IBM Acquires Cognos, Furthers Business Intelligence Market Consolidation

11/14/2007

As part of its Information on Demand strategy, IBM announced on Monday that it entered into a definitive agreement to acquire Cognos, a business intelligence and performance management solutions provider, for approximately $5 billion or $58 per share. Integrating Cognos is expected to enable new business insights to be delivered to a broader set of people across an organization, beyond the traditional users of business intelligence.

"IBM has made a bold statement with its Information On Demand initiative and the addition of Cognos is the exclamation point!" says Alan Langhals, principal, Consumer Business, Deloitte Consulting LLP. "Cognos, with its powerful analytical capabilities and pre-packaged performance management solutions positions IBM at the forefront of integrated business intelligence solution providers. The acquisition positions IBM as a single provider option for all components of an open standards, business intelligence and performance management solution."

Cognos is IBM's 23rd acquisition in support of its Information on Demand strategy. Other strategic acquisitions include Princeton Softech, FileNet, Ascential Software, DataMirror, SRD, Trigo, DWL and Alphablox. In the big picture, IBM's purchase of Cognos marks the third major acquisition in business intelligence and performance management market: Oracle bought Hyperion in March, and SAP announced its purchase of Business Objects just last month.

So what does this mean for the user community?

"Many manufacturing firms count Cognos among their vendors although few see them as strategic to the portfolio. IBM services bring the necessary process domain and industry expertise to assist with decision re-engineering projects, regardless of the underlying software. For manufacturers that aren't overly invested in alternative software platforms, combining those services with IBM software can become compelling once the Information on Demand vision is fully integrated across the point products," says Bob Parker, vice president, Research, Manufacturing Insights, an IDC company.

"When we saw the news, our initial reaction was 'IBM finally did it,' followed by, 'Interesting that IBM intends to directly challenge SAP in the important BI/PM market.' The SAP base has always been an important revenue source for IBM hardware, software, and services. While the exact overlap is not known, there is high probability that many SAP customers have some combination of Business Objects, Cognos, Hyperion and other third-party BI/PM software in use. This could set up an interesting showdown as buyers begin to rationalize the number of BI/PM vendors they support," say AMR Research analysts Bruce Richardson and John Hagerty (Source: IBM Nabs Cognos for $5B ... Who's Next?)

The acquisition is still subject to Cognos shareholder approval, regulatory approvals and other customary closing conditions. It is expected to close in the first quarter of 2008. Following completion of the acquisition, IBM intends to integrate Cognos as a group within IBM's Information Management Software division, focused on business intelligence and performance management. IBM also will appoint current Cognos President and CEO Rob Ashe to lead the group.