Cognos Layoffs a Growing Pain For BI

Flat license revenue growth and a changing landscape for business intelligence causes Cognos to make a strategic about-face.
Business intelligence (BI) applications vendor Cognos (Quote, Chart) announced that it is laying off 6 percent of its workforce.

Cognos president and CEO Rob Ashe said the Ottawa-based company is reducing its headcount in order to improve operating margins and to reflect new market conditions.

Ashe said the layoffs, which will affect 210 employees, are primarily in management and non-revenue-generating areas of the company.

The company will realize $28 million in annualized cost savings as a result of these moves, he added.

"It's a difficult move but it's the right move for us," said Ashe during a conference call to announce the moves.

He also said that Cognos is planning to hire 25 additional sales reps by the end of the year to bolster its 363-person-strong sales force.

Ashe placed the blame for the company's recent lackluster performance on a variety of factors, including the strength of the Canadian dollar, which he said cost Cognos 200 basis points in operating margin.

He also said that a Securities and Exchange Commission investigation during the second quarter cost the company momentum, although Cognos was eventually cleared of any misdeeds.

Ashe also suggested that the company has had trouble closing larger deals that are fast becoming its staple.

The reductions on the one hand and hiring on the other indicate that the company's business is evolving from a plethora of small and medium-sized deals to a greater proportion of larger enterprise deals.

This is having a ripple effect on the company's organizational structure.

"The assumptions are not the same in terms of management," Ashe explained. The company has several multi-million dollar deals were also in the pipeline, said Ashe, who added that Cognos is making changes to get it executing on larger deals.

Ashe said that several deals didn't get done in time for the quarter close and that a combination of more feet on the ground and a leaner management structure will help those deals close more quickly.

"The reality is we're closing more large deals than ever before. Negotiations are longer, more complex with more people involved at the customer end."

Peter Goldmacher, who follows the BI market for SG Cowen, said that Cognos has been a victim of its own success and agreed that the moves make sense.

"They're getting a slightly lower volume of much larger deals. You don't need as much management around those deals, and you need more face time around those customers," he told

"I think what they're doing is very smart. Most companies continue to look backward while moving their company forward," he said.

The BI market is estimated by research firm IDC to be worth $5.7 billion -- and growing by 10 percent over the next five years.

Little wonder, then, that companies such as Oracle (Quote, Chart) have announced their intention to enter the market.

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