A Springboard To Services

Interesting, but disappointing news that CA has decided to considerably downgrade it's capabilities in the Asia Pacific region, it is shutting several country offices, Indonesia, Hong Kong, Malaysia and the Philippines, and transferring the business to partners. Additionally a reduction is clear in other geographies. Given that the future of IT is in the region it is a surprise move.
In my opinion it says more about the failure of CA to meet local market conditions from a pricing, distribution and services perspective. The market also has a long memory, it tends to be unforgiving of those who turn their backs on it. This sort of move is not something that will accelerate business locally, so expect to see declines for CA in the region, and for customers, a reduction in CA direct interaction.

Today's announcement that IBM are buying Cognos has implications for the whole BI market, and more broadly the Apps Software space. As highlighted below, IBM is now an Application Software player, regardless of the spin they put on things. HP will make some sort of a move in the space soon.

Another wild card is Accenture. It has traditionally  avoided acquiring software companies, prefering to build or partner. But as IBM, HP, Oracle and SAP (as well as Infosys and others) radically blur the distinctions between a services and software company, can Accenture continue to drive a partner based model. Given that Oracle and SAP will become the vendor with the power in terms of choosing a partner, the whole relationships in this space are at a very delicate position at this point in time.

Accenture may benefit IF Oracle and SAP move from the blurry Software/Services companies (IBM and HP), to partner with those firms such as Accenture that are just services. However they may also be left behind if the market moves in a slightly different direction.

This is the sort of market plays that make the market so interesting from the perspective of an analyst.

As many will know IBM has bought Cognos for US$5Billion. Having spent considerable resources trying to convince that it is not an applications provider, it is pretty hard now for it to make the call. With other acquisitions from SAP and Oracle, it is firmly competing against these two firms in the BI space (which is an application, regardless of how IBM will try to spin things). HP seems to be left out of this, perhaps Mark Hurd may have to go back to his old NCR days and look at Terradata.

I mentioned a few weeks ago that I thought that IBM and HP would lead the next round of consolidation in the software space, Oracle and SAP got in ahead of them, but I expect that it will not be the end of the rationalisation.

Integration of Cognos for IBM will be a challenge. Aside from the whole Application and partner issues, the integration of some of the recent IBM software acquisitions has not been as smooth as IBM would have liked. Additionally a couple of the brands are also facing strong internal and external challenges in the AP region at least, so interesting times for IBM from a software point of view.

Along with HP who have appeared to have missed the action at this stage in the consolidation of the BI players, despite making BI as a front and centre part of the corporate strategy for growth, losers from this maybe partners such as Accenture and Bearing Point who are strong Cognos integrators. Clearly IBM will look to push away from these partners. By the same token, SAP and Oracle may do the same as IBM continues to enter the Applications space explicitly or otherwise.