Four Reasons to Cheer the IBM-Cognos Merger

 |  Includes: COGN, IBM
by: Joe Panettieri

I'm usually skeptical of software acquisitions. But IBM's (NYSE:IBM) $5 billion buyout of Cognos (COGN), the business intelligence specialist, makes perfect sense. Here are four reasons why the pending deal, announced yesterday, is a good fit for both companies -- and their customers.

1. Similar Cultures: I spent many months moderating executive events for Cognos, and also visited the company's headquarters in Ottawa a few times. Cognos's corporate culture is professional, fun and enterprise-focused — a good match for IBM. Cognos would have been a poor fit for Oracle's win-at-all-costs approach to business.

2. Location, Location, Location: Cognos is headquartered in Ottawa. IBM runs Canada's largest software development facility in Toronto. IBM also has a software lab in Ottawa. Anyone else seeing a neighborhood pattern here? Close proximity between the Cognos and IBM development teams should ease the integration of Cognos into IBM.

3. Extending DB2: Cognos's business intelligence software is a natural extension to IBM's enterprise database, DB2. But IBM will need to make sure Cognos continues to strongly support Oracle and Microsoft SQL Server, while also beginning to embrace open source databases like MySQL and EnterpriseDB.

4. Consulting Dollars: Business Intelligence is a perfect addition to IBM Global Services' toolbox. Big Blue's consulting and services arm will be able to promote Business Intelligence software to CEOs, CFOs, chief marketing offers and other C-suite members who want to better manage their businesses.

Still, the deal has its share of challenges. When SAP announced plans to buy Business Objects for $6.4 billion in October, lots of folks expected Cognos to be the next object of desire. Some Cognos insiders began updating their resumes, I hear, because they were prepping for new ownership. Now, IBM will need to work overtime to retain the Cognos talent.

Disclosure: none