In-Depth

Speculation Grows Over Acquisitions

In light of IBM’s purchase last year of Ascential, SAP and Oracle could be contemplating blockbuster data integration acquisitions of their own.

• By Stephen Swoyer
• 01/17/2006

You probably remember that IBM Corp. purchased the former Ascential Software Corp. last March for more than $1 billion. That move had ripples in the industry: for Ascential’s customers, partners, and competitors, for starters, but also for IBM’s own vendor adversaries. Only weeks after Big Blue announced its intent to acquire Ascential, for example, German ERP giant SAP AG chose not to continue its own OEM agreement with Ascential. Then, last October, SAP announced a similar deal with data integration pure-play, and former Ascential rival, Informatica Corp.

It’s for this reason, some analysts say, that Informatica could itself be acquisition bait—if not for SAP, then for still another voracious acquirer, Oracle Corp.

For one thing, says Michael Gonzales, president of business intelligence consultancy The Focus Group Ltd., Informatica’s bread-and-butter data integration technology—extraction, transformation, and loading (ETL)—will soon disappear as a discrete category as relational database powerhouses Microsoft Corp. and Oracle Corp. (along with IBM) have incorporated ETL facilities into their RDBMS platforms.

“I think it’s safe to say that the relational databases of choice will own your relational and your multidimensional data. These [vendors] will be core components for any data integration scenario, especially when you push toward real-time,” says Gonzales. “So if I were arguing [in favor of] any particular technology being commoditized, ETL is a prime example. There’s Informatica, who’s left alone—the last ones to be invited to the dance.”

Mark Madsen, a consultant and data warehousing manager with a prominent online gift retailer, concurs. “I agree that the general ETL tools alone already are a commodity market, but the problem is that the whole market is being redefined with data becoming more of a platform, so what I’m really looking at is where does the data integration fall?” he says. “Data warehouse-specific ETL is pretty much going away. It has become a commodity. That’s why Microsoft is in there with Integration Services and they’ve bundled it through SQL Server. IBM is viewing it the same way. Informatica likes to talk about being a platform—but we’re really not talking about a platform, we’re talking about infrastructure.”

It’s the transition to a data integration infrastructure that most interests Gonzales, who argues that Informatica is ripe for the plucking—if not by partner SAP, then by Oracle, where many current and former Informatica employees first cut their teeth. SAP badly needs a data integration stack (ETL and metadata management) to flesh out its NetWeaver architecture. (SAP currently licenses ETL technology from Informatica, of course, along with iWay, a subsidiary of BI powerhouse Information Builders Inc.)

Gonzales isn’t entirely alone in this view. If Informatica is going to be acquired, concedes Phil Russom, a research director with TDWI, SAP will be the most likely buyer, in part because both companies have a pre-existing partnership.

And what of Oracle? What do Larry Ellison and company have to gain by acquiring Informatica? For starters, says a prominent analyst who spoke on condition of anonymity, there are rumblings that Oracle’s Warehouse Builder ETL tool—which is heavily biased in favor of connectivity into, but not necessarily out of, Oracle environments—isn’t quite ready for prime time, at least for use as an enterprise ETL tool. While Oracle’s next-generation release of Warehouse Builder 10g—code-named Paris, and expected perhaps as early as the first quarter of this year—might address many of these concerns, it still won’t have bi-directional connectivity into SAP.

There’s a potentially more important reason for Oracle to acquire Informatica: It would deny SAP still another prize.