IBM: Financially Sound and Well-Poised for Cognos Acquisition

Analysis of News Events
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

3Q07: Mixed Results from Systems and Technology Group

Overall, IBM performed well in the third quarter, reporting in its 3Q07 Quarterly Earnings Report diluted earnings of $1.68 per share (up 16 percent). IBM Global Business Services revenues were up 16 percent, and IBM Global Technology Services revenues were up 13 percent. Revenues from Software Group were $4.7 billion, up 7 percent (3 percent, adjusting for currency) compared with 3Q06. However, reported revenues for the Systems and Technology Group (STG) totaled $4.9 billion for the quarter, down 10 percent (13 percent, adjusting for currency) compared to 3Q06.

IBM's STG reported revenues from System p UNIX server products increased 6 percent compared with 3Q06 and System x server revenues increased 6 percent compared with 3Q06.

System z and System i, however, did not fare as well. Revenues from System z server products decreased 31 percent compared with 3Q06 and revenues from System i servers decreased 21 percent compared with 3Q06. Furthermore, revenues from System Storage increased only 1 percent and revenues from Microelectronics decreased 15 percent.

So what does all this mean?

The More Things Change, the More They Stay the Same

In his prepared remarks to the analyst community, Mark Loughridge, IBM Senior Vice President and Chief Financial Officer, indicated that IBM saw sector growth in the public sector with "...solid growth in government, healthcare, and education." However, Loughridge pointed out that the "...weakest sector performance was in the financial services sector ..." and "...more pronounced in the US." This, he averred, had a negative impact on System z. Also, many deals slated to close in the third quarter have been deferred, with expectations that they will close in the fourth quarter.

In the humble opinion of this analyst, I think it is obvious that in recent years there has been a growing trend in the marketplace toward UNIX and Intel-based systems. Most higher-end mid-sized companies and virtually all large companies run heterogeneous IT shops and usually have a mix of UNIX, Intel-based, and mainframe servers—not to mention a mixed bag of application, middleware, and hardware vendors.

IBM has worked diligently to build up its System x franchise, and it shows in increased mind and market share. UNIX and Intel-based systems as well as blades, which grew 8 percent compared with 3Q06, are the jewels in the proverbial crown of STG. Why? Because customers understand UNIX and Intel-based systems and blades.

While the anomalies in the System z revenue were addressed, IBM remained somewhat quiet on the System i front. The fact remains that the perception of System i as legacy and outmoded still persists despite efforts by STG to change that perception. Moreover, part of the value proposition of System i is its staying power. System i is like Stride Gum—"the ridiculously long-lasting gum"—which, as the ad laments, still has consumers chewing their first piece. As with Stride, System i customers' wont is to keep chewing or at least holding onto the same server forever, loathe to purchase additional footprints. System i needs less maintenance than other servers, and you don't have to buy another System i whenever you implement a new application. Those stories about immured AS/400s that keep on working are not fiction.

I tend to think the following are some pretty solid reasons for System i revenues being down for the quarter:

  • Product transition—Customers are evaluating POWER6 technology. Customers on the leading edge are also looking at the migration effort involved in moving to i5/OS V6R1 and the concomitant program conversion. While IBM, on its i5/OS V6R1 program conversion Web page, indicates that this conversion will be simpler than previous ones (i.e., when moving from System/38 to AS/400 V1R1M0 in 1988 and when moving to AS/400 V3R6M0 in 1995), program conversion is still daunting, especially when the business—and your job—are on the line.
  • It's always been this way—System i's existing, and even prospective, customers tend to be cautious, especially at this time of the year. Demand is seasonal, and it is a function of product announcements as well as those ever-anticipated year-end deals. Budgets also tend to be spent, and/or customers are preoccupied with next year's budgets.
  • Re-tooling—As IBM is well aware, customers that continue to run legacy and/or homegrown applications on earlier versions of System i servers are either loathe to change or may be looking at ripping and replacing existing systems. Small and mid-sized business are now savvy enough to know that decisions regarding applications must be made at the business level, and that translates into applications that support the business, regardless on what servers they run. And even though IBM has been successful with its System i Vertical Industry Program (VIP), which has generated $52 million in customer purchases—$30 million of which are first-time System i customers—the program is still gaining momentum. The challenge for IBM is to grow this program beyond the 160 or so sub-industries and continue to inculcate the value of applications delivered on System i to customers and Business Partners. (Note: I was encouraged to see that Marc Dupaquier, General Manager of IBM Business Systems believes that "[t]he success of the program is predicated on IBM’s understanding that small and medium businesses identify themselves in the context of their industry and therefore seek industry-specific expertise.")

