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The Way Business Is Moving

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Issue Date: November 2005

Back to the future

November 2005

Madan Sheina talks to Informatica CEO, Sohaib Abbasi, about getting back to basics, staying independent, and the next big opportunity for data integration software.

Madan Sheina talks to Informatica CEO, Sohaib Abbasi, about getting back to basics, staying independent, and the next big opportunity for data integration software.
“It is a good time to be in this business.” Sohaib Abbasi,  Informatica CEO
“It is a good time to be in this business.” Sohaib Abbasi, Informatica CEO
There can be no doubt as to the strategic importance of data integration technology to corporate IT. Over 40%of enterprise IT budgets are spent on data integration projects. It is hard to imagine any new IT initiative that does not require integration of some kind. It is not surprising that research house, IDC, estimates the data integration market to be worth over $10bn. "It is a good time to be in this business," says Sohaib Abbasi, Informatica CEO.
"Operational and analytic data integration are the highest priority IT projects today and are now regarded at the CIO level as the single most strategic technology in the enterprise," Abbasi explains.
Adoption is being pushed by a tail-wind of business imperatives such as Basel II and Sarbanes-Oxley compliance, which mandate tighter control and visibility over corporate data.
"The fact is that while companies are spending a fortune on data integration initiatives, most of it is not automated," says Abbasi. "We estimate that for every dollar spent on integration technology, around seven to eight dollars is spent on labour [hand coding]."
Informatica's technology automates the data integration life cycle, and Abbasi sees plenty of opportunity for the company to flourish. Industry research shows that over 80% of organisations plan to automate their manual integration processes.
Informatica is an established leader in the data warehousing tools space and has built a thriving business on top of its flagship PowerCenter ETL (extract, transform and load) platform. Despite seeing most of its early rivals swallowed up by larger software vendors, Informatica has steadfastly remained independent. "We are the only true independent, cross-platform data integration vendor left in the market today," Abbasi claims.
But it has hardly been smooth sailing. When Abbasi, a 22-year Oracle veteran, joined Informatica as CEO in 2004 he did so at a critical juncture in the company's history. At that time Informatica had just offloaded an unsuccessful business analytic applications operation and was leaking market share to arch-rival, Ascential Software.
Financially the company was coming off a string of under-performing quarters and its stock price was sliding. Abbasi's predecessor, co-founder of the company, Gaurav Dhillon, had also just unveiled an ambitious strategy that would evolve its PowerCenter suite to broader data integration markets. Clearly Abbasi had his work cut out to put the company back on the right track and regain lost ground in the market.
Abbasi says the company learnt a valuable lesson from its ill-fated foray into business analytics. "Focus is critical," he says. "When you step away from your core area of competency you are competing against more experienced vendors. Our singular goal is now to be the dominant leader in the enterprise data integration market."
According to John Entenmann, Informatica's executive VP of corporate strategy and marketing, the company learnt an even bigger lesson: the importance of being an independent data integration player. "Being independent is not that key in many software markets. But in the data integration space it is very important because you have to work with many parties to make integration work."
Unbiased and open strategy
Having refocused its efforts solely on integration, Abbasi now believes Informatica has an edge in the market over rivals such as Ascential, which was bought by IBM earlier this year. He emphasises Informatica's open strategy for accessing all databases, application servers, operating systems and hardware: "Unlike some of our rivals we have no hidden agenda and no bias to promote one database or application source over another."
Peter Fiore, IBM vice president, information integration solutions business unit
Peter Fiore, IBM vice president, information integration solutions business unit
The market seems to be comfortable with Informatica's change of tack and its new strategy seems to be feeding through into sales. In its most recent quarters Informatica has returned to healthy licence revenue growth and profitability as more customers are drawn to its platform.
Earlier this year Informatica notched up its most profitable quarter ever, with a massive 128% income growth. It also added over 250 new customers to its roster last year and saw existing customers ramp up their investments considerably. "Our customers are clearly happy with us. Nearly 95% renewed their maintenance contracts, which is well above the industry average," says Abbasi. Informatica is also rebuilding ties with partners such as Cognos, Business Objects, SAP, Siebel and Sybase; all of which might have felt alienated in the past. In its last quarter nearly 50% of revenue was partner-influenced.
But Informatica is now eyeing broader and more lucrative integration pastures. "We are growing our leadership in the data warehousing market to lead the broader data integration space," Abbasi says. "First, companies are starting to take their departmental data warehousing implementations to an enterprise level and they are looking to standardise on a single integrated platform. Second, companies are looking beyond their analytic environments to address operational data integration projects such as data migration, consolidation, synchronisation and replication, master data management and single customer view."
IDC estimates the operational data integration market is worth over $13bn, which Abbasi says, "is over five times larger than the data warehousing market we have grown up on."
Informatica seems to be getting more traction in these broader markets. "We are now seeing many of our customers evolve towards broader integration deals," Entenmann says.
A glance at Informatica's deal sizes confirms this trend: five out of the six million dollar-plus deals and two thirds of deals over $300 000 in its last quarter were by customers who plan to use Informatica for these broader types of data integration.
"Some of our larger customers such as BMW and Johnson & Johnson are spending more and more IT dollars on legacy data migration projects and the development of customer hubs," Abbasi says. These companies are also beginning to see real business benefits. "Using Informatica, one company managed to reduce its SAP migrations from a 60 man-year to a 10 man-year project."
Of course, Informatica is not the first vendor to branch out. IBM Ascential claims to have been broadening its suite for the past two years.
