Monday's announcement that IBM snapped up Cognos completes the megavendors' pairings with the major independent business intelligence companies. "Obviously it was just a matter of time before IBM would buy [a BI company]," says John Hagerty, an analyst at AMR Research. "Business intelligence is part and parcel to a broader set of issues that companies need to address." More on CIO.com How Will the IBM Purchase of Cognos Impact End-Users? Need for Business Intelligence Grows Five Key Business Intelligence Trends You Need to Know 10 Keys to a Successful Business Intelligence Strategy The Secret of Successful Business Intelligence Business intelligence is increasingly seen as core to enterprise strategy. To stay competitive, SAP, Oracle and IBM needed business intelligence offerings to complete their portfolio, but recognized that they would never catch up if they created those offerings organically. So they have extended through acquisition, says Hagerty. Business Objects, Hyperion and Cognos\u2014all strong companies\u2014allowed the larger software vendors to gain market presence and a large customer base quickly. The deals were natural extensions, he says. The consolidation itself is simply the natural maturation of the business intelligence market, says Hagerty, who points to the ERP market, which underwent the same consolidation. Helena Schwenk, senior analyst at the consultancy Ovum, agrees: "I think IT as an industry is maturing and likewise the BI sector within the IT industry is maturing. Market consolidation is a natural evolution. There was only so far the independents could take the BI market by itself." She thinks the larger players can take the BI market to the next phase\u2014mainstream and operational. Such growth is only possible with the backing of large players. What BI Market Consolidation Means for YouIt's too soon to tell, says Hagerty. So far, "it's a non-event. There's a lot of things that could happen to make it go either way [positively or negatively]." Schwenk thinks all three companies must make customer communications a priority to alleviate some of the fear and uncertainty that naturally arise. Among the concerns that should be addressed: their product roadmap, integration issues and how support will play out over the next few years. As for customers, Hagerty thinks existing customers will continue to be supported and will see no changes. "Only when new prospects come will things change," he says, "they'll be told to buy SAP or Oracle or IBM." In other words, complete offerings may mean less choice, says Colin White, founder and president of BI Research. Consolidation will likely mean lock-in. So far these companies say they'll maintain their independence, he says, but inevitably there will be conflicts for Cognos' customers who want to use Oracle, for example. "Inevitably they will become more integrated and you'll be pushed into buying the whole stack." If you're an Oracle customer that might be more of a concern, but SAP isn't such a big issue because you're probably using IBM anyway." Then there are integration issues. On that front, the IBM-Cognos pairing may have it the easiest. Cognos' front-end BI provides a logical complement for IBM's back-end integration and management capabilities. Because there is little overlap in the two companies' products, some analysts think product integration for IBM and Cognos will be nearly seamless. That's not true for the Oracle-Hyperion and SAP-Business Objects pairings, which do have overlapping products. But all three mergers will present integration issues, says Ovum's Schwenk. Traditionally business intelligence software is meant to be compatible with a variety of applications from a variety of vendors, and that compatibility has required cooperation from the vendors. Now What?"The interesting dynamic is all six vendors all have some integration with one another which provides a level of confusion for the customers that use the tools and a level of 'coopitition,' and they don't want to lose that partnership," says Schwenk. For example, SAP and IBM have a partnership, but (until now) are typically used in different ways within the company. (A large proportion of SAP customers use DB2, for instance.) In other words, historically there hasn't been much overlap. "Now these companies are just going to have to work harder at working with each other even though there are lines of competition are crossing more frequently," she says. There are complementary elements across all three acquisitions, but it is true that there is less overlap with IBM and Cognos than with the other two, she says. With Hyperion, Oracle gains an enterprise OLAP server and a series of financial management applications that significantly boost its credentials in the performance management market. On the other hand, Oracle got a series of BI tools that overlap with its homegrown business intelligence tools and also with BI tools the company acquired with the Siebel acquisition. With the SAP-Business Objects deal, there is complementary technology in terms of some of the front-end tools: SAP acquired some great data integration and data quality software. However, similar to Hyperion-Oracle, there are overlaps when it comes to some other parts the actual performance management toolset. One area of concern for the IBM-Cognos pairing may be in how IBM plans to integrate Cognos's performance management business. There's a natural fit on the BI tool side, but the Cognos acquisition places IBM more firmly in the applications business\u2014something IBM has been very hazy about in the past, says Schwenk. The conflict comes because Cognos is now a part of the information management division. The products will be bundled in with a lot of other middleware and infrastructure technology and products that are typically sold to IT shops. On the other hand, performance management has a completely different value proposition: It has been more of a business side sell, so trying to balance those two different disciplines within one division of IBM may prove difficult, says Schwenk. The most exciting area for Schwenk in the IBM-Cognos merger is what the partnership may develop in the way of bridging unstructured and structured search. "I'm interested to know if it's going to use the whole information on-demand product set to try and bridge the gap between the structured and unstructured side now that it has Cognos under its belt." What Does Market Consolidation Mean for the Little Guys?The megadeals have left smaller BI companies and niche players with unguarded territory. Whether that's a blessing or a curse depends on the company, and the effect will only be told with time. As for SAS and Information Builders, "these are private companies and my sense is they'd like to keep it that way," says White. Both Information Builders and SAS have their niches, he says. Schwenk says because of their private status and because the founders are the CEOs, it's hard to predict what these two players will do, but says that neither CEO has given any "indication they want to retire and hand over the reigns." White thinks one independent that has cause for concern: MicroStrategy. On the one hand, the company can still promote its independent status. But on the other, the fact that it targets large enterprises pits it against the Cognos-Business Objects-Hyperion triple threat\u2014without the megavendor backing. Schwenk thinks that some of the other vendors such as Actuate, Informatica and Panarama are targeted to different parts of the BI market, and says, "I suspect they will either look at new markets or look at new business models, or for the time being just survive on the fact that the larger independent players have been taken out of the picture. So, the BI market has been cleared somewhat until the three mergers are fully integrated, and most likely smaller players will benefit. As for customers, "Buying a whole technology stack gets expensive, says White, and smaller companies are likely to balk at being forced to do so. Luckily, the BI market consolidation opens up the market for innovative and open source business intelligence companies, says White. Hagerty agrees: "Although the attention is placed on [the big BI players on the] upper end, there's a whole bunch of little guys who are really focusing on specific types of issues\u2014analytics, open source, real-time data access. Innovation will continue at the lower end." Schwenk points to BI offerings targeted to small- and mid-sized business as an area of current innovation. For example, Clique Technologies, which she says is doing well. "It has a different take on the BI market in the sense that its technology is based on an in-memory database. And it's also priced very competitively. She says the company has done very well based on its technology and also its business model.