Cognos Inc. Business Information, Profile, and History

Company Perspectives:

Cognos Incorporated is a global provider of business intelligence software solutions. The Corporation develops, markets, and supports an integrated business intelligence platform that allows customers, as well as their partners, customers, and suppliers, to analyze and report data from multiple perspectives. The company markets and supports these solutions both directly and through resellers worldwide.

History of Cognos Inc.

Cognos Inc. is the leading provider of business intelligence solutions that optimize the performance of the world's largest and most successful organizations. Business intelligence (BI) is a category of applications and technologies for gathering, storing, analyzing, reporting on, and providing access to data to help enterprise users make better business decisions. Cognos consistently adds immediate context to business-driving information, aligning decisions and making enterprises more agile. Cognos serves more than 17,000 customers in 120 countries of the world.

1960s Origins

In 1969, computer technology was much different from that of today. It was the era of mainframe computers and terminals. Computers were room sized and information was centralized in one location. The average manager or employee had no contact with computers.

Cognos' forerunner, Quasar Systems Limited, was founded in 1969 by Alan Rushforth and Peter Glenister. The company, consisting of a handful of programmers and consultants, provided information system consulting to the federal government of Canada. In 1972, Michael Potter joined Cognos. He became a partner in 1973 and bought out the co-founders in 1975.

In 1979, Quasar introduced the company's first software product--QUIZ--for Hewlett Packard HP 3000s. QUIZ extracted data from the computer, manipulated and formatted the data, then printed a report or listing. By 1984, sales of QUIZ had reached 2,500 copies at $7,000 each. The same year that Cognos introduced QUIZ, it also introduced a selection of end-user reporting tools for terminal based users.

New Product Development in the 1980s

Three years later, Quasar introduced PowerHouse, a fourth-generation application development tool for the HP mid-range platform. In 1984, Quasar previewed PowerHouse for VAX at the DEXPO West show in Las Vegas. This heralded a new generation of development tools. The success of QUIZ allowed Cognos to expand its sales force and research and development. This, in turn lead to increased development of products based on the PowerHouse computer language. The PowerHouse eventually ported to the major proprietary and Unix platforms. PowerHouse-based packages, such as the new Expert report-writing system, meant that tasks that would have taken weeks to complete using a traditional computer language now could be accomplished in a day or less.

The 1980s were troublesome years for many Canadian software companies. Canada was in a recession and many competitors went under. However, Cognos continued to earn a profit, largely due to its successful switch from the provision of consulting services to the production and sale of packaged software. By the middle of the decade, consultation accounted for only 20 percent of the company's revenues and software for the remaining 80 percent. As Barbara Crook wrote in the Computer Post: "This seemingly effortless performance was actually the product of conservative management, strong teamwork, and a hefty chunk of corporate humility." Crook quoted Michael Potter as saying, "We certainly weren't unique in recognizing the importance of packaged software, but I think we were unique in our ability to successfully make that transition from custom to packaged software."

In 1983, Quasar changed its name to Cognos. Cognos is a fragment scissored off the Latin word "cognosco," which means "knowledge from personal experience." Quasar changed the name to Cognos to reflect its growing emphasis on products that provide information and knowledge.

Cognos began concentrating on international markets. By 1984, Cognos had grown to 300 employees across North American, and revenues for fiscal 1983 had topped $18 million. While competitors were turning to third party marketers and value-added resellers, Cognos bucked the trend and continued to utilize a direct sales force. Potter acknowledged that a direct sales force was more costly, but said that having control of the sales effort justified the expense.

In 1984, the company became a key player in artificial intelligence (AI). (AI is the area of computer science devoted to replicating human thought processes.) Cognos headed a $100,000 study by the federal government to determine Canada's priorities in AI research.

