Andy on Enterprise Software

The dust settles

November 29, 2007

I had a chance recently to dig a little deeper into the recent acquisition of Purisma by Dun & Bradstreet. The way that this news leaked out was a case study in how not to do software PR. The news came out in an investor briefing by D&B, and there were no clues as to whether D&B was even going to continue selling the Purisma technology, or just use it for internal purposes. After all, D&B has daunting master data issues. 150 million companies are tracked, one and a half million updates a day made to the company information it sells: plenty of data management implications there. So what did this mean to Purisma customers and prospects? No clues were offered.

Having now spoken to Bob Hagenau, who was VP of products and co-founder of Purisma, the smoke has cleared a little. Purisma will be retained as a stand-alone business unit, with its own enterprise sales force. The Purisma technology will continued to be sold in its present form, though it is too early to say what the technology roadmap will look like; I am going to take a wild stab in the dark and say bet that further integration with D&B data will feature. Clearly the D&B name brings many benefits: a parent with deep pockets, a customer base that is essentially all large corporations and so a potentially wonderful leads channel. However the botched news release shows the dark side of a large parent in an different core industry: falling foul of the corporate bureaucracy, in this case the corporate press office.

Hopefully, as the acquisition beds down, Purisma will learn how to work the D&B corporate systems and avoid future press gaffes, while taking advantage of the undoubted resources that D&B can bring to bear.

Appliances on demand

November 27, 2007

It is interesting to see Kognitio launching a data warehouse on demand service. Traditionally data warehouses are built in-house, partly because they are mostly “built” rather than bought even today, and partly because of the data-intensive nature of them, by definition involving links to multiple in-house systems. However there is no real reason why the service cannot be provided remotely. In my days at Shell my team used to provide a similar internal service to small business units who did not want to build up in-house capability. We implemented a warehouse, built the interfaces and then managed the operational service. Kognitio is well placed to provide such a service because they have good data migration experience, and they conveniently have a powerful warehouse appliance, which is much more mature than many others, even if it has been, until recently, not very successfully marketed. Hence this seems an astute move to me.

I would not expect this to be the last such offering. Given some clear advantages that software as a service brings to customers (less installed software footprint, typically a smoother pricing model) it will be interesting to see whether these advantages outweigh the fear in customer minds about allowing their key data outside the firewall.

Self Raising Appliances

November 21, 2007

Dataupia has an odd name (presumably hinting at data utopia) but a very interesting idea. The technology was neatly summarised by Phil Howard so I won’t repeat the details. The key is that it promises something that sounds too good to be true: an appliance that runs on existing databases (Oracle, SQL Server etc) essentially removing the execution of queries and data management form the DBMS, and running queries on a massively parallel processing architecture using commodity hardware. Coming from one of the founders of Netezza, it has inherent credibility, and I am looking forward to hearing some production customer case studies to validate whether it is really as good as it claims. If it does something close to what it claims to do then it could have a great market, since it removes the key barrier that limits the market of data warehouse appliances like Netezza (and indeed Teradata, the uber “appliance”), which is the proprietary nature of their software. This makes buyers nervous and at the very least means a significant conversion effort for an existing application. But if you can really just plug in the Dataupia appliance without modifying any SQL, and just watch the queries run faster, then it will appeal to a whole range of creaking data warehouse applications that Netezza et al have yet to convince. Given that most data warehouses are smaller than you might think, there is a large market out there Dataupia can address which will never be appropriate for Netezza and the like. It also has partner potential due to its non-invasive nature e.g. Kalido and Dataupia already have a relationship, and there are already early OEM deals on show.

The venture world obviously buys the story, as in a fund-raising environment where enterprise technology companies are as out of fashion as corduroy, Dataupia has secured a USD 16 million B round. This is no mean achievement in itself these days. To me this is definitely a company to watch.

Blowing Bubbles

November 15, 2007

Back in the late 1990s companies filed for IPOs even though they had modest revenues and were losing money. Due to the tulip mentality of the time investors suspended disbelief and bought in anyway, giving way to the crash of 2001. A couple of years after that bankers were telling me that in order to have an IPO you would need “at least a couple of years of solid trading profits”, quarterly revenues of at least $25 million and preferably more, as well as strong growth. Those heady days of the late 1990s were a freak occurrence, like the South Sea Bubble. Certainly technology IPOs dried up almost entirely.

With the recent gloom on Wall Street I was therefore surprised to see Initiate Systems filing for an IPO. They are growing quite rapidly but not only have never made a cent of profit, but their losses appear to be, if anything, widening slightly at about a third of their revenues. Throw in an admitted financial misstatement and does this start to feel to you like the late 1990s again? No doubt Initiate is expertly and expensively advised, but this will certainly be one to watch, as if the IPO goes ahead and well then it will change perceptions of exit strategies for high tech companies.