"We did not just see BI [business intelligence] as the primary driver for ETL... we also saw an opportunity to focus on the broader integration drivers throughout the enterprise," says Mark Register, VP of IBM information integration solutions.
Informatica is reinforcing its new stance with a robust and open data integration platform. Last year the company publicly announced an aggressive two-year roadmap for extending PowerCenter's functionality in new and exciting ways, eventually evolving the platform towards a true shared service oriented architecture (SOA) called Universal Data Services (UDS).
The aim of UDS was to provide a common set of services built on shared foundational metadata layers that bind Informatica's ETL, metadata management and BI products into a tightly managed framework.
Driving towards this goal, Informatica has already this year introduced an Advanced Edition of PowerCenter that comes with collaborative development capabilities and flexible bundling. "The combined offering is just 30% more than our standard PowerCenter offering. It is coaxing companies to step up their departmental data integration efforts to the enterprise-level," says Entenmann.
Shared services integration
The Zeus release of PowerCenter, which is due in the autumn of 2005, will come with what Abbasi calls "spectacular advances" in grid-scalability and performance, support for semi-structured data, integrated federated query and access and enterprise-class security that will allow users to integrate data across corporate firewalls.
Informatica plans to raise the bar even further with the follow-on Hercules release that evolves to a shared services-architecture. It will be built on a unified 'smooth data surface' layer that will integrate all types of data integration projects onto a single platform and give customers the flexibility to integrate data in multiple modes: batch, change, realtime or on the fly. "Hercules is the final culmination of UDS. It will deliver a comprehensive set of re-usable and open data integration services architected to seamlessly work together," says Abbasi.
IBM Ascential's Register, however, begs to differ. "Information integration available as a service is a technology trend that has only recently been picked up by Informatica. We released the first SOA version of our integration suite two years back."
While Informatica might be following Ascential's lead, Abbasi says it has a massive lead in another area: product suite integration. "Our unified platform offers higher productivity by enabling greater re-usability. We are delivering a single, portable product that allows developers to develop once, run anywhere."
Of course, Abbasi's comments are directed at IBM Ascential, which has broadened its suite functionality through a string of technology acquisitions including Torrent, Vality, Metagenix, Dovetail and Mercator. It is a touchy subject for IBM Ascential. "This is just FUD [fear, uncertainty and doubt] put out by our competitors. Integration is what we do and therefore we need to be good at it ourselves," says Register. "Over the last 18 months we have become a market leader by bringing technologies together in a single integration suite."
Business process outsourcing
Abbasi is also eyeing the $70bn business process outsourcing (BPO) market as the next big opportunity for Informatica. He sees data integration becoming increasingly important as more and more business functions and transactional systems are outsourced. "Companies risk losing control over, and visibility into, their corporate data," he says.
"The day you outsource a function you are challenged to migrate and synchronise in-house data to and from systems managed by the outsourcing provider." Hence, data silos that have existed within companies are now suddenly being stretched across organisational boundaries adding a new dimension of complexity to get an holistic view.
Abbasi maintains the outsourcing business model will be a key driver for data integration technology over the next five years. A recent survey of Informatica customers shows that nearly 95% regarded cross-enterprise data integration as a 'critical' technology. "Our research shows that between 5% and 15% of a
BPO engagement is data integration. But little of it is automated right now," says Abbasi.
Underscoring its interest in cross-enterprise data integration, Informatica has also been championing the idea of Integration Competency Centres (ICCs) that point towards a shared services approach for driving efficient and cost-effective integration across enterprise IT projects.
Abbasi is appalled at how badly data integration projects are managed today. "It is outrageous that IT has not managed this expense better. A substantial amount of integration effort and resources, by our estimations up to 40%, are being wasted because they are neither automated nor properly planned and managed across the enterprise," he says.
Companies can lower these costs through ICCs that centralise data integration efforts and leverage common skills, standard technologies and best practices across projects. "ICCs are all about driving re-use and economies of scale. Interest is certainly there. We have several customers today - ING, Best Buy and Pfizer - that have successfully adopted an ICC model," Abbasi says. He adds that 45% of Informatica's customers are now looking to establish some kind of competency centre around integration in the near future.
Abbasi is well aware of the rampant consolidation occurring in the enterprise software sector. After jousting with Informatica for top-spot in the market for several years, Ascential was snapped up by IBM in March for $1,1bn. But he is not losing sleep over competing with IBM in the data integration space. "Sure we have seen a lot of consolidation in this market. But like I said, the value of being independent in today's market is obvious."
Entenmann agrees, saying: "When Ascential was bought by IBM our phone rang a lot." He says many of the calls were from ISVs and system integrators that now viewed IBM as a competitor of sorts. Of course, IBM has baggage to carry - notably its database and application server middleware - into the data integration space. "For non-IBM shops that have an aversion to get drawn into IBM's universe this is a real concern," says Abbasi.
Abbasi says that Informatica remains focused on organic growth. "While one of our competitors was busy writing cheques to buy companies, we have been busy writing code."
For the time being Abbasi's goal is to establish, or arguably one could say re-establish, Informatica as the dominant player in the enterprise data integration market.
CBR opinion
Data integration remains the single most strategic infrastructure technology today, since one of the biggest challenges IT faces is the fragmentation of data across disparate systems. This challenge will grow in complexity as organisations continue to outsource more functions and fragment their data further, beyond enterprise boundaries. Informatica, a pioneer in the field of data warehousing, has stepped forward with a far broader strategy for delivering integration as services across the entire enterprise, from a single platform. It may just have put itself in the right place at the right time.


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