Is Business Intelligence an Oxymoron?

I have been writing about business intelligence (BI) now for over 10 years. And for those 10 years plus, the nirvana of bona fide business intelligence—the ability to transform data into actionable and even predictive decision-making information—is still elusive. Sometimes I think that spinning hay into gold would be easier.

This is why I applaud IBM's move to acquire Cognos. This is a brilliant and competitive gambit, as it follows SAP AG's recent announcement to link-up with Business Objects SA, for which Reuters reported that SAP is set to pay $6.84 billion. And it also follows on the heels of Oracle Corp.'s recent purchase of Hyperion Solutions for $3.3 billion, which is the company's first ingress into the BI market since its purchase of Siebel.

Since the IBM announcement, pundits have opined about the pros and cons of the Cognos proposed acquisition. In its November 12, 2007, press release, IBM says it is acquiring Canada-based Cognos, which its 23rd acquisition in an already impressive portfolio of products designed to enhance its Information on Demand strategy, which was announced on February 16, 2006.

IBM has been a bellwether player in the BI space, providing business intelligence solutions for decades. As Steve Mills, Senior Vice President and Group Executive, IBM Software Group, pointed out, "Customers are demanding complete solutions, not piece parts..." Cognos is a stable company with solid technology and has been a premiere IBM Business Partner for many years.

Bottom line: Customers don't want to integrate multiple solutions. The industry has shifted (paradigmatically, of course) from the halcyon days of boutique applications that came with huge price tags for the services involved in integrating them into the existing application architecture. I think Mills is on target. Customers want complete and interoperable solutions so that they can cease having to assemble the puzzle and, instead, enjoy the fruits of big integrated picture.

Maria DeGiglio

Maria DeGiglio is president and principal analyst of Maria A. DeGiglio & Associates. Current clients of Maria A. DeGiglio & Associates include the Visiting Nurse Service of New York ; Experture, LLC; and MC Press. Ms. DeGiglio has more than 20 years of experience as an IT consultant, industry analyst, and executive. From 1997 to 2005, she worked for Andrews Consulting Group and the Robert Frances Group.


Ms. DeGiglio received her Masters Degree in Health Advocacy from Sarah Lawrence College and graduated Cum Laude from Cornell University with a Bachelor of Arts Degree.



Ms. DeGiglio has worked with IT and C-level executives to enable IT alignment with business goals and to implement best practices. She has experience and expertise in both large enterprises and in small- and medium-sized business. Ms. DeGiglio has authored over one hundred articles, reports, and white papers.



Since 2004, she has worked in the healthcare industry and in health IT investigating the legal, ethical, and regulatory aspects of creating, implementing, and exchanging electronic health records (EHRs). Ms. DeGiglio is an expert in security, privacy, and HIPAA regulatory compliance.



Ms. DeGiglio may be contacted at




Support MC Press Online





  • White Paper: Node.js for Enterprise IBM i Modernization

    SB Profound WP 5539

    If your business is thinking about modernizing your legacy IBM i (also known as AS/400 or iSeries) applications, you will want to read this white paper first!

    Download this paper and learn how Node.js can ensure that you:
    - Modernize on-time and budget - no more lengthy, costly, disruptive app rewrites!
    - Retain your IBM i systems of record
    - Find and hire new development talent
    - Integrate new Node.js applications with your existing RPG, Java, .Net, and PHP apps
    - Extend your IBM i capabilties to include Watson API, Cloud, and Internet of Things

    Read Node.js for Enterprise IBM i Modernization Now!


  • Profound Logic Solution Guide

    SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation.
    Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects.
    The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the companyare not aligned with the current IT environment.

    Get your copy of this important guide today!


  • 2022 IBM i Marketplace Survey Results

    Fortra2022 marks the eighth edition of the IBM i Marketplace Survey Results. Each year, Fortra captures data on how businesses use the IBM i platform and the IT and cybersecurity initiatives it supports.

    Over the years, this survey has become a true industry benchmark, revealing to readers the trends that are shaping and driving the market and providing insight into what the future may bring for this technology.

  • Brunswick bowls a perfect 300 with LANSA!

