The overall approach to data management is changing. Corporate information requirements are no longer satisfied by integrating data on a point to point basis. Customers are moving beyond creating isolated data warehouses to a more comprehensive approach to information management. One company that has taken this transition to heart is Informatica as exemplified by its recent acquisitions of Similarity Systems and Itemfield. The two cash deals, each valued at $55 million, represent a fairly bold move for a company of Informatica's size. (Informatica reported 2005 revenues of $267 million and provided guidance of $355M to $370M in revenue for the year ending December 31, 2006.) However, based on industry trends, the company had very strong evidence that these technologies were of critical importance to its business.
Enterprise data integration initiatives have become more complex because of the increase in the volume of structured and unstructured data and the increasing fragmentation and distribution of multiple data sources. In addition, mergers, acquisitions, and the expansion of different types of corporate partnerships have all contributed to the growing complexity of data integration needs at many businesses.
This change is reflected in Informatica's customer base and is a key driver for these two acquisitions. Two years ago, approximately 90% of Informatica's customers deployed the company's software primarily for use in data warehousing projects. Over the course of 2005, a dramatic shift began to occur as customers began implementing Informatica's software for broader data integration initiatives such as data migration, synchronization or master data management programs.
As a result of this change in customer requirements, nearly 40% of Informatica's customers were deploying the company's software for more complex data integration projects by the beginning of 2006. Informatica's strategy to expand its offerings in order to develop a more comprehensive life cycle approach to data integration is an outgrowth of what their own customers have been telling them. In addition, Informatica is aiming to improve its product differentiation and strengthen its position in a highly competitive market. The data profiling and data quality solutions gained from the January, 2006 acquisition of Similarity Systems and the data transformation technology focused on unstructured and semi-structured data gained from the December, 2006 acquisition of Itemfield will help Informatica meet these goals.
Prior to the acquisition of the Ireland-based Similarity Systems, Informatica offered data profiling and data quality capabilities to customers through OEM partnerships with two different data quality vendors (Firstlogic, subsequently purchased by Business Objects in February, 2006 and Trillium Software, owned by Harte-Hanks). Given the dynamic nature of the data integration market, the only way that Informatica could ensure that it would have long-term control over its data quality technology was to own the technology outright. Informatica selected Similarity Systems as the company to fulfill this role for several reasons including the strong business user focus of the software; the ability of the software to cleanse and validate unstructured as well as structured data; and the company's industry specific solutions and expertise in areas such as financial services, manufacturing and consumer packaged goods. Similarity Systems has been integrated into Informatica's PowerCenter platform and provides a full spectrum of technology for data profiling, standardization, cleansing, matching, and monitoring, and the analysis of multiple data sources.
One aspect of Similarity's approach that clearly resonated with Informatica in its quest to differentiate its data integration software is the company's focus on the business user. One of the major challenges that companies have in implementing a data quality solution stems from the proliferation of data sources and the many silos of information distributed across the enterprise. Much of the knowledge about what makes the data good or accurate is concentrated in the business area responsible for a particular source of data. Customers benefit from the Similarity approach because their software is designed to empower data analysts and others who understand the data in context with its meaning to the business to make decisions about data quality. An emphasis on the business requirements is also reflected in the reporting capabilities of the software that provide scorecards to business management on the major attributes of data quality such as completeness and consistency.
Informatica was able to evaluate customer experience with Itemfield data transformation technology over the past year as the technology was embedded in PowerCenter through an OEM partnership with the company. The acquisition of California based, Itemfield helps to extend Informatica's integration capabilities to deal with unstructured as well as semi-structured information. The technology understands and learns the structure of documents to enable data transformation and extraction of unstructured data found in documents including Excel, PowerPoint, Word and PDF formats to structured data. The unique aspect of the technology is a metadata parser that enables the specification, for example, of how to identify a customer ID within a PDF document and learns new formats by example without additional programming. Itemfield technology could, for example, enable the extraction of explicit information such as that found in a purchase order in a PDF formatted file. Itemfield's technology also provides pre-built cross enterprise data exchange capabilities for documents utilizing formats such as SWIFT (secure messaging for financial institutions), ACORD (standards for insurance and financial institutions), and NACHA (rules and standards for electronic payments).
With the acquisition of Itemfield, Informatica will be able to provide its customers with the ability to extract structured data from unstructured and semi-structured sources. This is a large growth opportunity for the company given the vast amounts of unstructured data that reside in an organization. Informatica now has the ability to integrate three different types of data - structured, unstructured, and semi-structured data - a great customer benefit. Additionally, Itemfield's data exchange capability represents another growth opportunity for Informatica, since companies need to share information in order to conduct business more effectively.
Informatica has made a smart move based on customer expectations and how the data integration market is evolving. The traditional data integration tools used to automate key ETL (extract-transform-load) functions are only one part of the customer requirements for complex data integration projects. While Informatica has maintained a steady focus on extending its data integration capabilities in recent years, acquiring both Similarity and Itemfield in one year provided the company with a way to make a grand leap ahead into new territory. In addition to integrating the data profiling, data quality, and transformation capabilities for unstructured and semi-structured data into PowerCenter, Informatica is looking to leverage the combined technologies of these two acquisitions in new ways. For example, the combination of the two technologies will enable Informatica to extend data quality to unstructured data to assess and measure the quality of the data in Word and Excel documents.
However, changing customer requirements are spurring innovation in data management among the company's competitors as well. Informatica's challenge moving forward will be to continue to increase product differentiation and provide customer value in the face of formidable competitors such as IBM, Oracle, and perhaps even HP, given its recent agreement to acquire the information management services firm, Knightsbridge Solutions. We predict that there will be additional acquisitions and consolidations involving data management technology in 2007. In some ways, Informatica's partnership development and acquisition activity this year is reminiscent of Ascential Software's efforts to build and buy the pieces required to create a more comprehensive data management offering just prior to the company's acquisition by IBM in 2005. Watch this space.
Posted: 24th January 2007 | By ItsAllGood :
Informatica has been doing a good job of copying the strategy of Pervasive who took the wider definition of "data integration" to heart 5 years ago...
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Published by: electronicdawn Ltd.