Cognos follows the CPM pack, acquires Applix

With Oracle, SAP and Business Objects investing heavily to extend corporate performance management into the finance office, Cognos today responded by buying Applix.

Cognos Inc. today responded to acquisitions and a push by its corporate performance management (CPM) competitors

into the finance office by making a purchase of its own.

Ottawa-based Cognos agreed today to purchase Westborough, Mass.-based Applix Inc. for approximately $339 million. The deal is expected to close in the fourth quarter of this year.

Applix's analytics technology capability will join Cognos's product portfolio, including: Cognos 8 Planning, Cognos 8 Controller, and Cognos 8 Business Intelligence. A key feature of the addition of Applix is the company's TM1 product, a 64-bit, in-memory multidimensional OLAP server.

"The TM1 store is a centralized, high-performance, read-write store," Cognos CEO Rob Ashe said in a morning conference call. "But if you peel back the layers of the onion and look at what we're both good at, Applix is good at centralized, highly analytic, rapid-update, scenario-based planning. What we're really good at is distributed planning with an architecture built for thousands of users in remote locations who look at their own models to create a centralized plan for high-frequency planning. Combined with our specialized go-to-market model, I think we'll be very highly competitive in the market."

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Ashe added that integration of the two companies' products would be "modest," thanks to some overlap between Applix's 3,000 customers and Cognos's 3,500.

"Overall, we anticipate a relatively smooth integration given the shared vision and familiarity between the two companies and many shared customers," Ashe said.

He estimated that 25% of the two customer bases overlapped.

"[Applix] has a really strong technology foundation that Cognos didn't really do that well before," said John Hagerty, vice president of research with Boston-based AMR Research Inc. "It's a plus-plus deal. Applix customers become part of a much larger company, and Cognos offers its customers and prospects a better opportunity to play in the finance office and do more real-time analytics."

The office of the CFO has emerged as a battleground for vendors selling BI and CPM, technologies that are rapidly coming together. Earlier this year, Redwood Shores, Calif.-based Oracle Corp. acquired CPM specialist Hyperion; Walldorf, Germany-based SAP AG responded by acquiring OutlookSoft; and Paris and San Jose, Calif.-based Business Objects then bought Cartesis.

Cognos saw an opportunity to become the standalone option.

"Cognos sees this huge opportunity as an independent player," Ashe said. "Finance often wants to choose an independent solution. One, because of the diversity of their infrastructure. Two, they want the focus to be exclusively on performance management, and they want the innovation. With that as a backdrop, Cognos began to take steps to specialize its market model around finance. Part of that thinking was the acquisition of Applix and a go-to-market model that would emerge as a more specialized model than we've had before."

The emphasis on finance is not a new one for BI and CPM vendors, and certainly not for Cognos, according to Hagerty.

"Cognos had made a really big pitch around finance about a year ago and then let finance become just a part of its story," he said. "Everyone else did the reverse. Cognos saw the market shifting from where it was to where it had been. This restatement of Cognos's historical position around finance -- they realized they shouldn't have done that."

Applix, which spans multiple industries in its customer base, is split roughly 50-50 between enterprise and midmarket accounts, according to David Mahoney, president and CEO of the company. Midmarket customers do all their reporting and planning on the Applix platform. Larger customers run more complex operational and financial planning and tend to be customers of Oracle or SAP.

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