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Wayne Eckerson

Welcome to Wayne's World, my blog that illuminates the latest thinking about how to deliver insights from business data and celebrates out-of-the-box thinkers and doers in the business intelligence (BI), performance management and data warehousing (DW) fields. Tune in here if you want to keep abreast of the latest trends, techniques, and technologies in this dynamic industry.

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Wayne has been a thought leader in the business intelligence field since the early 1990s. He has conducted numerous research studies and is a noted speaker, blogger, and consultant. He is the author of two widely read books: Performance Dashboards: Measuring, Monitoring, and Managing Your Business (2005, 2010) and The Secrets of Analytical Leaders: Insights from Information Insiders (2012).

Wayne is currently director of BI Leadership Research, an education and research service run by TechTarget that provides objective, vendor neutral content to business intelligence (BI) professionals worldwide. Wayne’s consulting company, BI Leader Consulting, provides strategic planning, architectural reviews, internal workshops, and long-term mentoring to both user and vendor organizations. For many years, Wayne served as director of education and research at The Data Warehousing Institute (TDWI) where he oversaw the company’s content and training programs and chaired its BI Executive Summit. He can be reached by email at weckerson@techtarget.com.

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.

Business Strategy

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.

Technology Trends

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.

Summary

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
Permalink | 3 Comments |

3 Comments

Wayne, nice to see you last week and glad to hear you are bullish on Informatica. As you pointed out, Self Service Data Integration can really streamline the communication between analysts and developers. Self service empowers the analysts to do more on their own without having to rely on others, eliminating a lot of the wait time involved in the back-and-forth iterations and avoiding specification errors. It is also important to have the right level of governance controls to prevent chaos and mitigate risk.

Hi Wayne,

I agree with you that Informatica is still on a growth path, but will it last forever?

My message to your readers and Informatica is that today's niche vendors like expressor (by the way you forgot to include Talend in your niche vendor list) will significantly change the landscape in the ETL/DI space over the coming years.

Look at all the changes that are going on in the DBMS market! The same will happen in our space.

Here is what I think will happen! Informatica will be acquired by Oracle (or another suitor) within the next 3 years because the company won't be able to sustain its very expensive "enterprise business model" as a standalone business entity.

New vendors like expressor will have become mainstream ETL/DI vendors by then and will offer Informatica-like functionality at 80 percent less cost.

What are your 2014 predictions for Informatica?

Michael,

No doubt that could happen. The low-cost guys are pushing upwards, forcing the big guys to acquire or be acquired. If the Cloud doesn't generate rapid growth for INFA, look for an acquisition. Now that HP owns Vertica, why not an ETL tool? Of course, there is a lot of advantage in remaining independent when your a data integration vendor.

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