FSN: Cognos disappears into IBM – so where to now for the BI and performance management market?

Cognos disappears into IBM – so where to now for the BI and performance management market?

26th November 2007
In a widely expected move IBM has snapped up Cognos the last remaining independent provider of Business Intelligence (BI) and performance management applications of any size. The deal followed hard on the heels of SAP's acquisition of Cartesis and Oracle's purchase of Hyperion. The glowing embers of a separately identifiable industry are now fading and the question that arises is what is going to happen now? Gary Simon FSN's managing editor examines whether the BI industry was a victim of its own success or a sector which failed to deliver a viable strategy.

In a world encumbered by ever growing volumes of data the need for analytical tools that can make sense of it has never been greater. In fact the genesis of the BI industry was off the back of exponentially growing transaction volumes and Cognos in particular grew its reputation in part as a very popular BI tool on mainstream financial packages. In effect the providers of financial systems ceded responsibility for advanced analytics, i.e. beyond regular operational reporting to BI vendors that had more advanced presentation and data visualisation tools. In the early days customers were impressed by demonstrations of colourful digitised world maps, gauges and dials that showed ‘hot spots' around the world that management could drill through to unearth ‘nuggets' of information about current and prospective performance.

But very soon most BI vendors had this sort of capability and increasingly native Microsoft Excel and Excel add-ins could emulate the functionality of BI tools at a fraction of the cost. It quickly became apparent that there was a limited future in the provision of pure BI software. So the industry pursued a new direction which would enable it to add value through the provision of applications that would harness the power of data visualisation, data mining and analysis to advanced performance management applications such as budgeting, planning, forecasting, consolidation and financial reporting.

Rather than develop this capability from scratch the BI industry embarked on a series of acquisitions that would allow it to bring the component applications together. Leading vendors such as Cognos and Business Objects made key acquisitions. For example, Business Objects acquired ALG Software and Cartesis (which itself had snapped up several independent vendors). Cognos, for its part, acquired Adaytum and Frango.

Approaching the consolidation from the other direction were performance management vendors such as Hyperion that acquired BI capability in, for example, Brio and Arbor.

The net result of the feeding frenzy which lasted a full two years was that the industry coalesced around a core capability in which integrated applications made BI barely distinguishable from performance management.

Whilst this was happening the ERP industry was going through its own set of mergers and acquisitions largely fuelled by a desire for growth rather than the need for a particular set of applications. The major ERP vendors such as Oracle and SAP played to a limited extent in the performance management space but not convincingly enough to persuade sufficient numbers of their customers to put their weight behind their applications and ditch the specialist vendors such as Hyperion, Cognos and Business Objects. The latest round of acquisitions, i.e Oracle/Hyperion and SAP/Business Objects dealt with the ‘problem' and merges finally the transaction world of ERP vendors with the information world of performance management suppliers.

To a lesser extent Infor, another of the industry's consolidators, has gone down the same path. It has merged the performance management capability of what used to be Extensity/GEAC/Comshare and MIS Alea with its ERP capability derived from a series of acquisitions such as SSA Global and JBA.

So at present there are four broadly based ERP vendors with performance management capability, namely; SAP, Oracle, Microsoft and Infor. But where does that leave IBM and Cognos?

The answer is in a quite different position. IBM is not noted for its strength in financial applications and has to date had a more of a technology bias rather than wholesale applications. Steve Mills, senior vice president and group executive, IBM Software Group commented, "IBM has been providing Business Intelligence solutions for decades. Our broad set of capabilities — from data warehousing to information integration and analytics — together with Cognos, position us well for the changing Business Intelligence and Performance Management industry. We chose Cognos because of its industry-leading technology that is based on open standards, which complements IBM's Service Oriented Architecture strategy."

Cognos clearly provides a technology fit but the deal raise questions about the future of the applications that come with it. For the moment IBM intends to park Cognos as a group within IBM's Information Management Software division, focused on Business Intelligence and Performance Management. It remains to be seen whether IBM will continue to develop the applications or simply rely on the technology to enable its Information on Demand strategy.

But IBM is not completely out on a limb. In a sense its positioning looks more similar to SAS which, like IBM, does not have an ERP foundation but has substantial strength in infrastructure and information management. As such Cognos retains a certain independence. Its solutions will no doubt find their way into Oracle and SAP ERP accounts (as they always have) because it does not threaten their ERP base. Oracle and SAP customers still have a choice of performance management vendor.

So after all of these deals have completed has a new world order emerged in the performance management space? It's certainly a more confusing and convoluted market place (barriers that should disappear over time) but customers may be better off in the longer term. It is clear that not all performance management vendors could survive independently so the consolidation of the marketplace has secured the future of certain vendors (particularly the smaller ones) whose future was in jeopardy. Whilst the leading products are theoretically aligned with ERP vendors the reality is that vendors will compete or collaborate depending on the situation. The tricky bit will be ironing out the product portfolios so that customers can confidently finalise their information system strategies safe in the knowledge that their preferred platform will still be around in 5 years time.

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