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Vendor Rating: Cognos Raises Its Stake in the BI Market
27 January 2003
Howard Dresner, Frank Buytendijk

Document Type:  Research Note
Note Number:  VDR-19-0973
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Cognos continues to be a strong player in the enterprise business intelligence suites market. However, it has raised its stakes in the packaged financial BI applications market, with an eye toward corporate performance management.


Cognos Overall Rating: Positive

What You Need to Know

Cognos continues to be a "safe buy." Series 7.0 has been well-received by the market and has bolstered its position as a leader in enterprise business intelligence suites. However, the acquisition of Adaytum and its pursuit of packaged financial business intelligence applications and corporate performance management will present substantial challenges to Cognos.

Cognos
Headquarters: Ottawa, Ontario
Web Location: www.cognos.com

Analyst Comments

Having succeeded as a leader in enterprise business intelligence suites, Cognos is investing heavily in packaged financial business intelligence applications and is placing a great deal of faith in the future of corporate performance management.

Detailed Rating

Initiative Rating
Corporate Viability  
     Strategy Promising
     Financial Strong Positive
     Marketing Positive
     Organization Positive
Product/Services/
Technologies
 
     Product/Service Promising
          Cognos BI Series 7 Positive
          DecisionStream as an adjunct to PowerPlay and Impromptu Promising
          Metrics Manager Promising
          CognosFinance and Adaytum Promising
     Technology Promising
     Pricing Promising
Customer Service/
Product Support
 
     Sales/Distribution Strong Positive
     Support Services Promising

Corporate Viability

Cognos is a successful and healthy business intelligence (BI) software vendor. More than 30 years old, it has reinvented itself from a fourth-generation language (4GL) development tools company in the 1970s and 1980s to a pioneer and leader in the BI market with its PowerPlay and Impromptu tools. It is now embarking on what appears to be a third transformation — packaged applications — specifically financial/corporate performance management (CPM) applications.

Financially, Cognos remains especially strong. Its license and overall revenue continues to grow with relative consistency and profitability (3Q02 profit margin of 14 percent). In its third quarter, which ended 30 November 2002, overall revenue climbed 11 percent and license revenue by 7 percent year over year. In 2Q02, overall revenue grew by 11 percent and license revenue by 10 percent. Cognos has approximately $176 million in cash. Given the current economy, this is impressive.

A Yen for Acquisitions: Since 1997, Cognos has pursued a strategy of corporate acquisition to complete its product portfolio. Prior to acquiring Adaytum (completed 13 January 2003), Cognos' acquisitions presented relatively little risk, and involved modest costs and organizations.

Other acquisitions include:

This strategy, while allowing Cognos to obtain needed technology and expertise quickly, also introduced substantial integration projects that often lasted years.

The Move to CPM and the Adaytum Acquisition: When Cognos purchased LEX2000 in early 1999, it made a commitment to financial applications, specifically financial consolidation, statutory reporting and budgeting. At the time, it was a modest initiative, offering little competition to Cognos' tools business. During this period, Cognos learned about financial applications and managing acquisitions. With the acquisition of Adaytum, it has shifted the strategic balance further toward packaged financial applications. Packaged applications revenue for 3Q02 totaled $10 million, representing only 7 percent of overall revenue. The Adaytum acquisition is expected to increase this to an estimated 16 percent for the same time period.

Adaytum is Cognos' largest acquisition, with 316 employees (now 246) and $62.1 million in revenue. Cognos' financial applications to date have been sold by a semi-independent CognosFinance sales force. Cognos will perpetuate this model and has already integrated the Adaytum sales force with its CognosFinance team, which will continue to focus on the finance department and the CFO. Cognos does not view its BI tools business as transitional. As such, it will attempt to successfully balance its core BI tools and applications businesses, which can be a substantial challenge.

Products/Services/Technologies

Cognos has had a history of having a functionally rich portfolio of BI tools and products. A number of these products have been developed internally — for example, PowerPlay, Impromptu, Impromptu Web Reports, Upfront and MetricsManager. It has also acquired or licensed numerous products — for example, DecisionStream, CognosQuery, Visualizer, CognosFinance, 4Thought, NoticeCast, NovaView and Scenario. This array of disparate products has introduced a great deal of inconsistency and fragmentation into the product line over the years. Components that are not well integrated will remain.

