Andy on Enterprise Software

Informatica goes shopping

October 9, 2012

Informatica has made an offer to buy Germany PIM vendor Heiler – the deal has not gone through yet and the German securities laws are complex, but it appears to be a “friendly” takeover. There are a few interesting aspects to this. Firstly, it sets a useful valuation benchmark. Heiler did 17.4 million Euros in revenue in their last financial year, and the offer is 80.8 million, so this is a price to sales ratio of 4.6, a healthy though not extreme valuation (Heiler also has 15.8 million euros of cash and is modestly profitable, with profits in the last financial year of 1.4 million Euros). It had been around in the MDM market for 12 years, and so is quite a mature product/company, shown in the split of its revenue, with nearly half its revenue in services, and a fifth in maintenance revenue, with several hundred customers.

The deal makes sense to Heiler, as Informatica has a far more powerful sales channel. From Informatica’s perspective they gain a solid piece of technology with a proven footprint in the product data domain, whereas Informatica, for all its multi-domain marketing, has been primarily used to managed customer data. They also gain a slice of the European MDM market, reducing their heavy US revenue preponderance. Moreover, assuming the deal goes ahead, Informatica now has several hundred new customers to up-sell its other software to e.g. its integration and data quality offerings.

The deal also shows that the M&A market is still active for MDM software, which is positive news for the shareholders of other independent MDM vendors out there.

Low Hanging Fruit

July 8, 2010

EMC has entered the data warehouse appliance market via the purchase of Greenplum, who made good progress in the space with their massively parallel database (based on PostgresSQL). Greenplum had impressive reference customers and some of the highest end references out there in terms of sheer scale of data. They had also been one of the few vendors (Aster is another) that went early into embracing MapReduce, a framework designed for paralleism and suitable for certain types of complex processing.

Data warehouse appliances can be a tough sell because conservative buyers are nevous of making major purchases from saller comapnies, but the EMC brand will remove that concern. Also, EMC have a vast existing customer base and the sales channel that can exploit this. Seems like a sensible move to me.

No Data Utopia

August 11, 2009

The data warehouse appliance market has become very crowded in the last couple of years, in the wake of the success of Netezza, which has drawn in plenty of venture money to new entrants. The awkwardly named Dataupia had been struggling for some time, with large-scale redundancies early in 2009, but now appears to have pretty much given up the ghost, with its assets being put up for sale by the investors.

If nothing else, this demonstrates that you need to have a clearly differentiated position in such a crowded market, and clearly in this case the sales and marketing execution could not match the promise of the technology. However it would be a mistake to thing that all is doom and gloom for appliance vendors, as the continuing recent commercial success of Vertica demonstrates.

To me, something that vendors should focus on is how to simplify migration off an existing relational platform. If you have an under-performing or costly data warehouse, then an appliance (which implies “plug and play”) sound appealing. However although appliance vendors support standard SQL, it is another thing to try and migrate a real-life database application, which may have masses of proprietary application logic locked up in stored procedures, triggers and the like. This would seem to me the thing that is likely to hold back buyers, but many vendors seem to focus entirely on their price/performance characteristics in their messaging. It actually does not matter if a new appliance has 10 times better price performance (let’s say, saving you half a million dollars a year) if it takes several times that to actually migrate the application. Of course there are always green-field applications, but if someone could devise a way of dramatically easing migration effort from an existing relational platform then it seems to me that they would have cracked the code on how to sell to end-users in large numbers. Ironically, this was just the kind of claim that Dataupia made, which suggests that there was a gap between its claims and its ability to convince the market that it was really that easy, despite accumulating a number of named customer testimonials on its web-site.

Even having the founder of Netezza (Foster Hinshaw) did not translate into commercial viability, despite the company attracting plenty of venture capital money. The company has no shortage of marketing collateral; indeed a number of industry experts who have authored glowing white-papers on the Dataupia website may be feeling a little sheepish right now. Sales execution appears to have been a tougher nut to crack. I never saw the technology in action, but history tells us that plenty of good technology can fail in the market (proud owners of Betamax video recorders can testify to that).

If anyone knows more about the inside story here then feel free to contact me privately or post a comment.

Running Against the Tide

January 9, 2009

We recently completed the Q4 “Market Landscape” for MDM. As part of this we looked at all the vendors in the market and obtained figures for software revenues and growth of each. One interesting aspect of this is that the MDM software market so far appears to be holding up well. Indeed it is currently growing at an annualised rate of 30% according to our research,a healthy clip. It should be noted that the market size figures that we use exclude systems integrator revenues associated with MDM – these are estimated at around three times the size of the software market. As an aside, it is these kind of assumptions that can lead to seemingly wide discrepancies between market size estimates from different firms; typically you see a figure quoted in the press, but what does it include and exclude? Our figures for MDM software exclude data quality vendors, which are handled in a separate twice yearly update.

These figures, which are admittedly retrospective, confirm our November market research study looking at the effect of the financial crisis on MDM spending. This found that about as many companies were planning to accelerate their MDM spend as were planning to slow it down or defer projects (admittedly nearly a third of respondents were undecided).

So far at least, then, both actually Q4 spend as seen by vendors, and spending intentions in our survey are telling the same story. MDM software revenues are holding up well. We will continue to track the market closely, with a Q2 2009 Market Update to be published in July.


