Cognos To Buy Performance Management Software Vendor Applix

Cognos said the addition of Applix and its products, especially its TM1 OLAP (on-line analytical processing) engine, would strengthen the profitability, customer and product analysis capabilities of its performance management software. "With Applix we'll add these important capabilities to our overall offering, filling out the industry's broadest and strongest solution for financial performance management," said Rob Ashe, Cognos president and CEO, during a conference call.

The acquisition should strengthen Cognos's competitive stance against Business Objects, Oracle and its recent Hyperion acquisition, and SAP, which recently bought OutlookSoft. Hyperion and OutlookSoft were both performance management software developers. And this fall Microsoft will debut its PerformancePoint Server software to compete in the same arena.

Westborough, Mass.-based Applix had sales of $61.2 million in the 12 months ended June 30, representing 45 percent year-over-year growth. The company has some 3,000 customers for its financial performance management applications. Cognos's $17.87-per-share offer for publicly held Applix is valued at $339 million or $306 million net of cash Applix has on hand.

While the majority of Applix's software license sales are direct, the company has a large stable of reseller, OEM, system integrator and ISV partners and as much as 90 percent of the company's sales involve a partner, said Ben Plummer, Applix senior vice president of marketing and strategic alliances, in a recent interview. Applix relies exclusively on channel partners to sell to companies with less than $250 million in revenue. Cognos relies on some 3,000 channel partners for about 30 percent of its sales.

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"We see their channel as hugely valuable," said Mychelle Mollot, Cognos VP of market strategy and strategic communications. VARs and ISVs build industry-specific solutions using TM1 for financial services, healthcare, manufacturing, consumer goods and telecommunications customers.

By using its marketing resources to promote TM1 Cognos should be able to generate more opportunities for TM1 resellers like TLC Technologies, an Allentown, Pa., Applix channel partner, says Patrick Byrne, a TLC Technologies director. He says Cognos sales representatives will be unfamiliar with Applix products and that also presents joint-sales opportunities for resellers that know the Applix software. "I think this is a positive for us as it will give us an entry into the Cognos world," Byrne said.

Ashe said there is "modest" overlap between the two companies' product lines. Cognos' performance management products focus on financial planning, forecasting, control, consolidation and reporting, he said, while Applix's products are used for complex financial analysis and optimization tasks, including product, market and channel profitability analysis.

Cognos offers its own OLAP product, PowerPlay, but Ashe maintained it rarely competes head-to-head with TM1. PowerPlay is designed for broad distribution to workers for quick reporting and analysis chores while TM1, a high-performance, 64-bit, in-memory OLAP engine, performs more heavy-duty data analysis, he said.

The success of the merger from the perspective of VARs like Creeth, RichmanAssociates, of Wilton, Conn. will hinge on just what Cognos does with TM1, says president Richard Creeth. If Cognos recognizes the strategic value of what Creeth calls TM1's superior technology and makes it the foundation of its business performance management apps, Applix channel partners will fair well. But if Cognos neglects TM1 and treats it as a tactical product, it could spell trouble. "Situations like these present both challenges and opportunities," Creeth says.

Cognos plans to integrate TM1 with its Cognos 8 business intelligence platform over the next six to 12 months. A more detailed product integration roadmap will be released after the acquisition is complete.