Over the previous four years, sales had climbed from $2.1 million to $26.45 million. The Globe & Mail reported that in a survey of 437 software companies in Canada, half had sales of less than $500,000. In the early eighties, Cognos had considered going public. However, the market was not right for software companies, and the public listing was put on hold. Cognos had other sources of funds, primarily from the high technology investment arm of the Toronto-based Noranda Inc. Noranda owned 30 percent of the shares, Potter owned 47 percent, and employees owned approximately 25 percent.

In 1985, Cognos opened new headquarters in Canada, the United Kingdom, and the United States. It also opened offices in France and Australia. The expansion was necessitated by a need to find new markets for PowerHouse--which by that time had been adapted to run on several operating systems. The expansion resulted in losses in the first two quarters of the year. Consequently, Cognos made a concerted effort to lower costs by implementing a hiring freeze and cutting back on capital expenditures. Potter was quoted as saying that despite getting "lean and mean," the goal was to support high revenues with the same resources. In the 3rd quarter, the company realized a profit approximately 50 percent of the profit a year earlier.

In 1986, Cognos underwent a major restructuring, commencing with the hiring of Thomas Csathy, formerly of Burroughs Canada, as the new president and CEO. Founder Michael Potter became chairman. Csathy announced his intention to steer Cognos in the direction of software development, believing that software was the way of the future. Csathy also outlined a second objective: to adapt the company's software to the changing market. Cognos anticipated a changed computer environment within five years, involving the complete "networking" of computer systems by major users. Software would have to be compatible and accessible for a whole range of users within an organizational structure

Cognos reorganized in yet another way. In order to respond to its three vendor's distinct markets: Hewlett Packard, Digital Equipment Corp. and Data General Corp. Cognos consolidated product development and sales support along hardware lines. The company replaced separate product development and marketing organizations for each product line with one combined operation. The Globe & Mail quoted Potter:" We have shifted from a functional organization to a product organization."

As a first step towards developing products for microcomputers, Cognos released a new version of the PowerHouse language. This new version allowed developers to work with relational databases. (Relational databases are collections of data that can be compared and searched by logical relationships.)

Cognos went public in 1986. The share issue allowed the company to retire its million bank debt. However, in 1988, profits dropped dramatically from the previous year, primarily due to increased operating expenses--up 25 percent from 1987. Michael Potter predicted that profits would increase substantially in the coming year, since expenditures had slowed. He attributed the decreased expenditures to planned restraints in spending, lowered product costs and sales commissions. The sales force was now contacting customers by mail and telephone instead of crossing borders to knock on doors in search of prospects. The costly "face-to-face" sales approach had been justified when the company was marketing software applications that cost up to $100,000. However, with the switch over to applications for microcomputers, few applications cost more than $2,000. These lower priced applications necessitated a more economical method of conducting sales.

Cognos chairman Michael Potter told shareholders that the new challenge was to broaden the application of software to include giving sales representatives online access to customer information, tailoring software packages to specific customer needs, and helping computer users gain access to the databases of other computers. Potter predicted that information systems, rather than computer languages, would represent the way of the nineties. The company had already begun marketing and developing software in conjunction with other companies to expand its markets.

Cognos increased spending on R&D. The research push was designed to bring the company into new areas of customer demand. Cognos researchers were developing a new generation of software that could write other programs. Potter reported that computer end-users with no programming experience would be able to specify the programs they needed, and the software would do the writing for them.

Despite Potter's optimism, the Financial Post reported that analysts were questioning how long it would take Cognos to recover from its growing pains. Analysts linked Cognos's low sales in 1987 to flat HP sales, but commented that 1988 looked more positive. Two years later, in 1989, revenues hit $100 million. The company had become the largest firm in the world devoted to producing software development tools.

The 1990s

In the early years of the nineties, Cognos enjoyed what journalists described as a "spectacular comeback." In 1990, Cognos introduced PowerPlay--a PC Windows-based business analysis tool that set a new standard for ease of use and power in decision support software. The year following, Cognos launched a powerful SQL database query and reporting tool named Impromptu. (SQL or Structured Query Language is a standard interactive and programming language used in the development of some databases.) Impromptu was said to bring corporate data closer than ever to the user. According to corporate documents, Cognos became a leading player in the move toward tools that empower the user.

