In Good PositionIn Good Position

Robert G. Ashe, president and CEO of Cognos, and Godfrey Sullivan, president and CEO of Hyperion, have some significant traits in common. They both recently were promoted from COO to CEO of leading BI companies. And they head the two pure-play BI companies that ranked in the top three of this year's IDC study of the growing "business performance management" market. (The top three, in descending order, were Hyperion, SAP, and then Cognos.) So, naturally, another thing they share is a bullish disposition about the performance management market. Here are some excerpts of my recent conversations with them.

Godfrey Sullivan
President & CEO, Hyperion Solutions

Q: What do you attribute the last quarter's performance to?

Godfrey: I would just say it's good execution on behalf of the entire team. The market's working in our direction because all the key drivers around transparency and visibility of numbers and disclosure — all those macro factors — are ones that play well for our company, given that business performance management [BPM] software is all about insight. So that's working well for us.

I would say that one of the long-standing competitive advantages of Hyperion has been that we sell six-figure deployments with rapid ROI and deployment. Customers do not have a big appetite at the moment for seven- and eight-figure software transactions that take years to implement. The urgency around fast ROI is pretty high right now.

Q: IDC analyst Kathleen Wilhide attributed Hyperion's first place in the IDC study of the BPM market, with three times the BPM sales of SAP, partly to Hyperion's preexisting success with the consolidation platform, consolidation being one of the three areas IDC includes in its definition of BPM. Is that usually the entry point for your BPM sales?

Godfrey: No. It's pretty balanced. Planning is a key driver for BPM. Consolidation's a driver. Custom analytics, you know, people who want good management reporting — that's a key driver. I'd say the three major drivers are planning and budgeting, consolidation, and the third would be management reporting/dashboards.

Q: Now you have a growth strategy to get to a billion. How are you going to get there?

Godfrey: It'll be a combination of core growth and acquired growth. So we fully expect for our existing products to grow, and as we demonstrated last year, that we will have an appetite, an appropriate appetite, for acquisitions based on where we can find complementary technologies.

Q: Why did you decide to acquire QIQ?

Godfrey: The Brio tools, the performance suite tools that we acquired last year, already have a reputation as the easiest-to-use reporting tools. The QIQ acquisition just helps them get easier still. QIQ has drag-and-drop report construction tools, which puts reporting in the hands of more people and makes it easier to get started and easier to get a fast ROI. We want to fully integrate their technology into our performance suite.

Q: What other areas are you looking at for acquisitions?

Godfrey: We've been saying for the last couple of years that we have three priorities for acquisitions. Number one is adjacent applications. Number two is what I would call strengthening the platform, and then number three is pure consolidation. So our acquisition last year of the Alcar Company, where we bought what is now known as Hyperion Strategic Finance, that's a great example of an adjacent application. It's used typically in the CFO's world. It's an app that works really nicely with our other financial applications. It's a high-level financial modeling tool that is often used by treasury, the CFO, or the business development departments to understand things like what would happen if we acquired a company? How would the two P&Ls merge? What would happen if we leveraged our balance sheet by using our cash to buy stock out of the marketplace? What would happen if we issued a bond or a debenture? So you can do all the high-level financial modeling around your company. It does income statements, balance sheets, cash flows, all that sort of thing.

It was actually written by a couple of guys out of the Kellogg School, who had taught a class, written a book, and ultimately wrote this piece of software on strategic financial modeling. It's a perfect example of an adjacent financial application that our guys could sell when they were out calling on the CFO's office.

The Brio acquisition is a better example of strengthening the platform. We needed relational reporting capabilities. We needed better dashboard technologies, and the like, and so Brio is a perfect example of strengthening the platform, and the QIQ acquisition is also a platform play.

We look at pure consolidation as a distant third because those [acquisitions] are typically harder to manage.

Q: Are you concerned that Microsoft is commoditizing OLAP?

Godfrey: Yes. And we still think Essbase is the best OLAP tool in the world, and our new 7.1 version is absolutely the most important new version we've put out in the last five years. So we feel like we do OLAP a lot better than [Microsoft], both in the financial world, where we are the runaway winner, and 7.1 will help us compete very nicely ... in the operational space.

