Business intelligence buyouts could lead to cheaper deals for users

IBM's £2.5bn purchase of Cognos is the latest in a series of buyouts by large database providers of business intelligence software suppliers.

IBM's £2.5bn purchase of Cognos is the latest in a series of buyouts by large database providers of business intelligence software suppliers.

As a result of this trend, business intelligence users could eventually be influenced into using one provider for both their database and business intelligence software through offers of cheaper licensing deals in the short term.

But if the database component becomes entrenched in the business, it can be expensive for users to change provider, and this could reduce the ability of business intelligence users to negotiate their licensing and support costs in the long term, say experts.

IBM's bid follows high profile buyouts of independent business intelligence suppliers this year, namely Oracle buying Hyperion for its financial reporting software and SAP buying Business Objects for its business intelligence tools - all to offer integrated systems which are quicker to configure and manage.

Ray Wang, senior analyst at Forrester, said users might genuinely benefit from integrated business intelligence solutions as the big four (Oracle, IBM, SAP and Microsoft) effectively buy the best-of-breed suppliers in business intelligence the market.

"This signals the move to incorporate these capabilities into the middleware platforms and create more lock in around the traditional products such as databases offered from the big four. Users need to keep in mind the trade off between sole sourcing with one vendor and the risk to innovation and compatibility," he said.

Helena Schwenk, senior analyst at Ovum, said users might initally be offered better licensing terms to use a business intelligence tool with a specific company's database, but in the long term, this could create lock-in. "business intelligence users could use the recent consolidation to negotiate better terms with their existing database and ERP providers," she said.

However, Andreas Bitman, a senior analyst at Gartner, thinks that end-users will be largely unaffected by the acquisitions, as the business intelligence technologies bought by the IBMs and Oracles are to fill out holes in their product portfolios.

"There are certain areas where technologies overlap (eg. data integration in Cognos and IBM) that can cause sun-setting of some products, but typically not without any migration strategy. Although there are no imminent implications for current contracts, renewals and maintenance cost may need to be renegotiated in the long term," said Bitman.

Gartner recommended that enterprises take advantage of the highly competitive environment to negotiate contracts and buy basic business intelligence functionality at lower prices, but stressed that they need to prepare for changes in technology and products.

Mark laRow, vice-president of products at Microstrategy, an independent business intelligence software supplier, urged users who are negotiating business intelligence software licensing costs to remember that selling licences on databases offers a greater return for these suppliers than selling business intelligence tools. The decision to go with a single provider for database and business intelligence tools should be reflected in lower licensing costs over an agreed period.

"Selling databases is where they make their money. Databases are stickier applications compared to business intelligence ones and offer the Oracles and Microsofts a greater annuity from customers over time," he said.

An IBM spokesman said that the company does not anticipate any changes to Cognos licensing agreements following completion of the purchase in 2008 and that IBM was committed to ensuring its products interoperate with other software suppliers.

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