As Cognos--and any other mid-sized software firm--gets consolidated by the elephants in the room (Oracle, Microsoft, IBM and SAP) the concept of best of breed is on life support. But the patient won't be in critical condition for long.
Contrary to all the indicators, the best of breed approach isn't dead. It's just morphing into something new. The best of breed approach as traditionally defined goes like this: An enterprise finds the best software for whatever it needs and bolts the applications together. For instance, for ERP you use SAP and you layer Cognos on top of it for business intelligence. You want the best database? You use Oracle. HR? PeopleSoft. You get the idea.
This traditional best of breed approach has been on the ropes for years--ever since Oracle triggered a massive consolidation. Pick a software company worth anything. It'll be acquired. In fact, if you're not acquisition bait Wall Streeters wonder what's wrong with you. The independent software vendor is a dinosaur these days. After all, CIOs allegedly want one vendor throat to choke. Steve Hamm of BusinessWeek captures the angst in the wake of IBM's acquisition of Cognos.
And Hamm's point is worrisome. Business intelligence as a category doesn't exist anymore. The whole category was acquired. Mike Abramsky, an analyst at RBC, notes that IBM bought Cognos because it had to. SAP bought Business Objects and Oracle had Hyperion. Since business intelligence is a critical category there's a lot of pressure not to be left out.
Larger, slower-growing software players (eg ORCL, SAP, MSFT) may continue to acquire growth companies in BI, Security, ECM, other sectors, to expand customer footprint, maintain profitable growth, defend against commoditization.
Abramsky's final point--that acquisitions are a way to play defense is notable. Why? It shows that these suite loving software giants are still worried about the best of breed approach, albeit with a new wrapper.
The future of best of breed has to do with approaches to applications and architecture. As Dana Blankenhorn notes open source has plenty of best of breed projects. Meanwhile, architecture may usurp proprietary software's dominance. Web services and services oriented architecture (SOA) will replace standard applications. Best of breed will come to mean everything from home grown apps to services to processes. Best of breed will mean SaaS. Best of breed will be whatever gets the job done with the highest return and lowest costs.
Meanwhile, there are always startups ready to disrupt markets including those dominated by giants. This newfangled future of best of breed isn't here yet, but it's coming. That's why the giants are acquiring everything in sight.