Mad Dog 21/21: Sheets for Brains

December 13, 2010 Hesh Wiener

In January 2009, Salvatore DiMasi made it a hat trick. He became the third consecutive Speaker of the Massachusetts House of Representatives to resign in the wake of a federal indictment. The feds said DiMasi, his accountant, and a couple of their buddies took bribes from Cognos to steer software and services deals its way. IBM had paid nearly $5 billion for Cognos a year earlier, and paid again, this time $17.5 million, when it refunded all the money paid by Massachusetts to Cognos.

IBM undoubtedly hopes it is better at business intelligence than it was at due diligence.

IBM is keeping the Cognos brand, which is now presumably as clean as a hound’s tooth, and expanding it to include a number of products from a software division currently called Business Analytics, products that come from firms other than Cognos. What began with IBM’s acquisition of one of Canada’s most successful software companies has grown into two-phase strategy. IBM has decided to build its BA business by aggressively boosting its acquired capability and augmenting its reach by acquiring other companies and also by licensing key technologies from companies that have complementary products. In addition, IBM has invested a lot of time and effort to study the BA market via a partnership with MIT’s business school publication, Sloan Business Review.

In its most significant BA acquisition since buying Cognos, IBM bought SPSS just over a year ago, bumping up its investment in BI and related technologies by another $1.2 billion. SPSS, despite its roots in academia and its core focus on quantitative analysis of sociology data, has software that is well suited for picking up market trends and correlations and for making trend-based forecasts. Whether SPSS can be made sufficiently user friendly to serve the Cognos base remains to be seen, but IBM talks as if it can successfully tame the powerful SPSS stats packages for the masses. Also, IBM can see that a key rival, SAS, has built a bigger business than the Cognos group (with SPSS counted in) by aiming high, so Big Blue can see it is not alone in serving the intelligentsia of the marketing universe.

SPSS adds a collection of statistical features to the Cognos product lines and it also brings a special set of offerings to the i, which IBM calls ShowCase. The SPSS deal not only brought IBM technology that originated with SPSS, it also gave IBM access to Essbase. Essbase provides well-regarded technology that Oracle acquired when it bought Hyperion to get into the BI game. Oracle licenses an Essbase port via SPSS for use on i. Essbase is OLAP; it extends the reach of analytic software, sort of like putting spreadsheets on steroids. Essbase lets users select and examine data that is organized in three or more dimensions. By contrast, typical spreadsheet BI applications are confined to two dimensions, in part because even when spreadsheet software provides some BI features, it can be cumbersome to use and a nightmare to audit when flat tables are stacked up. Users discover this when something has gone out of whack and it takes as long to find an error as it did to build the model in the first place.

That may be changing with Excel 2010. It has been extended to include technologies that enrich its business intelligence capability, making life easier for users who build large 3D models, even those daring enough to share their work with collaboration teams. When users want stricter auditing than Excel by itself can provide, Microsoft tries to sell users its SharePoint server. But users have other choices, as Excel 2010 can hook up with data sources from plenty of other environments, too; it’s not confined to the family of Windows servers.

The IBM BA Cognos line also incorporates technology from Information Builders, in the form of a product called DB2 Web Query (a constrained version of the product also known as WebFOCUS) that IBM says is the designated successor to Query/400. The Information Builders technology may be easy to spot now, but IBM is beginning to deliver smoother integration across its Cognos brand. As IBM gets customers to move from Cognos 8 to Cognos 10, it blurs the visible line between Cognos, Information Builder technology, SPSS code, and other components, possibly from IBM’s recent acquisition of data warehousing appliance maker, Netezza.

Evolving BA and BI products is crucial to i shops, which often want a single, provider of well-integrated and contemporary BA technology. If IBM fails to provide this software, they will worry that data repositories managed by DB2 on i are losing viability. IBM’s competitors are always circling the i like vultures and the minute data on i looks like it is hard to exploit compared to data stored under Linux, Unix, or Windows systems or their respective databases, the i will be in real danger.

And there are other players providing business intelligence software that runs natively on the IBM i platform, notably the products from NewGeneration Software. And Qlik Technologies has integration with the i platform with its Windows-based BI products, too. These and other companies are looking for any advantage, often by offering simpler, more targeted, and less expensive products to i shops can get from Big Blue. Just about anything is better than IBM’s Query/400, apparently, despite its popularity in days gone by.

