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Can Cognos and IBM Loosen Microsoft's Grip on the Mid-market?

by Maroushka Kanywani, Editor, Dashboard InsightThursday, June 19, 2008

By Helena Schwenk

When IBM acquired Cognos it gained a logical extension to its information management product and services portfolio and plugged some obvious gaps in its information management software stack. We have no doubt that the combination of these two market-leading companies will pack a considerable punch in the business intelligence (BI) and performance management (PM) market. It will have the greatest impact in the enterprise market, where both companies can use the breadth of their product and service expertise to craft out industry specific analytic solutions. However, can this dual approach work for other parts of the market - specifically the mid-market - and will it be successful in loosening Microsoft's grip on this sector?

Prior to the acquisition both Cognos and IBM were committed to developing their mid-market share predominately through the channel. Cognos, for example, attributed 29% of revenues in fiscal year 2007 to indirect sales, up from 25% in 2005. A significant proportion of these sales were to mid-market organisations, with the company typically aiming its direct sales force at larger enterprise customers.

The major turning point in Cognos's mid-market strategy came with the acquisition of Applix in October 2007. Applix brought with it a large stable of ISV, reseller, OEM and systems integrator (SI) partners that primarily worked with Applix to build out industry-specific solutions for mid-market firms using its TM1 in-memory OLAP database for applications such as product profitability, inventory management and scenario planning.

Similarly, IBM made some significant investments in the mid-market in the years leading up to its Cognos acquisition, developing a number of new offerings, marketing programmes and channel initiatives around its Websphere and Infosphere product lines that targeted mid-sized businesses in the data warehousing market. While the company directed a lot of efforts towards the mid-market, its software offerings have traditionally been skewed to meet the needs of large organisations. However, with Cognos now integrated into the IBM fold, the company has an opportunity to change this outlook. Not only does Cognos have an established BI and PM partner network but it also brings a robust set of BI platform tools and performance management applications that can round out IBM's mid-market offerings for BI as well as other application areas.

While Cognos will continue to target mid-market customers that are not IBM Information Management customers, both companies stand to gain significant value from a combined approach - for example, by bringing together data warehousing, data integration and BI/PM capabilities. Furthermore, since mid-size businesses rely on ISVs, SIs and other services vendors for guidance when selecting BI/PM and data warehousing products, IBM must not only preserve Cognos's existing channel but also aim to maximise opportunities to grow its partner base given its scale and the number of resources it has at its disposal.

To succeed, IBM and Cognos must continue to translate their expertise in solving BI/PM problems with appropriate packaging and pricing of its software to better meet the needs of mid-market businesses and take into account their financial and resource limitations. But satisfying mid-market needs is not only about offering 'lite' versions of full-blown BI-PM applications. Consideration needs to be made for ease of use, skill-sets, training, speedy installation and deployment. The software needs to be pre-bundled, easy to install, come with a flexible range of configuration options, and offer pre-built reporting templates that are industry specific. At the same time, it must actively recruit and engage leading ISVs to optimise their solutions for its software platform and convince partners that development on an IBM/Cognos platform is as easy and lucrative as Microsoft's.

Partners are also critical about IBM's ability to ramp up penetration in the mid-market services market. As such the company must help allay partner concerns about potential competition with IBM's Global Services division and clarify how it and partners can best work together to reduce channel conflict and drive growth.

IBM and Cognos, however, still face some challenges with ISVs if they want to compete more effectively with Microsoft. First, mid-size ISVs and businesses are more numerous and diverse than in the enterprise realm. This means that both IBM and Cognos need to make their mid-market product offerings industry specific and capable of mapping to in-house skills and levels of users as well as creating productive partnerships with a large volume of ISVs, local and regional SIs and VARs, all of which need to have expertise and business practice spanning both IBM and Cognos's product sets. Secondly, Microsoft's operating systems and SQL Server database still dominate the data warehousing and BI mid-market today. To break that stranglehold, IBM needs to convince ISVs that building on IBM and Cognos's technology will prove a profitable venture and that it will support and help partners sell and market their solutions.

With the Cognos acquisition, IBM has finally assembled the many components needed to make a successful mid-market product and service proposition. Importantly, the company also understands that it needs to succeed in this market if it is to sustain its overall growth. We have no doubt that IBM and Cognos can overcome some of these challenges and give Microsoft a good run for its money.

About the Author

Helena Schwenk is a Senior Analyst within Ovum's Technology Group, specialising in business intelligence covering OLAP, reporting, data warehousing, data integration, scorecarding and data mining.

Her responsibilities include running the service Ovum Evaluates: Business Intelligence Platforms, and writing and speaking regularly about BI market activities. As part of her role she speaks at conferences across Europe, writes for trade and business publications, and provides personalised advice to Ovum clients on a range of topics including data warehousing architectures, BI tool selection, future BI market direction and marketing strategy. In addition, Helena has worked on a variety of consulting projects for major clients, including a critical assessment of a data warehousing, ETL, business intelligence and performance management RFT for a large Australian government organisation.

Helena has over 12 years' experience working within the IT industry as both an analyst and IT practitioner, predominately in the data warehousing and business intelligence domain.

Helena holds a BA (Hons) in Computing and Information Systems.

© Ovum 2008

Source: Ovum:http://www.ovum.com/news/euronews.asp?id=7083



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