IBM Slips Further Into Apps Market With $5B Cognos Deal - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Software // Enterprise Applications
03:30 PM

IBM Slips Further Into Apps Market With $5B Cognos Deal

Tighter integration with IBM's WebSphere middleware and DB2 database means Cognos will be better able to help users sniff out significant business events.

IBM Software Chief Steve Mills says the partnership model the company has relied on for years to extend its reach into the applications market is no longer sufficient to meet the demands of real-time business. Well, that and the fact that the number of big independent apps vendors with which IBM can partner is drying up fast.

Mills was speaking last week on a conference call to explain why IBM agreed to pay $5 billion to acquire ally Cognos, a Canadian developer of business intelligence applications and tools. The rationale: Tighter integration with IBM's WebSphere middleware and DB2 database means Cognos will be better able to help users sniff out significant business events--say, a sudden sales slump in a region--as they're happening.

The Cognos 8 suite includes modules for reporting, scoring, and creating dashboards that display a range of business metrics used by companies in most industries. Printing company Consolidated Graphics, for instance, is using Cognos 8 to more quickly deliver accurate financial results to markets and investors.

Cognos brings IBM deeper into the applications market than it has been in almost two decades. IBM last year paid $1.6 billion for FileNet, whose apps include Content Manager, which lets users store and manage documents and other unstructured information; and Email Manager, designed to help businesses manage ever-increasing volumes of messages. IBM has acquired numerous software companies in recent years (see chart).


Absorbing midtier players lets IBM combine their products with its own in ways that are more seamless than what can be achieved through partnering, says Buell Duncan, general manager for IBM ISV and developer relations. "We can share technology road maps and work more closely day to day to build on each other's strengths," Duncan says. "You can do that if you're one company much more quickly and capably."

Duncan says IBM will continue to acquire companies whose products are natural extensions of its information management offerings, and whose software--like Cognos'--is built to live in service-oriented architectures. IBM isn't shopping for a broad-based ERP vendor like SAP or a midtier one like Lawson Software, Duncan insists. "There's no fundamental shift in our strategy that says we'll be going into the business applications market," he says.

Longer term, however, IBM may have little choice but to expand its software footprint to keep pace with major industry players--principally Oracle--that are acquiring more and more pieces of "the stack." Oracle recently snapped up BI and performance management vendor Hyperion for $3.3 billion, while SAP has agreed to buy Business Objects for $6.8 billion--deals that left Cognos as the only major BI tools vendor without a dance partner.

Still, Duncan insists that IBM is committed to its existing ISV partner program and won't plunge deeper into applications as a defensive measure. "We'll continue to work closely with Business Objects" and other partners that have been bought up by rivals, he says.

But there's another reason IBM may need to build out its app portfolio more aggressively: the growth requirements of a $90 billion company that has become more dependent on software for revenue since shedding big parts of its hardware business in recent years. Duncan is unphased. "We're not on the same path as Oracle in terms of acquiring pure application vendors for the sake of expanding our customer base," he says.

Of course, it was only four years ago that Mills told a group of journalists that "IBM is not in the applications business."

App'd Up
IBM's recent software deals

Cognos Business Intelligence 2007   $4.9 billion
WebDialogs Web conferencing 2007   NA
MRO Asset and service management 2006   $740 million
FileNet Content management 2006   $1.6 billion
LAS Language analysis 2006   NA
iPhrase Search 2005  NA
Ascential Integration 2005   $1.1 billion
SRD Identity Authentication 2005   NA

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2021 Outlook: Tackling Cloud Transformation Choices
Joao-Pierre S. Ruth, Senior Writer,  1/4/2021
Enterprise IT Leaders Face Two Paths to AI
Jessica Davis, Senior Editor, Enterprise Apps,  12/23/2020
10 IT Trends to Watch for in 2021
Cynthia Harvey, Freelance Journalist, InformationWeek,  12/22/2020
White Papers
Register for InformationWeek Newsletters
Current Issue
2021 Top Enterprise IT Trends
We've identified the key trends that are poised to impact the IT landscape in 2021. Find out why they're important and how they will affect you.
Flash Poll