Series 7: Cognos' early BI products, PowerPlay and Impromptu, have evolved into enterprise BI suites (EBIS) and have been complemented by Web-based versions, a portal and extraction, transformation and loading (ETL) functionality. In the latest release of its EBIS product, Series 7.0, Cognos has done a fine job of insulating the customer from the multiple "moving parts" of the underlying technology and has succeeded in reducing the overt fragmentation that has dogged the products (for example, disparate administration, user paradigms and repositories). A number of customers have praised this uniformity.

Within Series 7, the two most-popular tools are still PowerPlay and Impromptu Web Reports. Content from both tools is delivered through Cognos' Upfront portal. However, PowerPlay still favors its own proprietary Powercube data file structure, an obstacle for many prospective customers. CognosQuery, its Web-based query tool, has been far less popular and has received some complaints surrounding usability and scalability.

DecisionStream: DecisionStream is often thought of as ETL "light." Cognos sells this tool as part of Series 7.0 and as a complement to PowerPlay and Impromptu. It excels at taking data from multiple sources and transforming its "multidimensionally" ("cubing" it) and populating relational star schemas, Microsoft's Analysis Services and Cognos' own Powercubes. However, Cognos does not sell DecisionStream as a mainstream ETL tool. It complements more-powerful ETL tools from providers such as Ascential and Informatica (see "ETL Magic Quadrant Update: Market Pressure Increases").

CognosFinance/Adaytum: The CognosFinance product, acquired from LEX2000 in 1999, has been the cornerstone of Cognos' packaged applications initiative. It offers financial consolidation/eliminations, statutory reporting, planning and budgeting. Sales have been modest since its inception. The acquisition of Adaytum strengthens Cognos' position in the market, adding 1,500 Adaytum customers to its installed base, a stronger financial-planning module and needed expertise. The CognosFinance product still sports its unique, proprietary architecture and technology. The Adaytum acquisition increases near-term technological fragmentation because it must be integrated with Cognos' infrastructure, CognosFinance and MetricsManager.

Cognos has already facilitated first-level integration between Adaytum and MetricsManager, the Upfront portal and the security engine. Deeper integration, including metadata consistency, common management console and user interface commonality, will not be completed before 2004 (0.8 probability) and has the potential of draining resources from other efforts (for example, improvements and extensions of the established product line). This will create the greatest impact on Adaytum and CognosFinance customers and the least on EBIS customers.

Metrics Manager: Metrics Manager replaces the KPI Business Pack, which was not much more than a placeholder for KPI viewing capabilities. It enables the definition of business metrics, metric sharing and metric change control. Metrics Manager is easy to use and implement because it has just the right amount of necessary functionality and nothing more. Metrics Manager shows a promise of where Cognos is going with its vision on BI by including some early collaborative (workflow) functionality.

Customer Service/Product Support

Historically, Cognos' technical and field support has been below average, due to a lack of responsiveness and knowledgeable resources. It has improved and can now be considered adequate. This is an area where Cognos can continue to improve. The advent of Series 7 should reduce demand on the product support staff, enabling it to focus on raising the bar for customer satisfaction.

Related Research and Ratings

"BI Magic Quadrants: Excitement in a Flat Market"

"Cognos and Customers Should Win With Adaytum Acquisition"

Rating Definition

Strong Positive Solid provider of strategic products, services or solutions.
• Customers: Continue investments.
• Potential customers: Consider this vendor a strong strategic choice.
Positive Demonstrates strength in specific areas, but is largely opportunistic.
• Customers: Continue incremental investments.
• Potential customers: Put this vendor on a short list of tactical alternatives.
Promising Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured.
• Customers: Watch for a change in status and consider scenarios for short- and long-term impact.
• Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor.
Caution Faces challenges in one or more areas.
• Customers: Understand challenges in relevant areas; assess short and long term benefit/risk to determine if contingency plans are needed.
• Potential customers: Note the vendor's challenges as part of due diligence.
Strong Negative Difficulty responding to problems in multiple areas.
• Customers: Exit immediately.
• Potential customers: Consider this vendor only if there are no alternatives.

This research is part of a set of related research pieces. See AV-19-2672 for an overview.