The early 1990s presented a special challenge to Cognos. Suddenly the market for centralized processing software dwindled, replaced by a rapidly growing interest in computer networks. The movement caught Cognos by surprise. Earnings suffered as the company struggled with the transition to new products and new markets. In 1992, sales dropped to a new low. However, the turnaround was quick to come.

In 1992, Cognos introduced PowerHouse Client for Windows. This software was thought to be a key step in the smooth transition from centralized processing to client/server computing. (Client/server describes the relationship between two computer programs in which one program, the client, makes a service request from another program, the server, which fulfills the request.) Two years later, in 1994, Cognos unveiled the Axiant Developers' Workbench at UNIX Expo.

The next year, 1995, Cognos named Ron Zambonini as chief executive officer. One of Zambonini's strategies was to change the way in which Cognos software was sold. Zambonini advocated that widely different marketing approaches were necessary at different points in a technology's life. He stated that many companies use outdated sales techniques long after the market has shifted.

That same year, Cognos joined the OLAP Council. This was a software industry association established to provide education about the benefits of OLAP technology for business intelligence applications. OLAP refers to on-line analytical processing server technology. In 1996, Impromptu won the Product of the Year award. Also that year, the company announced a three-for-one stock split. Analysts lauded Cognos for cashing in on a lucrative market (i.e. personal computer networks), and stock prices hit a high of $53.50 on the Toronto stock exchange. One year after, in 1997, Cognos acquired Right Information Systems. This acquisition was expected to broaden and extend the business intelligence product family. Likewise that year, a Cognos product, Scenario, won PC WEEK lab analysts choice award.

Nevertheless, problems were arising. The Internet had gained importance, and the Globe & Mail reported that Cognos was facing a strategic turning point that threatened to impair its comeback of the last few years. From 1993-97, the company had become one of Canada's three largest software developers, based on the success of its BI products for local area networks (LANS).

However, Internet technologies introduced a new, and more economical type of product--BI software to run on intranets. Intranets are corporate computer networks that use the technology of the Internet. Corporate customers struggled to make decisions between investing in powerful but costly BI software for LANS or the more economical, but less powerful intranet software. Customer indecision resulted in delayed sales. Cognos had expected that Web technology would eventually infiltrate BI technology, but it had not anticipated the speed at which this would occur.

Sales and revenues had been excellent in the past few years. However, Cognos issued a notice to its shareholders that its growth was likely to be moderate over the next few quarters. Investors scrambled to sell and the prices of shares dropped accordingly. For the first time, Cognos turned to acquisitions in a big way to bolster its web technology. As Patrick Brethour wrote in the Globe & Mail, "Cognos is being pushed into the unfamiliar role of acquisitor of other firms." Traditionally, Cognos had relied on internal research and development initiatives to acquire new software.

Cognos announced that it had spent $16 million to buy Interweave Software Inc. Interweave's Internet-based information retrieval programs were expected to complement Cognos' main web program, PowerPlay Server Web Edition. This was to be followed by several more acquisitions over the next two years.

In 1998, the company upgraded Interweave's software, renamed it Impromptu Web Query and shipped it. A little later that year, Scenario was named Datamation product of the year. Also, Cognos acquired BI University, which allowed attendees to experience first-hand how BI works in an organization. In December, Cognos acquired Relationship Matters, including DecisionStream software. And lastly, Cognos received the Software Technical Assistance Recognition award for excellent in automated software support in North America.

PowerPlay Enterprise Service was launched in 1999. This was the only OLAP application server that supported the Web, Windows, Microsoft Excel, and mobile users from a single, centrally administrated server. Also that year, Cognos released Cognos DecisionStream, a dimensional framework to build and implement datamarts to form a fully integrated BI system. (A data mart is a repository of data gathered from operational data and other sources that is designed to serve a particular community of knowledge workers.)

