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Analysis: Cognos Makes Strong Performance Management Move

There’s a lot to like in Cognos’ latest purchase, industry watchers say -- though some issues remain

• By Stephen Swoyer
• September 12, 2007

Few industry watchers predicted Cognos Inc.’s acquisition last week of OLAP specialist Applix Inc. There’s an undeniable logic to Cognos’ move, in fact, but in a number of key respects, there was little to suggest that Cognos would tap Applix to augment its analytic expertise. The two companies had no formal relationship with one another, didn’t resell one another’s software, and hadn’t engaged in any joint marketing or sales promotions, either.

Why did Cognos agree to spend nearly $340 million—its most expensive acquisition ever—for Applix? One reason may be that Applix and its in-memory TM1 OLAP engine will help boost Cognos’ analytic and performance management (PM) credentials. Since the OLAP wars of the late 1990s (and thanks in part to the efforts of both Microsoft Corp. and Oracle Corp.), OLAP itself has become largely commoditized.

TM1 isn’t like other OLAP tools: its in-memory architecture results in extremely fast load and query response times. That makes TM1 ideal for real-time and near-real-time analytic scenarios, i.e., situations where business decision-makers tend to place a premium on freshness and responsiveness, Applix officials like to argue.

"In cases where the data requires higher velocities of change and you need to work at an atomic level, there’s no comparison between our competitors and TM1. If you need to change the data, the model, the security of the user model, Applix had the only product that could really do that in real time," says Ben Plummer, vice-president of marketing and strategic alliances with Applix—and a Cognos veteran of 14 years.

"That’s why we could tackle applications like real-time customer churn, you could never pull that off with Hyperion [Essbase]. They use a pre-aggregation model, so no matter if you run it in memory or on disk, any change requires a whole series of re-aggregations to occur to get performance."

The Essbase example speaks to still another reason why Cognos nabbed Applix. When Oracle Corp. acquired the former Hyperion Solutions Corp. earlier this year, it did so largely to bolster its own PM credentials. But Hyperion gave Oracle something else, too—direct access to chief financial officers (CFO), thanks to its enormous installed presence in finance (see http://www.tdwi.org/News/display.aspx?id=8349). In this respect, Cognos officials say, Applix helps give Cognos—whose PowerPlay OLAP front-end is one of the most ubiquitous such tools in the industry—a compelling one-two punch.

"It’s a dynamite combination," claims Mychelle Mollot, vice-president of market strategy and strategic communications with Cognos. "It gets to solution areas that we haven’t really been able to address before. PowerPlay’s strengths are in analyzing historical information. You’ve got a mart, it’s updated, but [TM1] lets us reach the people who need a read/write engine. These are the people who want things to happen at the speed of thought."

There’s also the Essbase angle, Mollot acknowledges: "PowerPlay still is the most widely used OLAP front-end in the world. But Essbase is an engine, and in fact there’s a lot of PowerPlay customers [who] are using it to analyze against Essbase. [For these reasons,] we wanted to have an open cubes strategy, so [Cognos] PowerCubes became just one of the data sources we were supporting."

Most industry watchers give the Applix acquisition an enthusiastic thumbs up. Indeed, says Cindi Howson, a principal with BIScorecard.com, Cognos might have gotten itself a bargain—Applix’ $340 million price tag notwithstanding.

"While Applix may have ranked at the bottom of IDC’s BI market shares, the vendor has been one of the fastest growing and has a stronger position in the performance management market segment," Howson writes, noting that "the acquisition will almost double Cognos’ number of performance management customers." In addition to its in-memory OLAP capabilities, TM1 boasts write-back support and an open API—two things that Cognos lacked.

It’s hard to imagine an acquisition today that doesn’t entail some degree of overlap. This is true in the case of Cognos/Applix, too—although Howson cites varying degrees of overlap in the business intelligence (BI) and PM market segments. "[G]iven that Cognos 8 can access OLAP and relational data sources, I would expect TM1 support to be quickly added. Cognos' initial road map suggests native TM1 access will be added six months or later following the acquisition close. The scalability and openness of TM1 strengthens Cognos’ position in the BI market," she points out.

The picture’s a bit muddier in the PM segment, however. Applix does give Cognos considerably more PM market share, as well as a powerful analytics engine in TM1. On the other hand, Applix has something of a thriving PM practice of its own.

As Cognos tries to reconcile the considerable PM overlap between its own Planning and Controller products and Applix’ own PM offerings, there’s a chance it could give slightly shorter shrift to the Applix assets. "[T]he acquisition brings Cognos additional market share and a strong sales force, but similar to the Business Objects acquisition of Cartesis, it will call for some product rationalization and/or clarification on product positioning," Howson writes.

She notes that "Cognos officials suggest that Cognos Planning and Controller will continue to be the leading performance management products from a process perspective, with the TM1 engine offering users the ability to model and analyze financial data on the fly. Allowing customers to create TM1 cubes from Cognos Planning and Controller is at the top of the vendor's integration priorities."

Cognos and Applix officials wouldn’t directly address this issue. Cognos’ Mollot, for example, asserts that Applix customers need not fear that Cognos will pull the plug on TM1. "What we have to say to [Applix customers] is that [TM1] is a crown jewel. That’s at the center o the acquisition. TM1 is critical to us for us going forward. [Applix customers] should feel really good about this acquisition," she comments.

When pressed about Applix’ PM and other extra-TM1 assets, Mollot demurred, stressing that at this point Cognos can’t talk much about its integration roadmap. "In terms of how we’re going to package, we’re going to be coming back when the deal closes, and we’re going to talk at that point about what our vision is for bringing the two companies together from an organizational and a technological and a people perspective."

Notwithstanding the issue of overlap, there’s a great deal to like in the acquisition, says Wayne Eckerson, Director, TDWI Research. The salient points, he stresses, are that Applix brings both formidable technology and a fiercely loyal customer base to the table.

"[Applix] gives Cognos a strong mid-market PM player with a loyal customer base and an in-memory database that provides fast performance and write-back functionality that supports budgeting, forecasting, and modeling, things which Cognos doesn't have except for some stuff from Celequest," Eckerson observes.

There’s a further intangible here, Eckerson says: Applix’s corporate headquarters (in Westborough, Mass.) is just down the road from Cognos’ U.S. office, in Burlington, Mass., which could help communications as the companies merge.

Applix offers one more benefit, according to Howson: it helps buttresses Cognos’ position in the performance management segment. Rival Business Objects SA, which has made a number of PM-related acquisitions—including Cartesis as well as SRC and ALG—has been coming on strong, she points out, as has ERP giant SAP AG, which just four months ago picked up PM specialist Outlooksoft.

In this respect, Howson concludes, Applix helps give Cognos a little breathing room: "It shores up their position in the number two spot [after Hyperion], whereas without the acquisition, SAP’s acquisition of Outlooksoft and [Business Objects’ purchase of] Cartesis might have unseated them—depending on whose numbers you use."