Update: IBM agrees to buy Cognos for $5B

IBM's acquisition of Cognos will be a blow to rival HP, which offers a business intelligence and data warehousing platform built using products from Cognos

IBM has agreed to buy business intelligence software vendor Cognos for around $5 billion in cash, in a bid to expand delivery of BI beyond the traditional user base.

The move follows a period of consolidation in the BI and performance management software market, where Oracle bought Hyperion, while Cartesis and ALG Software were snapped up by Business Objects, which is itself being swallowed by SAP. Cognos also bought the much smaller performance management software vendor Applix earlier this year.

The acquisition will especially be a blow to IBM rival Hewlett-Packard, which offers a business intelligence and data warehousing platform built using products from Cognos.

To some analysts, the move into BI applications marks a new strategy for IBM, which has long said it doesn't want to compete with partners in the application market.

"This is a change of direction for IBM," said David O'Connell, senior analyst at Nucleus Research in Wellesley, Mass.

IBM hedged, though: "Business intelligence and performance management are not stand-alone applications," it said in a statement.

"Our intent is to be careful not to compete with our ecosystem," IBM insisted, even though it works with SAP and Oracle, and both are now present in the BI market.

Cognos will be the 23rd company IBM has bought in pursuit of its "information on demand" strategy, launched in February 2006, IBM said.

Although the deal looks great on paper, O'Connell said, "it also looks like IBM is buying new customers." Cognos has more than 25,000 customers, although not all will be new to IBM, which already partners with Cognos to reach some of them.

IBM intends to integrate Cognos into its Information Management Software division when the deal closes. That should happen in the first quarter of 2008, subject to regulatory approvals and other closing conditions, the companies said Monday.

Cognos CEO Rob Ashe will join IBM to lead the Cognos team there, reporting to the general manager of the IMS division, Ambuj Goyal.

IBM did not say how many of Cognos's other 4,000 employees it planned to retain.

O'Connell is skeptical of IBM's ability to integrate Cognos into its organization, however, based on its performance integrating the Rational business with its existing WebSphere division. Some WebSphere customers have had to buy Rational separately, he said.

The acquisition of Cognos could put pressure on remaining independent BI players such as Microstrategy to increase their stock prices by getting acquired, whether or not it makes sense for the end-user, O'Connell said.

One potential buyer for Microstrategy is HP, now it has missed its opportunity with Cognos, wrote Forrester Research principal analyst Boris Evelson in a blog posting. He speculated that HP will now have to content itself with buying a smaller player such as Microstrategy, Information Builders or Actuate -- but probably not privately held SAS Institute, which because of its size and cultural differences would be too difficult to integrate.

With the big players preoccupied with integrating their acquisitions, they will be too busy to add new functionality to their products, opening a window of opportunity for the smaller BI vendors, he wrote.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
Join the discussion
Be the first to comment on this article. Our Commenting Policies