    FortraBrunswick is the leader in bowling products, services, and industry expertise for the development and renovation of new and existing bowling centers and mixed-use recreation facilities across the entertainment industry. However, the lifeblood of Brunswick’s capital equipment business was running on a 15-year-old software application written in Visual Basic 6 (VB6) with a SQL Server back-end. The application was at the end of its life and needed to be replaced.
    With the help of Visual LANSA, they found an easy-to-use, long-term platform that enabled their team to collaborate, innovate, and integrate with existing systems and databases within a single platform.
    Read the case study to learn how they achieved success and increased the speed of development by 30% with Visual LANSA.


  • Progressive Web Apps: Create a Universal Experience Across All Devices

    LANSAProgressive Web Apps allow you to reach anyone, anywhere, and on any device with a single unified codebase. This means that your applications—regardless of browser, device, or platform—instantly become more reliable and consistent. They are the present and future of application development, and more and more businesses are catching on.
    Download this whitepaper and learn:

    • How PWAs support fast application development and streamline DevOps
    • How to give your business a competitive edge using PWAs
    • What makes progressive web apps so versatile, both online and offline



  • The Power of Coding in a Low-Code Solution

    LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed.
    Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

    • Discover the benefits of Low-code's quick application creation
    • Understand the differences in model-based and language-based Low-Code platforms
    • Explore the strengths of LANSA's Low-Code Solution to Low-Code’s biggest drawbacks



  • Why Migrate When You Can Modernize?

    LANSABusiness users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.
    In this white paper, you’ll learn how to think of these issues as opportunities rather than problems. We’ll explore motivations to migrate or modernize, their risks and considerations you should be aware of before embarking on a (migration or modernization) project.
    Lastly, we’ll discuss how modernizing IBM i applications with optimized business workflows, integration with other technologies and new mobile and web user interfaces will enable IT – and the business – to experience time-added value and much more.


  • UPDATED: Developer Kit: Making a Business Case for Modernization and Beyond

    Profound Logic Software, Inc.Having trouble getting management approval for modernization projects? The problem may be you're not speaking enough "business" to them.

    This Developer Kit provides you study-backed data and a ready-to-use business case template to help get your very next development project approved!

  • What to Do When Your AS/400 Talent Retires

    FortraIT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators is small.

    This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn:

    • Why IBM i skills depletion is a top concern
    • How leading organizations are coping
    • Where automation will make the biggest impact


  • Node.js on IBM i Webinar Series Pt. 2: Setting Up Your Development Tools

    Profound Logic Software, Inc.Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. In Part 2, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Attend this webinar to learn:

    • Different tools to develop Node.js applications on IBM i
    • Debugging Node.js
    • The basics of Git and tools to help those new to it
    • Using as a pre-built development environment



  • Expert Tips for IBM i Security: Beyond the Basics

    SB PowerTech WC GenericIn this session, IBM i security expert Robin Tatam provides a quick recap of IBM i security basics and guides you through some advanced cybersecurity techniques that can help you take data protection to the next level. Robin will cover:

    • Reducing the risk posed by special authorities
    • Establishing object-level security
    • Overseeing user actions and data access

    Don't miss this chance to take your knowledge of IBM i security beyond the basics.



  • 5 IBM i Security Quick Wins

    SB PowerTech WC GenericIn today’s threat landscape, upper management is laser-focused on cybersecurity. You need to make progress in securing your systems—and make it fast.
    There’s no shortage of actions you could take, but what tactics will actually deliver the results you need? And how can you find a security strategy that fits your budget and time constraints?
    Join top IBM i security expert Robin Tatam as he outlines the five fastest and most impactful changes you can make to strengthen IBM i security this year.
    Your system didn’t become unsecure overnight and you won’t be able to turn it around overnight either. But quick wins are possible with IBM i security, and Robin Tatam will show you how to achieve them.

  • Security Bulletin: Malware Infection Discovered on IBM i Server!

    SB PowerTech WC GenericMalicious programs can bring entire businesses to their knees—and IBM i shops are not immune. It’s critical to grasp the true impact malware can have on IBM i and the network that connects to it. Attend this webinar to gain a thorough understanding of the relationships between:

    • Viruses, native objects, and the integrated file system (IFS)
    • Power Systems and Windows-based viruses and malware
    • PC-based anti-virus scanning versus native IBM i scanning

    There are a number of ways you can minimize your exposure to viruses. IBM i security expert Sandi Moore explains the facts, including how to ensure you're fully protected and compliant with regulations such as PCI.



