Analysts: IBM abandons vow not to compete with partners

Analysts: IBM abandons vow not to compete with partners

Denies shift in strategy; some question what deal means for SAP relationship

IBM's US$5 billion takeover of Cognos Monday shows that Big Blue is abandoning its longtime policy of not competing against partners who sell business applications, analysts say.

The addition of business intelligence vendor Cognos to IBM's portfolio comes on the heels of SAP's October purchase of Business Objects, and places partners IBM and SAP in direct competition.

IBM's "corporate position on partnerships is out the window. This deal changes that," says Forrester analyst Paul Hamerman. Cognos is "a little bit different animal for IBM and could foretell some additional acquisitions where they acquire some application vendors."

The IBM/SAP partnership involves SAP's enterprise resource-planning application systems running on IBM's database and middleware, Hamerman says. IBM has thousands of employees working with SAP to implement SAP applications, notes Gartner analyst Andreas Bitterer.

IBM denies that buying Cognos is contrary to its policy of not competing with ISV partners. IBM already has such applications as Lotus Notes and has been offering query, analysis and reporting tools since 1983, according to Steven Mills, senior vice president and group executive of IBM's software group.

"We haven't changed our strategy in any fundamental way," Mills said during a conference call discussing the acquisition. Business intelligence "is not a new space for us. . . . It is very much a horizontal technology that cuts across all types of applications."

The question of whether IBM is reversing a prior strategy depends on how business intelligence is defined, Bitterer says. BI sits on the fence between infrastructure and applications, because it has a lot to do with metadata but is also used for such applications as budgeting and planning, he says.

"If you categorize BI as an application, then yes IBM just did a 180 and moved squarely into the application space," Bitterer says.

Don't expect IBM to take a charge at the ERP and CRM markets anytime soon, though.

"That would be even a bigger surprise than today's deal," he says.

Going forward, IBM's sales team may be more inclined to take on service engagements involving Cognos software than that of Business Objects, Bitterer says.

But overall, IBM and its partners will likely continue relationships as long as they are profitable to all parties, analysts say.

"From the services perspective, IBM will continue to work with SAP, Oracle and pretty much anyone else," Bitterer says.

HP is probably a keen observer of the IBM/Cognos deal, because it offers a business intelligence and data warehousing platform built using products from Cognos. Even that partnership is likely to continue, Hamerman says. "I think it will continue. If it produces revenue for the company, they'll find a way to stick with it," he says.

Inspiration from Oracle?

IBM's decision to buy Cognos may have been made in early March, when Oracle kicked off a series of BI consolidation moves by acquiring Hyperion for US$3.3 billion. Analysts correctly predicted that IBM and SAP would both have to make moves to counter Oracle's buy, and pegged Business Objects and Cognos as the most likely targets.

SAP followed suit in October by agreeing to purchase Business Objects for US$6.78 billion.

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