IBM announced that it intends to acquire business intelligence software vendor Cognos, a publicly held company based in Ottawa, Ontario, Canada, for approximately $5 billion in cash.

IBM said the acquisition of Cognos will help it deliver the “next generation” of BI (business intelligence) tools that customers will require as markets become increasingly global and competitive.

More specifically, IBM senior vice president Steve Mills said that Cognos technology is focused on processing information in near-real-time, rather than retrospectively.

Cognos BI applications are consistent with “a real-time, prospective approach to business analysis,” Mills said during a conference call with reporters to discuss the acquisition.

Cognos and IBM have partnered for more than 15 years, but Mills said that the acquisition will help IBM develop applications that customers will want in the future.

In an answer to a question from eWEEK, Mills noted that “the quantity of data [customers are] going to want to analyze is going up.” He asserted that independent companies are less able to produce “the next generation of business intelligence capabilities” that customers require.

He cited previous IBM acquisitions of Ascential and Rational as examples of where IBM acquired business partners to deliver greater value to the market.

Cognos has approximately 4,000 employees worldwide and serves more than 25,000 customers.

Cognos is the 23rd IBM acquisition in support of its Information on Demand strategy, which is intended to help customers deliver more business insights to a broader set of people across an organization.

Other strategic acquisitions in support of IBM’s Information on Demand initiative include Princeton Softech (data archiving and compliance), FileNet (enterprise content management), Ascential Software (information integration), DataMirror (changed data capture), SRD (entity analytics), Trigo (product information management), DWL (customer information management) and Alphablox (analytics).

IBM has identified BI as an important growing sector of the enterprise software space. Using numbers from IDC, the company said BI Tools represent a $7.8 billion opportunity in 2008, growing at almost 12 percent per year. It added that the overall market opportunity for BI software and services is expected to be $30.6 billion for 2008.

Ward Carter, president of M&A advisory firm Corum Group, predicted that mergers would continue unabated in the technology sector, despite a slowdown in the U.S. economy and the attendant crisis in mortgage lending.

Enterprise customers are flush with cash from four years of strong growth, and their long-term plans are unlikely to be affected by a short-term downturn in the economy, he said.

Carter noted that companies will continue to look for technology that will keep them a step ahead of the competition. “Those are the kinds of things companies can’t afford not to be doing,” he told eWEEK.

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Following completion of the acquisition, IBM intends to integrate Cognos as a group within IBM’s Information Management Software division, focused on business intelligence and performance management. IBM also will appoint current Cognos President and CEO Rob Ashe to lead the group, reporting directly to General Manager Ambuj Goyal.

IBM also said the acquisition fits squarely within both its acquisition strategy and capital allocation model, and that it will contribute to the achievement of the company’s objective for earnings-per-share growth through 2010.

The company said it expects that, if the transaction closes during the first quarter of 2008 as expected, it will add more than one percentage point of growth to IBM’s total 2008 revenue.

The acquisition is subject to Cognos shareholder approval, regulatory approvals and other customary closing conditions.

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