Analysis: A Limber, More Aggressive Cognos?

Is Cognos’ big-budget acquisition spree a harbinger of a more aggressive buying strategy?

If Applix Inc. was a surprising acquisition target for Cognos Inc., it also came at a surprisingly steep price: $340 million, the Canadian business intelligence (BI) giant’s biggest-ever publicly disclosed acquisition. Moreover, Applix was Cognos’ second high-profile acquisition this year. Back in January, it snapped up dashboard appliance specialist Celequest Corp. for an undisclosed amount.

Cognos has acquired plenty of vendors in the past, of course. In the last five years alone, it has picked up Adaytum, Frango, and Softa, among others. None of these companies was a household name, however. In contrast, both Celequest and Applix were established, and reasonably prominent, BI and performance management (PM) vendors.

The financial details of Cognos’ acquisition of Celequest weren’t disclosed, but given that company’s pedigree (it was launched by Informatica Corp. founder Diaz Nesamoney) and market success (including licensing deals with Fujitsu and intense interest in the financial services sector), Celequest, like Applix, probably didn’t come cheap.

All of this begs a question: is Cognos’ big budget acquisition spree an indication of a more aggressive buying strategy to come? If it is, what are we to make of this move?

Naturally, Cognos officials downplay the significance of both the Celequest and Applix acquisitions—at least as strategy-changing moves.

"We’ve gone and been making acquisitions in performance management for about five years. We started with Adaytum, [and then acquired] Softa, Frango—we’ve been on a beat. Maybe it’s a bit more of an accelerated beat in this calendar year," comments Mychelle Mollot, vice-president of market strategy and strategic communications with Cognos. "We’re committed to being the best in this space, and that’s going to mean acquisitions."

In contrast, Cognos arch-rival Business Objects SA hasn’t ever been afraid to pull the trigger on expensive acquisitions, starting with the mega-acquisition of the former Crystal Decisions Inc. (for $820 million) four years ago. It’s for this reason that Business Objects officials insist that Cognos’ Applix grab is a reactive move—in this case, to BO’s high-profile acquisition of PM power Cartesis several months ago.

"I very much see it as reactive. When I compare the two, I look at the acquisitions that Business Objects has done in performance management as real value-based versus a market share buy," argues Trevor Walker, vice-president of product marketing with Business Objects.

Mollot, for her part, insists that Cognos is not trying to play acquisition catch-up with Business Objects, which—in addition to Cartesis—recently added Firstlogic (a best-of-breed data quality provider) and FUZZY! (a highly respected EU data quality player) to its roster of products.

"[Acquiring Applix was] certainly not in response to what they’ve been doing. A lot of what they’ve done has been catch-up—they didn’t have planning, they had to get planning. They didn’t have consolidation, they had to get consolidation," she argues, noting that Cognos acquired its own ETL technology (the former Decision Stream) years before Business Objects snapped up the former Acta Software.

"You could argue that [Business Objects’] acquisition of Crystal was a reaction to ReportNet, which [with a September, 2003 scheduled release] they knew was coming and they didn’t have an answer for."

Finding its Stride

Some analysts, on the other hand, think Cognos has been more aggressive of late. More to the point, says Wayne Eckerson, Research Director at The Data Warehousing Institute (TDWI), would-be BI and PM players simply must be more aggressive to compete in an increasingly crowded market segment.

"Other than MicroStrategy, which seems content to play a niche role, Cognos is the smallest of the leading BI providers," Eckerson observes. "All the other players are larger and making aggressive moves to consolidate their position in the BI/PM space," citing Oracle Corp., SAP AG, Microsoft Corp., Business Objects SA (Cognos’ arch-rival), and SAS Institute Inc.

"Cognos has to be aggressive to stay in the game or it will fall off the map. Plus, PM is an emerging, potentially high-growth area centered on the office of the CFO that leverages BI extensively and is a natural growth area for BI vendors who want to move up the stack and start selling solutions to business folks."

There’s another emerging market driver, according to Eckerson: open source BI. "There is urgency to move up the stack since open source BI, SOA, and low-cost providers are on the rise. There is a race going on to stake out the position for the new PM market," he points out.