bundled with Rational application development products, Bitterer said that IBM would continue to work with BO from a technical perspective, and should be able to take any changes in its stride.

"IBM will continue to partner with everybody from a services perspective. IBM Global Services has many people that are trained on BO, are implementing BO, etc. This will generate some friction between IBM services and software sales, which will be incented to sell Cognos, but IBM has dealt with those internal conflicts forever," he said.

There is also the question of whether IBM had any choice but to go with Cognos. Both Oracle, in the second half of 2006, and IBM as late as the start of October this year were reported to be in discussions with BO. Oracle was unable to reach an agreement by end of 2006, eventually going for Hyperion instead, but IBM and SAP were both still speaking to BO throughout the summer. There is speculation that BO eventually chose SAP because of their commitment to operating BO as an independent unit, which would go down better with French financial regulators who would have to approve the deal.

This left IBM with little real choice for a BI acquisition, said Bitterer: "At the point of the announcement, IBM really didn't have a lot of options left that would be considered a good fit for the company. Any of the remaining BI vendors left for grabs are either privately held and as such not so easily available, or rather limited in their scope or size for someone like IBM, which had to enter with a bang rather than a blip."

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