In the November 13, 2007 edition of the New York Times, I read an article entitled “IBM Acquires Cognos, Maker of Business Software, for $4.9 Billion.” This article detailed how IBM, a major producer of computer systems and applications, plans to acquire Cognos, a company that is described as being “the last major independent producer of software that companies use to analyze mountains of data.” IBM’s decision to take over this company that produces software known as business intelligence software is just the latest move in a trend of acquiring companies that produce B.I. software. SAP and Oracle have also purchased other companies that produce this business intelligence software.
So what is this business intelligence software? In IST 210, we will be learning about different types of data and some of the organizational processes involved with that data. Cognos, and companies like it, produce software that goes through massive databases and pick out certain information that can be useful to large corporations. For example, business intelligence software can figure out certain things such as customers’ buying habits or a company’s inefficiencies. It is used to take valuable information out of a large database.
IBM is paying $4.9 billion to acquire this company. This is a very large amount considering Cognos’s finances. The amount is five times Cognos’s annual revenue and an astounding thirty-nine (that’s 39!) times its annual net earnings. IBM is willing to pay this much because they realize how big that the business of business intelligence software is getting. Prior to this acquisition, IBM had no stake in this sector.
A computer science major would look at this and analyze the new software potentials for IBM. A business or economics major would look at this and see what the software does for business and how the buyout is going to affect the financials. As an IST major, I must explore all of these aspects. My first question concerns the effect on the price of business intelligence software. With one less independent company to produce this software, I was worried that prices may go up. However, I realize now that IBM had no stake in this sector prior to its acquisition. Therefore, there is still the same number of companies producing the software as there was prior to the buyout. Actually, the prices of the software may drop because a very large company (IBM) is now in place to help a smaller company (Cognos) manage its development of software. I think that the business world will be thankful for this in the end because it is going to raise the quality of business intelligence software.
I must note that this buyout raises some interesting issues. A lot of competitors of IBM use Cognos software. What is going to happen now? On one hand, the competitors can continue to use this software because it has worked well in the past and will probably be less expensive to purchase. On the other hand, these companies could decide that it is a bad idea to give business to one of their competitors. I think that in the end, the competitors of IBM would rather give them a little business as opposed to spending a lot of cash on purchasing other software that may not be as effective.