Andrew Wahl: Why the Cognos takeover is a big deal
Tuesday, November 13, 2007 | 01:13 PM ET
Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).
Andrew Wahl is the Business Network's technology columnist. He is a senior writer at Canadian Business magazine.
By Andrew Wahl
(Listen to the original audio)
Just four weeks ago, I told you about how Cognos, Canada’s largest software company, would almost certainly be acquired because its closest rival had itself just gotten snapped up. Well, on Monday, it happened: IBM, always the most likely suitor, announced it was buying Cognos for $5 billion US.
It’s a big deal for a couple of reasons. First of all, it’s the largest acquisition in IBM’s 96-year history, which shows the value it perceives in Cognos. Based in Ottawa, Cognos is a strategic partner of IBM in the area of business Intelligence software, a hot growth segment because it helps corporations mine their data and put it to better use.
But the more important aspect of this deal is that it darkens another of the brightest lights in Canadian technology.
When Cognos officially disappears, probably sometime before spring, the new kingpin of Canadian software will be Open Text, based in Waterloo, Ont. It makes electronic content management software, and compared to Cognos, it has about two-thirds as much revenue over the last 12 months: $660 million US versus just over a billion at Cognos.
Now, Open Text is also a probable takeover target. And the next largest software company is roughly half as big, as measured by sales—and at least twice as obscure.
The fact is, Cognos will almost certainly be Canada’s last billion-dollar standalone software company, at least in the traditional sense. Building such a company was always very hard, but now the path leads to acquisition. If a company is targeting a market with billion-dollar potential, it will surely catch the hungry eye of some tech behemoth. The software industry is maturing, and has consolidated around huge, mostly American companies.
But at the same time, software itself is changing, both how we use it, and the business models of selling it. The biggest markets for software may have been cornered—but big is not always the best. The next wave of Canadian software makers will have to target lucrative niches. And investors will have to work much harder to find them.
-- Andrew Wahl
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Comments
Nick
Toronto
You might consider editing the article for quality next time and perhaps these points may be of assistance;
1. Cognos technology is dated and IBM is buying a cash cow to protect turf.
2. OpenText is about to sink like a rock becuase it is stitched together much like its recent Hummingbird acquisition. The company was being shopped before bulking up hoping to be even more valuable. Unfortunately the most recent technology comes in at less than half the price for better value.
3. Consider another measure other than revenue when equating Cognos as a brightest light. Canadians have superb search software, face and pattern recognition technology and, oh yes, telephony platforms.
Good luck with it, and practice makes perfect, if you don't consider that the technology cycle is about 3-5 years, complete.
This would be considerably less time than it took to develop and go to market for the latest Cognos platform--never mind that it has not passed the early adopter stage.
Posted November 19, 2007 10:58 PM