While IBM has singled out the i for some special Cognos family offerings, the company’s challenges in BA and BI are not limited to the i market. Big Blue has a fight on its hands in every platform segment from mainframes down to modest X86 boxes. It is pretty clear that BA is no longer an optional addition to DBMS; it is a capability that users must have on tap so they can unlock the value in their databases.

Gartner’s most recent data, which is for 2009, show IBM running fourth in the relevant segment, with 12.2 percent of the market, just over half the share held by BI leader SAP with its 22.4 percent slice. Check it out:

	2008 Sales	Market	2009 Sales	Market	Percent
Company	In Millions	Share	In Millions	Share	Change
SAP	$2,096.1	23.4%	$2,084.1	22.4%	-0.6%
Oracle	$1,284.0	14.4%	$1,351.1	14.5%	5.2%
SAS Institute	$1,286.6	14.4%	$1,324.6	14.2%	3.0%
IBM	$996.5	11.1%	$1,135.6	12.2%	14.0%
Microsoft	$681.5	7.6%	$739.1	7.9%	8.5%
MicroStrategy	$280.0	3.1%	$295.0	3.2%	5.4%
Other Vendors	$2,322.3	26.0%	$2,392.4	25.7%	3.0%
Total	$8,946.9		$9,321.9		4.2%
Source: Gartner

Between SAP and IBM lies Oracle, with 14.5 percent of the market, and SAS Institute with 14.2 percent. The market, according to Gartner, was $9.3 billion in 2009, up from $8.9 billion in 2008; the market is expected to grow faster this year than last, but Gartner’s data is unlikely to be available until next spring. Gartner may not see the BI market quite the way all the participants do. At the very least it might soon have to start talking in detail about a wider world, one that includes more contenders, particularly Microsoft.

About the time IBM was buying Cognos, Microsoft bought a Norwegian company called Fast Search & Transfer for about $1.2 billion. Fast developed technology for searching unstructured data, such as Web pages, and observers of the deal said that the code might show up in two places: Bing and related services that need to analyze a lot of content on the fly and SharePoint, the server that business users buy to do BA and BI chores, among other things.

Microsoft makes a big point of trying to pick off small and midsized accounts that keep their strategic data and services on platforms that aren’t running Windows. The threat from Redmond is obviously a factor in the Linux and Unix segments and it is also a significant menace to IBM’s i market. Microsoft offers Windows at prices that can beat the i (particularly on midrange, not entry, machines), and even when users won’t migrate they are tempted to put new applications and new databases on Windows in the belief they can get better pricing, particularly as workloads grow. Windows, SQL Server, SharePoint, and other technologies from Microsoft often provide less costly growth paths than i systems with comparable software.

IBM also faces competition from the generic Linux world, but lately, as Oracle chews up MySQL and SUSE Linux becomes a toy of private equity investors, open source has lost some allure in corporate markets. Red Hat Enterprise Linux is missing a database of its own and has some pretty hefty price increases with version 6. Some users are praying that Google or Amazon or some other generous giant will rescue Linux and at least one open database, while Microsoft just loves it when LAMP dims.

No matter how much IBM might wish otherwise and no matter how hard IBM works to improve its free Symphony productivity package, which has a spreadsheet component that is comparable to Excel for many purposes, Big Blue is not about to displace Excel from the desktops of market analysts and other users of BA and BI technology. Out of necessity, IBM integrates Cognos with Excel. IBM is not pleased when Microsoft wants to expand its role in BI from the desktop to the server farm, particularly if a Windows server might displace one of IBM’s proprietary systems. But there isn’t much IBM can do to stem the tide unless it can provide a spreadsheet client with the functionality and polish of the new Excel.

IBM earned its precarious position. It pretty much ignored the progress in BI technology until just a few years ago. It repeatedly failed to get Lotus products to enjoy the ubiquity in corporate settings that Office has held for what seems forever. Now the best IBM can do is fight for a better grip on BA and BI in its various server markets. IBM can help mainframers run Cognos in a zLinux engine; persuade i users to stick with the Cognos and SPSS technologies it ported to the i system or work with partners like NewGeneration to keep BI workloads native on it. It can try to price its products for AIX at attractive levels so its Unix shops don’t run their BA and BI in Windows sidecars.

Even so, when it comes to BA and BI cloud services and canned private cloud shake-and-bake BI servers, IBM will probably have to concentrate on products that run on X64 platforms. Conditions in this market segment won’t give IBM any other way for it to hit all the targets: ease of entry, cheap scalability, client technology that uses Excel 2010 under Windows 7 and presentation formats that make it easy to combine various reports into composite presentations and dashboards.

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