In-Depth

Pitney Bowes Changes the Rules of the Data Quality Game

Company threatens to transform the data quality space, for large and small vendors alike, with its acquisition of Group 1.

• By Stephen Swoyer
• 06/16/2004

One maxim holds true across almost any conceivable industry: a round of consolidation makes for an interesting marketplace.

Take the data quality space, which has been in the midst of a protracted consolidation phase for the better part of four years, starting in June of 2000 with the acquisition of data quality specialist DataFlux by SAS Institute Inc. Over time, the data-quality market has coalesced in fits and spurts, helped in no small part by Ascential Software Corp., which acquired both data quality vendor Vality and data-profiling specialist Metagenix in 2002.

That was the case before 2004 brought with it a surge of consolidation activity. Now, says Rob Lerner, a senior analyst in application infrastructure with Current Analysis Inc. the acquisitions of Search Software America (SSA) by Intellisync and of data profiling vendor Avellino Technologies by Trillium Software, along with the pending acquisitions of Evoke Software by Conversion Services International and Group 1 by Pitney Bowes, have changed the rules of the data quality game.

“The impact of some of these changes is fairly clear,” Lerner writes, noting that one of the most salient upshots is that “the market for standalone data profiling solutions probably doesn’t exist anymore.”

It’s still too early to ferret out many of the potential ramifications of this accelerated consolidation trend, Lerner concedes, but one thing seems fairly clear: The arrival of mail and document management specialist Pitney Bowes as a data quality competitor is a potentially troubling development for many of the players in this space.

“Data quality vendors should be concerned with the arrival of Pitney Bowes, because the company could have a significant [impact] on the market going forward,” he stresses. “Of course, in the near-term, it is unlikely that Pitney Bowes will change Group 1’s position in the market; in fact, because of the company’s lack of complete clarity with respect to its intentions in the market, Group 1 could be hurt because some prospects may be hesitant to buy until they know what Pitney Bowes has in mind.”

Most immediately, Group 1’s acquisition by Pitney Bowes ratchets up the pressure on FirstLogic, Innovative Systems, and other standalone data-quality vendors, says Lerner. “[T]he increasing competition will certainly put more pressure on … players without large parent organizations,” he speculates, conceding that “these vendors have established positions, substantive and stable installed bases, vertical strengths, and broad product sets that will enable them to grow and remain competitive.”

Many of the smaller standalone vendors, such as DataLever, DataMentors, and SSA, are susceptible to a pricing war, Lerner says, because they have “limited resources and small installed bases … and it is unlikely that they will be able to respond adequately to the increasing competition.”

The presence of a competitor such as Pitney Bowes could even dictate a change in strategy for established, and well-funded, data-quality purveyors such as DataFlux and Trillium, Lerner speculates. “While these parent companies give their respective subsidiaries a lot of freedom, it is likely that they also place some restrictions on this freedom,” he points out, noting that “it is doubtful that they allow their subsidiaries to partner and cooperate with their parents’ respective competitors.”

These arrangements, while perhaps not ideal, may certainly have been workable in the data quality marketplace such as it existed prior to 2004. Going forward, however, they could be a liability, Lerner cautions. “[S]uch restrictions could impact the abilities of Trillium Software and DataFlux to respond to a new and improved Group 1.”