November 19, 2008

Usually when economic times are tough then there are a series of things that the bean counters do to rein in costs. First they ban business travel except for customer facing situations, followed by freezing training budgets and recruitment, before sharpening their knives more seriously. The first two of these mean that conferences are usually at the sharp end of corporate spending cuts. I have just returned from speaking at a BI/MDM conference in Amsterdam, and was pleasantly surprised to see a healthy attendance of paying customers, a large number of which appeared in the last few days. This must have been a considerable relief to the conference organisers, and it was certainly nice to be speaking a packed room rather than one with rows of empty seats.

It is certainly hard to be sure just how deep recession is likely to be, with seemingly contradictory data all around. A scary figure is the cost of shipping (the Baltic Dry Index) which is a reasonable predictor of the flow of trade. This has dropped a little matter of 95% since the peak in June, with shipping companies cancelling orders and talking of mothballing ships. This kind of broader economic data would seem to suggest a fairly sharp recession is on the cards, and this must feed through into lower IT expenditure eventually, just as night follows day. Of course some areas will be hit harder than others, but I am always suspicious of claims that a certain area is “strategic” and so will be unaffected. Usually this is whistling in the dark by vendors. We shall see.

The economy and Wile E. Coyote

October 27, 2008

Like many of us, I am curious as to what extent the meltdown in the banks will affect the rest of the economy and, in particular, enterprise software spending. Random conversations over the last few weeks with vendors have been varied, with only those exposed heavily to financial services seemingly seeing a real decline in spend (one company had Lehman Brothers on its Q4 sales forecast). Certainly some sectors may barely be affected e.g. the public sector, or perhaps pharmaceuticals (people still get ill and will need to pay for their pills) and maybe law (imagine all the fun the lawyers will have as banking positions unwind and contracts cannot be fulfilled, never mind the shareholder class action suits). However there are only so many of these and I wonder whether we are in the situation that you get in cartoons, where Wile E Coyote or Bugs Bunny runs off a cliff and happily progresses forward until he actually looks down and notices there is no ground any more.

A troubling sign of this is in a sector a long way from the world of credit default swaps, that of trucks. Volvo is one of the largest suppliers of commercial lorries and trucks to continental Europe, and sold 41,970 trucks in the third quarter of 2007, when admittedly things were booming. They just announced their Q3 2008 results. How many trucks do you reckon that they sold? Less than 41,970 for sure, but what what sort of reduction might you expect? Maybe a 10% drop in sales, perhaps 20%, or even 30% if things had become really bad? Well, they actually sold 115 trucks in the last three months. That is not a typo. It is a 99.7% reduction in sales.

Now that is a scary number.

The Information Difference will shortly be conducting a survey of enterprise software buyers, looking specifically at their spending plans for master data management and data quality. I’ll keep you updated when we have some results (a few week’s time). If your company would like to sponsor this survey, you have four days left to do so (just contact me and I’ll send you details).

MDM Platform Support

July 9, 2008

At the Information Difference we continue to add new research on the MDM vendors. One of the things that is useful to know about vendors when drawing up a shortlist is which platforms the various vendors support e.g. which database, which web server, and perhaps more minor but useful technical information about whether they have double byte character support, do they have 7 x 24 helpline support etc.

There doesn’t seem to be a place where this kind of information is gathered together but there is now.

This also has information on the level of SOA support (if any), which non-English languages are supported in the user interface etc.

Initiate not going for Initial

June 27, 2008

In what could not be described as surprise move, Initiate Systems just pulled its previously planned Initial Public Offering. The turmoil in the capital markets means that it is difficult time to raise money right now, and so it seems sensible to wait until a better time for going public. This does raise the possibility of whether Initiate will consider raising money another way (update – it just did a USD 26 million private round), or indeed whether a potential predator might consider this a good time to pounce.

Generally this has little impact, but a lack of exit opportunities is a poor thing for the enterprise software sector in general, as venture capital firms are less likely to invest in earlier stage firms with one of the two exit routes (the other being a trade sale) closed. Initiate had made excellent market progress with its MDM technology, and it would have been nice to see a pure-play MDM vendor going public.

MDM Research

June 18, 2008

Just to let you know that the Information Difference has released its first piece of primary market research, as reported by IT Pro. There are some intriguing snippets in the survey results, as well as some rather more expected results, or the “well, duh” results as Homer Simpson might say.

13% of the (mostly larger) 112 companies surveyed had over 100 systems that hold and maintain customer data, which gives some idea of the scale of the problem that MDM is tackling. It is bit more than “just put in a hub” when you have systems at this level of complexity.

Given the generally flaky level of data quality reported, I found it surprising that nearly a third of the companies in the survey had not purchased an automated data quality tool.

The good thing was that plenty of companies seem to have begin measuring the costs of poor master data, and those costs are high, which should make it easier to justify master data management initiatives.

The Information Difference

May 13, 2008

Today sees the launch of the Information Difference, a boutique market research and analyst firm specialising in the master data management market. This reflects the increasing interest in this fast-growing area. The company has developed detailed profiles of all the vendors in the MDM space, as well as of some of the major and most interesting players in the related data quality space. The company will shortly announce its first piece of primary research (into MDM adoption) and will produce white-papers on key issues in the MDM market.

Its principals are Dave Waddington (ex Chief Architect at Unilever Foods) and myself, with some part-time assistance from a number of other talented individuals. It is nice to see some positive reactions from some serious industry luminaries (see press release).

We hope to bring a more in-depth perspective to this emerging market than is common today, and have some exciting research in preparation.

For more information see the company website.