Andy on Enterprise Software

The Other Shoe Drops

November 12, 2007

The ink is barely dry on the agreement selling Business Objects to SAP, but today a long-rumoured takeover was announced: IBM snapping up Cognos for USD 5 billion, a modest premium to its stock market valuation, at 3.5 times revenues (8 times maintenance revenues). As I wrote well over a year ago, this acquisition makes better sense than most. In particular, IBM has no proprietary application stack to defend (unlike Oracle or SAP) and so in buying Cognos it does not make things difficult for its sales force by casting doubt on application independence, in the way that the Business Objects purchase by SAP does.

I suspect there was a defensive element here too. Oracle purchased Hyperion and hence Brio, but given their acquisitive nature in recent years it was by no means clear that a another big BI purchase was out of the question. Hence IBM may have swooped quickly partly to keep Cognos out of Oracle’s hands. IBM has a superb sales channel, and so the deal is likely to be a good one for Cognos sales (and hence Cognos customers). Cognos and IBM have worked together for years, so there are no obvious technical concenrs, and the main concern will be whether Cognos staff will fit into IBM’s notorious bureaucracy.

This leaves few independent major BI vendors. SAS is privately held (most of the shares are held by one man) and so until Jim Goodnight says good night to his career, ownership of SAS is going nowhere. The same is probably true of Microstrategy, who although notionally public have a peculiar share structure making a takeover difficult. Actuate is perhaps the largest one left. However there is plenty of room out there, as shown by the vibrant performance of Qliktech.