In-Depth

Informatica Retreats from Analytic Applications Market

Company will no longer sell analytic applications directly to customers; move signals a return to company's roots

• By Stephen Swoyer
• 07/23/2003

During its Q2 earnings announcement conference call, Informatica president and CEO Gaurav Dillon disclosed that his company will no longer sell its analytic applications directly to customers. Instead, Dillon indicated, Informatica would make them available only through systems integrators and ISV partners.

“Our customers want industry expertise that our systems integrator partners are best positioned to provide, along with customization, vertical-industry knowledge, and expert turnkey solutions," said Dillon in a prepared release.

Informatica first entered the packaged analytic applications space when it purchased Influence Software in 1999. Since then, however, the company has been unable to consistently derive revenue from its line of analytic applications. Informatica’s announcement last week signaled a return to its roots; even as he de-emphasized his company’s involvement with analytic applications, Dillon affirmed Informatica’s commitment to its real-time data integration toolset, along with its PowerAnalyzer BI platform.

Analytic Applications: Build, Not Buy

Informatica’s decision is hardly surprising, analysts say. After all, when it comes to analytic applications, most enterprise IT organizations opt to build their own. According to a recent study from TDWI, for example, only 34 percent of organizations purchased packaged analytic applications. On the other hand, 62 percent built their own. (Four percent responded that they were “unsure.”)

The upshot, concedes TDWI director Wayne Eckerson, is that the “packaged analytic apps business has not panned out to be as strong as most vendors anticipated.” Eckerson cites a variety of contributing causes, foremost of which are the high prices that vendors typically charged for packaged analytic solutions for several reasons: “Vendors were trying to get big bucks for these things—at least $500,000 in licenses and then an equivalent in services to start—and there is little appetite for such big expenditures at this time,” he notes.

In addition, analysts say, organizations typically opt to customize analytic applications once they’re implemented—further detracting from the proposed value-add of a pre-packaged application suite. In Informatica’s case, Eckerson observes, it was hampered by the traditional difficulties associated with selling into a different market: “It’s difficult for a technology [and] tools sales force to sell applications."

Companies that traditionally profit from packaged analytic applications typically don’t have an existing investment in a business intelligence infrastructure. “While most companies say they want to purchase a package, most can’t find one that’s suitable or they over-customize them. The ones who profit from analytic applications are those without a relevant data warehouse or reports and who want to source from a specific ERP application, i.e., SAP or PeopleSoft,” says Eckerson.

Some Vendors Find Success

Business Objects SA and Cognos Inc. have both been moderately successful selling packaged applications.

Business Objects, for example, notched $21 million in application sales in 2002—up 160 percent from 2001. The company offers CRM, product and service, supply chain, HR, and finance applications, among others. Cognos, for its part, recorded $60 million in applications revenue in 2003. In addition, it claims more than 100 applications customers.

In Eckerson's view, “Business Objects and Cognos are still selling packaged analytic applications and showing good growth, although still just a puny portion of overall revenues.”

Business Objects and Cognos approach pre-packaged BI from different perspectives, however. “Business Objects supplements its packages with [an] analytic development environment—kind of like an IDE for analytic applications—called Application Foundation, which Business Objects used to build most of its apps in the first place, I believe,” Eckerson notes. “So, Business Objects is giving folks build and buy together, which is a good strategy. Cognos is wrapping apps into their [Corporate Performance Management] framework and calling them CPM Foundation.”