Our analytics business has declined over the last couple of years, but I think that's more because of our own focus on our applications business. I'm confident that we can grow that business, but we need to pay specific attention to it, and you'll see that happen beginning with the launch of the Essbase 7.1 product in the fall of this year.

Robert G. Ashe
President & CEO, Cognos

Q: What did you take away from the Cognos Forum?

Rob: [Attendance was] bigger than we've ever seen by a factor of 50%. I think it reflects the state of the BI-CPM [corporate performance management] market, that it has become so strategic to large companies. We had planning customers there, finance customers, BI customers.

Q: Is CPM starting to overshadow sales of general BI: OLAP and reporting?

Rob: No — I think we've got two curves moving with each other. On the BI side there's such a strong movement out there for standardization as a way to make BI pervasive and set the foundation for the performance management environment, combined with just the increasingly strategic nature of BI.

Q: But is reporting, say, less strategic for you because Microsoft has commoditized it with SQL Server Reporting Services?

Rob: Not in the large enterprise — the global 3500. I think Microsoft is clearly a phenomenon at the low end. At the high end — where you're really seeing the big activity around enterprise standardization — if anything, reporting as a theme has become higher in the agenda.

Q: What was behind the decision to port ReportNet to Linux?

Rob: Well we think Linux is an important platform. We think it's going to be a very interesting platform at the low end. For sure it's becoming an interesting platform for the large enterprise. I haven't seen it pervasively yet as an application server for BI, but it's certainly finding its way into the large enterprise and into the public sector. Two, it's a great opportunity to partner with IBM.

Q: What can you tell us about the Series 8 roadmap?

Rob: With Series 8 [expected around year end], we really bring PowerPlay into that [ReportNet] architecture so that we really take advantage of the power of that architecture across both OLAP and ROLAP as well as the basic SQL database.

Q: What will that mean for the end user?

Rob: The biggest advantage for an end user is going to be the ability to get at any data source from a single environment. You don't have to switch tools or mix tools. Exposing PowerPlay to ReportNet architecture, we'll be able to get PowerPlay reporting against the data sources that ReportNet's really good against right now: BW [SAP Business Information Warehouse], [Microsoft SQL Server] Analysis Services — data sources like that.

Q: And how well integrated is your Adaytum acquisition into the ReportNet architecture?

Rob: That is going to just be a gradual process over time, where we will — as we see the need to push new functionality, we'll push as much of it as we can out of the new architecture. That's probably 12 to 18 months away before we're really talking about a planning product inside that architecture. The most recent version of Planning, 7.2, has some integration, but doesn't yet take full advantage of that platform.

Q: What are your projections for the next three to five years?

Rob: I think we're going to see an acceleration of the convergence [and an environment] where it's just accepted that BI is foundational for CPM, and your investment in BI is an investment in a CPM environment for the vast majority of the cases. I think that we're going to see good growth rates: BI growth rates in excess of 10%, and with market share gains, hopefully we can see between 10 and 20% in the next couple of years. And I think CPM's growth rate is going to be higher than that, but over time you're going to see these things converge into more of a single view of the market.

Q: Are you looking at getting into business activity monitoring [BAM]?

Rob: I think the challenge is, where is BAM going to show up as a real business priority? I think where we see the application of BAM or BAM-like technology is really probably in operational scorecards that are drawing data from multiple sources, where a change in the data source becomes important to the scorecard, and so you really want to be up to date.

But when does a scorecard stop being a management tool and become a process tool? So I'm kind of skeptical that we're going to want to turn all of our dashboards' environments into process management-like environments, because people don't manage their organizations in real time. But there's certain data that becomes important in a real-time environment, and I think there's a lot of relevance around that in some of the scorecarding environments that we're seeing.

We've got our agent product that is called NoticeCast, which is another part of the environment that shows up in the Series 8 architecture. I'm a believer that [BAM is] going to find its home in an important place in the enterprise. I just don't know if it's going to be a pervasive thing because I think you really have to draw a distinction between process control and management control.