That year, Cognos completed the acquisition of LEX2000 Inc., a developer of financial reporting consolidation, budgeting and forecasting systems, and of Information Tools AG, the Corporation's distributor in Switzerland. Cognos also completed the purchase of the entire outstanding minority interest in the subsidiary in Singapore, Cognos Far East Pte Limited. Also in 1999, Cognos held its first User Conference, Enterprise 99. The conference was held in Orlando, Florida, and was open to all customers and partners.

In 2000, the company released the Cognos platform, an application for building, managing, and deploying BI solutions for enterprise and e-business needs. A little later, Cognos launched a new e-business intelligence applications business unit. Business Week magazine named Cognos as one of the world's Top 100 Information Technology companies. It was the only business intelligence software provider named to the list. DM Review readers named the company the number one independent business intelligence company in its annual ranking of the industry's top 100 vendors in business intelligence, CRM (Customer Relationship Management), and data warehousing.

Acquisitions continued. In 2000, Cognos acquired Powerstream OY (the distributor in Finland), NoticeCast Software Ltd. (an event management software company), and Johnson and Michaels, Inc. (a provider of business intelligence consulting services).

In June 2001, Cognos announced financial results for the first quarter. Revenue for the quarter was $108.0 million, compared with revenue of $108.7 million for the same period last year. Net loss for the first quarter of fiscal 2002, excluding restructuring charges, was $2.1 million or $0.02 per share. The company attributed the losses to the economic slowdown occurring in the United States and announced a strategy to reduce the cost structure in response to the current economic environment, including a reduction in the work force. On July 3, 2001, Ron Zambonini was listed as the 24th most influential technology industry CEO in the Enterprise Systems Journal Power 100 list.

The Future

Despite economic slowdown in the United States, and the cost-reduction strategies being implemented, the company did not expect its strategic programs to be affected. Cognos has planned a number of product releases for later in 2001--including the fully integrated BI platform and version 5.1 of Cognos Finance.

The high technology industry is volatile and subject to constant and sudden changes. Cognos, like its competitors will always be faced with the need to adjust to changing times and to remain current. Since it has successfully faced such challenges in the past, there is reason to anticipate that it will continue to do so in the foreseeable future.

Principal Subsidiaries: Cognos Corporation (U.S.A.); Cognos do Brasil Ltda. (Brazil); Cognos BC (Sweden); Cognas A/S (Denmark); Cognos Austria HmbH (Austria); Cognos B.V. (Netherlands); Cognos France S.A. (France); Cognos GmbH (Germany); Cognos Limited (U.K.); Cognos N.V./S.A. (Belgium); Cognos OY (Finland); Cognos South Africa (PYT) Limited (South Africa); Cognos S.p.A. (Italy); Cognos (Switzerland) Ltd. (Switzerland); Cognos Far East Pte Limited (Singapore); Cognos PTY Limited (Australia); Teijin Cognos Incorporated (Japan; 50%).

Principal Competitors: Brio Technology, Business Objects, Hyperion.

Chronology

• Key Dates
• 1969: Quasar, Cognos' forerunner, is founded.
• 1979: Quasar introduces QUIZ for HP 3000--the company's first software product.
• 1982: PowerHouse is introduced.
• 1983: Quasar changes its name to Cognos and launches a new generation of development tools.
• 1985: Cognos opens new headquarters in Canada, United Kingdom, and United States; the company goes public.
• 1989: The company's revenues hit $100 million.
• 1990: Cognos introduces PowerPlay.
• 1991: Cognos launches Impromptu, a database query and reporting tool.
• 1992: Cognos introduces PowerHouse Client for Windows.
• 1995: Cognos joins the OLAP Council.
• 1997: Cognos acquires Right Information Systems.
• 1998: Scenario wins Datamation product of the year, and Cognos acquires BI University.
• 2000: Cognos releases the Cognos platform and launches a new e-business intelligence applications business unit.