The Other Shoe Drops

November 12, 2007

The ink is barely dry on the agreement selling Business Objects to SAP, but today a long-rumoured takeover was announced: IBM snapping up Cognos for USD 5 billion, a modest premium to its stock market valuation, at 3.5 times revenues (8 times maintenance revenues). As I wrote well over a year ago, this acquisition makes better sense than most. In particular, IBM has no proprietary application stack to defend (unlike Oracle or SAP) and so in buying Cognos it does not make things difficult for its sales force by casting doubt on application independence, in the way that the Business Objects purchase by SAP does.

I suspect there was a defensive element here too. Oracle purchased Hyperion and hence Brio, but given their acquisitive nature in recent years it was by no means clear that a another big BI purchase was out of the question. Hence IBM may have swooped quickly partly to keep Cognos out of Oracle’s hands. IBM has a superb sales channel, and so the deal is likely to be a good one for Cognos sales (and hence Cognos customers). Cognos and IBM have worked together for years, so there are no obvious technical concenrs, and the main concern will be whether Cognos staff will fit into IBM’s notorious bureaucracy.

This leaves few independent major BI vendors. SAS is privately held (most of the shares are held by one man) and so until Jim Goodnight says good night to his career, ownership of SAS is going nowhere. The same is probably true of Microstrategy, who although notionally public have a peculiar share structure making a takeover difficult. Actuate is perhaps the largest one left. However there is plenty of room out there, as shown by the vibrant performance of Qliktech.

Pure and chased

November 7, 2007

Purisma has been acquired by Dun & Bradstreet, the business information company that provide, amongst other things, assessment of credit risk of companies and company statistics. On the face of it this is a somewhat peculiar acquisition, since D&B is not a pure provider of enterprise software solutions in the way that, say Oracle, is. However D&B did have its own data quality offering (clearly data quality is a big issue for an information supplier) and Pursima’s customer hub technology is certainly complementary to this data quality offering. It seems possible that D&B has bought Purisma primarily for its own internal purposes, and at this point it is unclear whether Purisma will even continue to be sold as a product in its current form. Rather ironically, Purisma had a product offering allowing integration of D&B into its CDI application. I guess that will come in handy now.

Purisma does not publish public financial data, so it is tricky to tell whether how good or bad the price paid of USD 48 million for the company was. I believe that Purisma had less than 50 employees and I would speculate that its revenues were in the USD 15-20M range. In general it is known that stand-alone CDI and PIM players have been struggling somewhat in the market. This is part due to a gradual dawning on customers that master data management is a broader topic than just “customer” or “product”, a long term theme of this blog. When customers ask “ah, but what about other kinds of master data” (asset, location, employee etc) then specialist CDI and PIM vendors do not have good answers, however good their offerings in their particular domains are. Even IBM has done an about turn on this topic recently, laying out a roadmap for a single MDM Server that will eventually bring together its menagerie of acquired technologies into a platform that will handle multiple master data domains consistently. For this reason I suspect that D&B did not pay over the odds for Purisma.

D&B has had phases in the past of buying software companies, and then moving away from this business e.g. those with long memories will recall the 4GL Nomad, which it sold off after some years. The press release that is tucked away on the Purisma web site today is not giving anything away. If press releases played poker, this one would be a tough player. Purisma customers need to seek guidance from D&B about its future intentions, and consider their alternatives.

Mr Blue Sky

November 5, 2007

The round of recent quarterly results continued with Microstrategy. We have observed a strong performance by Informatica yet a weak one from Business Objects, whose execs had cited difficult market conditions e.g. the global credit crunch, as the reason for poor demand (as distinct from any conceivable errors on their part). Indeed Informatica is in a related but distinct sector to Business Objects, so perhaps the Business Objects results were an indicator of something amiss with the business intelligence sector rather that this just being special pleading on the part of management. Microstrategy is a direct competitor to Business Objects (along with Cognos, SAS and others such as Actuate and SPSS), so its results should cast some light on the issue.

Microstrategy’s numbers were in fact what we Brits might describe as “stonking”. Licence revenue, the key health indicator of a software company, was up 23% from a year ago. Overall revenue of USD 95.8 million was also 23%, reflecting a broad-based increased in services and maintenance revenue as well as new licences. Operating margins were a tasty 29.8%, meaning that the chunky increase in revenues did not come at the cost of disproportionately increased marketing expense. This strong performance shows up the Business Objects quarterly results for what they were, a serious stumble in a sector that appears otherwise buoyant. Perhaps the Microstrategy CEO deserves his new plane after all.