The business intelligence (BI) sector has experienced rapid growth over the past few years, with the result that many BI companies emerged with point solutions delivering excellent products in one area of the market, but only in that one area.
"Corporate users used to work on a best-of-breed principle, buy point solutions and try to integrate them into a consolidated BI solution," says David McWilliam, MD of Cognos SA. "This approach worked to a degree, but always left the customer with multiple suppliers and constant integration headaches every time a product was updated. The trend has changed in recent years and corporations now want BI solutions that deliver a full suite of integrated enterprise performance management solutions."
This has resulted in the long predicted BI market consolidation. The smaller companies are vanishing as they are either bought by larger organisations that need to top up the functionality missing from their portfolios, or they go out of business. The problem with consolidating through acquisition is that companies have to figure out how to incorporate their new employees and applications into their solutions portfolio in a manner that causes the fewest problems for customers and delivers a long-term product roadmap.
"This bedding down can take time and distract the companies from dealing with real market issues," notes McWilliam. "While the outcome might be a stronger company with a tighter product range, the intermediate period may cause them to lose their competitive edge and substantial market share."
There have been two recent huge buyouts in the BI market: Hyperion Software bought Brio for $142 million, and Business Objects bought Crystal Decisions in a $823 million deal to become the BI software market leader, a position previously held by Cognos. Analysts have noted that while the deal may create the largest company in the field, the effort to consolidate the two companies and their software could hurt the combined organisations in the end.
"Business Objects has a colossal task of integrating the two companies as there is a large overlap of products and consequently a large number of people who will be redundant," adds McWilliam. "While it may have taken the advantage and assumed the leadership position on paper in the short term, Cognos already has a fully integrated offering it is taking to market in the corporate performance management (CPM) space.
"We expect to continue our current growth - the fastest in the BI industry - and be back on top in two or three years."
An IDC study found that organisations that "implement analytic applications, like Cognos Enterprise Planning, can achieve a significant and rapid return on investment due to increased efficiencies and expanded business opportunity. Three Cognos Enterprise Planning customers participated in the IDC study and received ROI results ranging from 140% to 1 163%."
McWilliam says the Hyperion deal is even less of a threat and it will also require substantial effort to integrate Brio`s query and reporting capabilities to the Hyperion platform.
"As the CEO of Cognos has mentioned, the evolution of the merged companies will result in one platform becoming standard fare for the new organisation. This means customers will have to migrate to the new toolset and this will provide an opportunity for Cognos to demonstrate we have the ability to execute better than anyone else, now," he explains.
Cognos itself made an acquisition earlier this year. It now offers a world-class planning solution integrated into the Cognos Series 7 product suite. The company has also announced the release of Cognos ReportNet, a solution it expects to set a new benchmark in the query and reporting market."
In the Meta Group report "21st Century Reporting" by Dave Folger, the analyst comments on ReportNet: "Although many BI companies offer [reporting] products targeting the same functions, these older products are reworked client/server tools initially developed before Web technology became available and they retain client/server deficiencies. ... The Cognos product is a new development from the ground up with "modern" Web-related technology (eg, Web services, HTML-only interface, management/development from browser)."
Folger adds: "Cognos will likely take the lead in Web reporting and other business intelligence vendors (eg, Business Objects, Actuate, Brio) will eventually have to rewrite their tools` code bases to new technology."
"Consolidation in the BI market will continue, but for Cognos it`s a matter of business as usual as the company is well position for the opportunities that will arise in future," McWilliam concludes. "Datamonitor expects good BI business over the next few years, predicting investment in BI software by European enterprises will grow from $1.09 billion in 2001 to $5.8 billion in 2005. That`s a 40% average annual increase and we are confident we will be leading the market again in the short-term."
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