A year later, IBM's Cognos views merger as right move

Former CEO claims success as BI software maker releases two major upgrades, adds employees
  • Eric Lai (Computerworld)
  • 09 February, 2009 09:02

IBM officially closed its US$5 billion acquisition of business intelligence software maker Cognos at the end of January 2008.

In the year since then, the company has transitioned to the heart of IBM's business intelligence and performance management division, and moved strongly forward, according to Rob Ashe, the IBM general manager for that group.

In an interview, Ashe touted milestones such as two major upgrades to its flagship Cognos 8 suite and a "close to 20 percent" increase in the number of employees in the past year.

Things are going "great across the business," said Ashe, who first joined the company in 1984 and was Cognos CEO for three years.

As Cognos CEO, Ashe had talked about his dream of making Cognos the top independent BI vendor in the market. But reality, in the form of acquisitions by key rivals - Business Objects SA by SAP and Hyperion by Oracle interfered, sending Ashe to seek the embrace of IBM.

The year-and-a-half-long courtship, which according to SEC filings began in July 2006, turned into a marriage proposal on November 11, 2007. By the way Ashe describes it, it's still a honeymoon.

Take the recent layoffs at IBM, which have hit more than 4,000 employees and are still continuing. According to Ashe, Cognos has "not really" been affected by the layoffs, despite adding about 500 employees since the acquisition.

Despite the merger, Cognos was able to release Cognos 8 version 3 a year ago and follow up with Cognos 8 version 4 nine months later. This latest October 2008 release offers new search and mobile features as well as new user dashboards. For instance, Cognos responded to the banking crisis by developing risk analytics and planning solutions tailored to financial customers looking to cut spending in six months, Ashe said.

"Companies want to survive and thrive, cut costs or reduce risk and focus on their most profitable products and suppliers. For that, there's no better product than BI performance management," Ashe said.

Delivering two major releases in the past year helped Cognos make a strong showing in the influential Gartner Magic Quadrant for BI platforms that was released in January, in Cognos appeared to be ranked tops overall.

"We had a strong move, while our main competitor moved the other way," said Ashe, apparently referring to Gartner's downgrade of SAP division, Business Objects.

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Cognos did just shy of $1 billion in revenue in 2007 before the IBM acquisition. Ashe declined to reveal what Cognos' sales are today, though he echoed IBM CFO Mark Loughridge's comment during IBM's earnings call in mid-January that Cognos "had a terrific fourth quarter."

Ashe said Cognos' sales were "solid" among industrial and health-care companies, and that Cognos was betting on companies in emerging markets in industries such as telecom, banking and government to boost revenues as sales to banks sag.

While Ashe conceded that the sales environment for BI software "was very tough" as CIOs "are spending very carefully," he added that the publicly stated target of doubling its revenue to US$2 billion by the end of 2010 "is still on."

Cognos got into hot water last year when software it sold to the US state of Massachusetts was claimed to have been chosen during a flawed, rushed procurement process. Cognos was also accused of having improper financial ties with a leading Massachusetts politician, which led IBM to refund the money paid by the state for the Cognos software.

Asked if Cognos has changed its sales process as a result of the incident, Ashe said it was "an exception" and an "isolated event." Cognos, he said, has always had "good, tight processes in the compliance area." He declined to comment further.

A pair of customers that spoke to Computerworld say little has changed in their relationship with Cognos since the IBM takeover, and that suits them fine.

"After a year, nothing has happened to remove Cognos' focus on me as a customer, if anything, it's stronger than before," said Paul Vallee, CIO of Papa Gino's Inc. "I am very, very happy."

The 370-store restaurant chain based in Dedham, Mass., has been using Cognos for slightly more than a year to boost orders and accelerate delivery times.

"I was happy to see Cognos become a part of a huge organization like IBM," said Nihad Aytaman, director of business applications for fashion designer, Elie Tahari.

The New York-based clothesmaker and retailer began using Cognos for BI and performance management more than four years ago. The privately held company, which does about US$500 million in sales per year, credits Cognos with helping to cut its shipping costs by 30 percent and boosting sales by 10%.

"New features are going into the product. Supportwise, I haven't seen any disruption. I deal with the old Cognos people that I used to deal with," Aytaman said.