It's been awhile since I've had the opportunity to examine Informatica as a company and its entire product portfolio, which has blossomed into a broad-based data integration platform. After spending a day with company executives in Menlo Park, CA this week and learning about the company's business and technology strategy, I am bullish on Informatica.
From a business perspective, the numbers speak for themselves. With $650 million in annual revenues, Informatica has grown revenues at a healthy clip (20% CAGR for the past five years) and maintained high operating margins (20%+ during the past 10 quarters and 31% in the most recent quarter), well above the industry average. And it believes it can continue to grow license revenue 20% a year for the foreseeable future.
Financial analysts repeatedly ask me "Who will buy Informatica?" At this point, the better question is "Who will Informatica buy?" and "Will Informatica expand beyond its core data integration market?"
Informatica has already made about a half-dozen strategic acquisitions in recent years, expanding its portfolio with data quality, master data management, B2B data exchange, messaging, lifecycle management, and complex event processing. CEO Sohaib Abbasi believes there are still many potential growth opportunities in the data integration market. His response to the above questions: "There is no need for us to consider ourselves anything other than a data integration vendor."
The Cloud. For one, Informatica sees the Cloud as a huge growth market for the company. Informatica made an early bet on the Cloud in 2007, and it's already paying dividends. Informatica has 1,300 companies using its Informatica Cloud service, which is a lightweight version of its on-premises, data quality and data integration software. Most Informatica Cloud customers are small- and medium-sized businesses (SMB) and three-quarters are new customers. Informatica believes there is significant upsell opportunity with this new customer base.
"Given the potential growth of the Cloud, we believe we are in the same position Oracle was in 1982 right before the relational database market took off," said Abbasi.
Future Investments. Beyond the Cloud, Informatica sees significant new data integration opportunities in the emerging markets for mobile computing and social networking. James Markarian, Informatica's chief technology officer, hinted that Informatica may deliver end-user applications that exploit these new deployment channels beyond offering core data integration services. In addition, Markarian mentioned other areas of potential investment, including Hadoop, search, semantics, security, workflow, Edge computing, and business process management.
Integration. On the technology side, I was impressed with the degree to which Informatica is integrating the products in its portfolio. The mantra is design once and deploy anywhere. For example, one customer, Smith and Nephew, built rules in Informatica's data quality product, and then reused the same rules when it purchased and deployed Informatica's MDM product. With reusable rules, customers can safeguard their earlier investments as they expand their Informatica footprint.
Self-Service DI. I was also intrigued by its desire to improve business-IT collaboration and promote "self service data integration." Last year, it deployed Informatica Analyst, a browser-based application that makes it possible for business analysts to profile data sets and create data quality rules. It will soon expand Informatica Analyst to support data mapping. Informatica Cloud also empowers business analysts to move and transform data using a very friendly, wizard-driven interface.
Self service is great in theory, but almost always falters in reality, unless there is sufficient governance to ensure that end-user development doesn't spiral out of control and wreak havoc with information consistency and manageability. So, I was very happy to see that both products had sufficient controls (e.g., role-based access control and audit trails) to manage end-user involvement without restricting their ability to create new objects and rules.
More importantly, I saw the early germination of governance mechanisms that enable a business analyst and IT developer to collaborate on data integration tasks, eliminating a large amount of back-and-forth and miscommunication that currently hampers and slows down data integration work. For example, Informatica Analyst makes it possible for business analysts to create "specifications" for data quality rules (and soon data mappings), test the output, and then pass to IT developers to flesh out in virtual tables.
The developers, in turn, pass their work back to the business analyst to evaluate and test before anything is produced. Essentially, Informatica Analyst is the basis for a good prototyping environment.
It would be ideal if Informatica added workflow to both the Informatica Analyst and Informatica Cloud products to further cement the ties between analyst and developer and foster a true collaborative and managed environment for creating data integration objects. It also would be nice to take these objects and turn them into services available to other users with appropriate permissions and other applications in the Informatica portfolio. This shouldn't be too hard.
While Informatica has some strong competition in the data integration from behemoths such as IBM, Oracle, and SAP, as well as a host of small, nimble vendors, such as SnapLogic, Jitterbit, Boomi, Denodo, Kapow, Pentaho, Expressor, DataFlux, and Pervasive, the company is in a strong market position. Perhaps Informatica's greatest asset is not its products, but its people and processes. It has a capable, stable management team that has had little turnover compared to other Silicon Valley firms. And its disciplined, focused approach to the market means it has resisted the temptation to pursue new opportunities outside its core competency and take shortcuts on the path to growth.
Posted February 11, 2011 6:55 AM
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