techslog

The jungle drums are beating louder in the business intelligence (BI) software market, and they telegraph consolidation in the industry. According to a senior figure, at least one IT infrastructure giant is investigating the possibility of acquiring a BI specialist and formal merger talks look increasingly likely.

Such speculation is unsurprising. Having bought all the infrastructure and business application technology they could ever need, many firms now need a better way to extract data from those systems to make quicker decisions if they are to obtain full value from their investments. As a result, vendors of reporting tools, such as SAS, Business Objects, Cognos and Hyperion, which help firms extract and analyse their data, have enjoyed rapid growth and increasing influence in the enterprise.

IBM, Oracle, SAP and Microsoft have watched the growth of the BI sector jealously and have made moves into the market. However, despite some progress, they generally lag behind the incumbents’ offerings and they may now see acquisitions as a good way to fulfil their ambitions.

Which leads to the question: who will make the first move?

My money is on IBM. Oracle is busy integrating PeopleSoft and Siebel and already has some BI tools in place. SAP has also made some progress and clings to its tradition of building almost everything itself. Meanwhile, Microsoft is more interested in taking BI to the mid-market than splashing out for an enterprise vendor.

In contrast, IBM has signaled its interest in BI by acquiring extraction, transport and loading (ETL) vendor Ascential (ETL is the first part of a full end-to-end BI solution) and it recently pledged to spend $1bn over the next three years to develop information management technologies that overlap with BI tools. Meanwhile, analysts agree there is a gaping hole in the portfolio where a sophisticated and established query and reporting toolset could sit.

So who should IBM buy? There are four main candidates: SAS, Business Objects, Cognos and Hyperion. SAS’s private status would make it difficult to acquire and it would likely rebuff any advances. Hyperion is a more feasible target, though it has a lower profile than its larger rivals. Business Objects may look particularly tempting after its shares fell last week on news that it would miss analysts’ forecasts.

However, of the four, my money is on Cognos, though it is worth mentioning at this point that my record on picking software mergers is about as good as my record on picking Grand National winners (ie appalling).

Cognos’s recent failure to file first quarter results to meet Nasdaq requirements leave its share price looking distinctly undervalued. Meanwhile, the company is engaged in joint development, marketing and sales activities with IBM as part of a recently extended partnership. It is a case of watch this space, but an IBM-Cognos merger could make a lot of sense.

IBM acuiring Cognos article