CIO — The business intelligence landscape has gotten another shakeup: Today IBM and Cognos announced that IBM has agreed to acquire the business intelligence and performance management software vendor for $5 billion in cash. The announcement ends months of speculation on which megavendor would buy Cognos.

The deal is the 23rd acquisition in support of IBM's "Information on Demand" strategy, a cross-company initiative announced on February 16, 2006 that combines IBM's information integration, content and data management and business consulting services. The company says that integrating Cognos technology will enable new business insights to extend beyond traditional BI users to a broader set of people across the organization "Customers are demanding complete solutions, not piece parts, to enable real-time decision making," said Steve Mills, senior vice president and group executive, IBM Software Group, in IBM's press release.

Analysts are divided on whether this is a good thing for end users.

The purchase is significant since it effectively levels the big vendor playing field, says Bill Hostmann, a research director at Gartner. "Now the big shift in [the business intelligence] market is that it's moved away from pure play vendors [those whose core offering is business intelligence] to being around megavendors competing and using it to differentiate," he says. Cognos was important to completing IBM's on-demand strategy, he says. "IBM didn't have the 'last mile,' but their major competitors did." He points out that with the purchase, IBM also gets online analytical processing (OLAP) technology with Cognos' Powerplay, an important offering, albeit to a smaller user base.

Boris Evelson, an analyst for Forrester Research, forecasts some difficulties in the merger. He worries that it will upset both companies' partner networks, and that Powerplay and Cognos' recently acquired Applix will lose out in the long-term to IBM's Alphablox. He also forecasts that all new BI behemoths—IBM, Oracle, SAP, Microsoft—will be required to spend time on integration issues, leaving little time for innovation. He believes smaller BI vendors (SAS, Microstrategy, Information Builders) and Tier 2 vendors (Panorama, QlikTech, Jaspersoft, Pentaho, Logixml, Inforsense and others) will step up to make their own innovations.

David O'Connell, an analyst at Nucleus Research, also voices concern. "I think [the merger] looks great on paper, but integrating product offerings is hard. I'm not sure it will be much more than a bolt on." He points to the integration difficulties Oracle is now having, and says, "It's easy to buy a company, but hard to integrate it in a way that gives customer value."

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