Excerpted from:
Dow Jones - www.dowjones.com
Cognos And Business Objects Rivalry Entering New Phase
By Stuart Weinberg - Thursday November 25
TORONTO (Dow Jones)--Cognos Inc. (COGN) and Business Objects S.A. (BOBJ) have barely begun their latest battle for leadership of the business-intelligence- software sector, but both sound as if they've already won.
The arch-rivals have re-armed themselves for a high-stakes confrontation in a growing but crowded sector. Cognos' new weapon is ReportNet, a highly-touted product that allows companies to create business reports in large volumes. Business Objects' new weapon is Crystal Decisions, the fast growing Palo Alto, Calif. company that it is in the process of acquiring.
ReportNet was officially launched Sept. 9, making it all of 11 weeks old. The $950 million Crystal acquisition isn't expected to close until mid-December. But that hasn't stopped the chest pounding.
Witness Cognos chief executive Ron Zambonini expounding on ReportNet during the company's September earnings call. "ReportNet is a giant leap forward in business intelligence. It is simply the most powerful, scalable, integrated and comprehensive solution for reporting in the world today.... We've generated lots of market attention and we've created a pipeline as plump as a Christmas goose."
On its latest earnings call, Business Objects suggested it's cooking ReportNet's goose. "I'm primarily seeing ReportNet trying to compete with Business Objects in the small-and-medium-business market, because no large enterprises are willing to be guinea pigs on the first version," Business Objects president John Olsen said. "And in the small-and-medium-business market, we're beating them fairly handily...without Crystal. With Crystal, it's not even a fair fight."
Far Too Early To Declare A Winner
Which version of events are investors to believe? Is ReportNet really that good, or is it overhyped? Is Business Objects really distracted by the Crystal acquisition, as Cognos has suggested, or is it business as usual?
Gartner analyst Bill Hostmann said it's too soon to answer these questions. Both companies are working on key product road maps that should provide more clarity in 2004 and beyond, he said. Cognos will reveal future plans for ReportNet, while Business Objects will unveil its integration strategy for Crystal, he said. For now, Hostmann said, Cognos and Business Objects are making "an awful lot of competitive assertions," which isn't surprising given their new weapons and given the increasing competition in their sector.
More companies than ever are using business-intelligence software to gain " competitive insights" from their enterprise applications, Hostmann said. And the world's biggest software vendors have noticed. Oracle Corp. (ORCL), PeopleSoft Inc. (PSFT) and Siebel Systems Inc. (SEBL) are all including business- intelligence functionality in their products, he said, with Microsoft Corp. ( MSFT) also entering the sector.
These players join an already crowded field that, in addition to Cognos and Business Objects, includes Hyperion Solutions Corp. (HYSL), MicroStrategy Inc. ( MSTR), privately held SAS Institute Inc. (X.SAI) and Information Builders Inc., plus a host of smaller vendors.
Still, Business Objects and Cognos are the sector's traditional leaders and long-time, often bitter, rivals.
Cognos has indicated that it believes it has the immediate advantage in this latest phase of the rivalry because Business Objects will be distracted by the integration of Crystal. "Even if the gods smile on them and they're not confused, they still have a massive amount of work to do to integrate two solutions which broadly overlap," Cognos vice-president of corporate strategy Rob Rose told Dow Jones.
Not surprisingly, Business Objects sees things differently. "I think the clarity that we're giving the marketplace, having identified the true leader in the industry, is more than offsetting any confusion that could be caused ( during) the integration period," Business Objects chief financial officer Jim Tolonen told Dow Jones.
Tolonen said the acquisition of Crystal caught Cognos off-guard. "Business Objects and Crystal's license revenues combined in the latest quarter is 85% bigger than theirs," he said. "That's a significant difference."
Cognos' Rose disagreed, saying that the main reason Business Objects bought Crystal was fear of ReportNet. "Even though we only launched ReportNet in September, we've been having early customer experience with it in deals.... They know what it's like to lose to ReportNet," he said.
Both companies shared recent competitive wins.
Ann Evans, vice-president of e-commerce at MeriWest Credit Union, said the San Jose company chose Business Objects Enterprise 6.1 over ReportNet because it's a proven product with very fast performance. Price wasn't a factor, she said, adding that it wasn't an easy decision. "It was a very, very close call," she said.
Fujisawa Pharmaceuticals Co. (J.FJP) said it chose ReportNet because it's completely Web-based and because it can produce nice reports with better layout features than competing Business Objects products. Nicola Marangoni, associate manager, business applications at Fujisawa, said price wasn't an issue. While ReportNet has some bugs, he said he is happy with the product.
Cognos' Rose said ReportNet has surpassed the company's expectations "across any dimension you care to look at." That's good news for Ron Zambonini, the Ottawa company's chief executive, who pledged to conduct Cognos' third-quarter earnings conference call nude if ReportNet hasn't generated at least $10 million in sales by quarter end.
Business Objects' Tolonen acknowledged that the integration of Crystal lies ahead, but noted that revenues at both companies were up sharply in their latest quarters compared with last year, suggesting that customers aren't confused and that the combined company will be a major force. "The proof is really in the numbers," he said.