  • Encryption on IBM i Simplified

    SB PowerTech WC GenericDB2 Field Procedures (FieldProcs) were introduced in IBM i 7.1 and have greatly simplified encryption, often without requiring any application changes. Now you can quickly encrypt sensitive data on the IBM i including PII, PCI, PHI data in your physical files and tables.
    Watch this webinar to learn how you can quickly implement encryption on the IBM i. During the webinar, security expert Robin Tatam will show you how to:

    • Use Field Procedures to automate encryption and decryption
    • Restrict and mask field level access by user or group
    • Meet compliance requirements with effective key management and audit trails


  • Lessons Learned from IBM i Cyber Attacks

    SB PowerTech WC GenericDespite the many options IBM has provided to protect your systems and data, many organizations still struggle to apply appropriate security controls.
    In this webinar, you'll get insight into how the criminals accessed these systems, the fallout from these attacks, and how the incidents could have been avoided by following security best practices.

    • Learn which security gaps cyber criminals love most
    • Find out how other IBM i organizations have fallen victim
    • Get the details on policies and processes you can implement to protect your organization, even when staff works from home

    You will learn the steps you can take to avoid the mistakes made in these examples, as well as other inadequate and misconfigured settings that put businesses at risk.



  • The Power of Coding in a Low-Code Solution

    SB PowerTech WC GenericWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed.
    Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

    • Discover the benefits of Low-code's quick application creation
    • Understand the differences in model-based and language-based Low-Code platforms
    • Explore the strengths of LANSA's Low-Code Solution to Low-Code’s biggest drawbacks



  • Node Webinar Series Pt. 1: The World of Node.js on IBM i

    SB Profound WC GenericHave you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.
    Part 1 will teach you what Node.js is, why it's a great option for IBM i shops, and how to take advantage of the ecosystem surrounding Node.
    In addition to background information, our Director of Product Development Scott Klement will demonstrate applications that take advantage of the Node Package Manager (npm).
    Watch Now.

  • The Biggest Mistakes in IBM i Security

    SB Profound WC Generic The Biggest Mistakes in IBM i Security
    Here’s the harsh reality: cybersecurity pros have to get their jobs right every single day, while an attacker only has to succeed once to do incredible damage.
    Whether that’s thousands of exposed records, millions of dollars in fines and legal fees, or diminished share value, it’s easy to judge organizations that fall victim. IBM i enjoys an enviable reputation for security, but no system is impervious to mistakes.
    Join this webinar to learn about the biggest errors made when securing a Power Systems server.
    This knowledge is critical for ensuring integrity of your application data and preventing you from becoming the next Equifax. It’s also essential for complying with all formal regulations, including SOX, PCI, GDPR, and HIPAA
    Watch Now.

  • Comply in 5! Well, actually UNDER 5 minutes!!

    SB CYBRA PPL 5382

    TRY the one package that solves all your document design and printing challenges on all your platforms.

    Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product.

    Request your trial now!

  • Backup and Recovery on IBM i: Your Strategy for the Unexpected

    FortraRobot automates the routine tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:
    - Simplified backup procedures
    - Easy data encryption
    - Save media management
    - Guided restoration
    - Seamless product integration
    Make sure your data survives when catastrophe hits. Try the Robot Backup and Recovery Solution FREE for 30 days.

  • Manage IBM i Messages by Exception with Robot

    SB HelpSystems SC 5413Managing messages on your IBM i can be more than a full-time job if you have to do it manually. How can you be sure you won’t miss important system events?
    Automate your message center with the Robot Message Management Solution. Key features include:
    - Automated message management
    - Tailored notifications and automatic escalation
    - System-wide control of your IBM i partitions
    - Two-way system notifications from your mobile device
    - Seamless product integration
    Try the Robot Message Management Solution FREE for 30 days.

  • Easiest Way to Save Money? Stop Printing IBM i Reports

    FortraRobot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing.
    Manage your reports with the Robot Report Management Solution. Key features include:

    - Automated report distribution
    - View online without delay
    - Browser interface to make notes
    - Custom retention capabilities
    - Seamless product integration
    Rerun another report? Never again. Try the Robot Report Management Solution FREE for 30 days.

  • Hassle-Free IBM i Operations around the Clock

    SB HelpSystems SC 5413For over 30 years, Robot has been a leader in systems management for IBM i.
    Manage your job schedule with the Robot Job Scheduling Solution. Key features include:
    - Automated batch, interactive, and cross-platform scheduling
    - Event-driven dependency processing
    - Centralized monitoring and reporting
    - Audit log and ready-to-use reports
    - Seamless product integration
    Scale your software, not your staff. Try the Robot Job Scheduling Solution FREE for 30 days.