In-Depth

Firstlogic Cashes In

From the moment it said “I do” to last year’s buyout proposal by Pitney Bowes, Firstlogic’s cards were on the table.

• By Stephen Swoyer
• 02/15/2006

It was only a matter of time. Almost from the moment the privately-held data quality specialist last year acceded to a buyout offer from campaign management powerhouse Pitney Bowes Inc., its cards—or, rather, those of certain unidentified private stakeholders—were on the table.

In other words, someone at Firstlogic was looking to cash in.

And cash in they did. Last week, Business Objects SA ponied up $69 million for Firstlogic. That’s a 38 percent premium over the $50.3 million that abortive suitor Pitney Bowes first tendered last September. It’s also substantially more than the $55 million data integration stalwart (and long-time Firstlogic partner) Informatica Corp. plopped down for Dublin, Ireland-based Similarity Systems.

But why is Business Objects acquiring a data quality vendor now?

“It makes sense that Business Objects would acquire Firstlogic and its mature, best-of-breed data-quality tool, as a natural extension of Business Objects’ long-standing commitment to data integration and their new direction into enterprise information management with a business intelligence focus,” says Philip Russom, senior manager of research at TDWI. “Besides, compliance has become a killer app for both reporting and data quality tools this decade, and Business Objects—which has a growing compliance practice—can address demand by supplying both technologies, plus services, to boot.”

It’s too early to know just how Business Objects plans to incorporate Firstlogic’s technology assets. Indeed, in light of recent history—viz., a second request for information from the Federal Trade Commission (FTC) that had a chilling effect on Pitney Bowes’ acquisition ardor—it probably isn’t wise to treat Business Objects’ overture as a fait accompli, either. Nevertheless, Russom has an idea how things will proceed. “If recent history serves as precedence, we should expect Business Objects to continue its product integration strategy based on metadata management in the form of the BusinessObjects Universe,” he comments.

Thanks to Business Objects’ existing OEM reseller agreement with Firstlogic, Russom points out, some of this integration work has already been done.

In the past, Business Objects has rescued at least one of its acquisitions from ETL market niche-dom (the former Acta, an SAP connectivity specialist) and—to its credit—more or less maintained the autonomy of another, more prominent acquisition (the former Crystal Decisions Inc.). In both cases, of course, Business Objects also tightly coupled the Acta (now called Data Integrator) and Crystal technology assets with its own data integration and BI tools stack.

Russom says he hopes Business Objects will similarly do right by Firstlogic’s customers. “With any luck, Firstlogic’s IQ suite will get resources like Data Integrator did, but retain enough autonomy and brand consistency to serve both Business Objects’ BI users and the broader market for data quality,” he says.

Diversification, Not Commoditization

With more than $100 million in data quality acquisition activity in the last month, it’s tempting to frame what’s taking place as the inevitable consolidation—or commoditization—of the data quality market in toto.

That doesn’t quite capture it, however. To the extent that data management specialists such as Firstlogic, Similarity (and earlier, Trillium, Group 1, and others) have been acquired by larger, non-specialty vendors (e.g., Business Objects, Informatica, Harte Hanks, Pitney Bowes, etc.)—yes, there’s a real sense in which data quality has become a much more pervasive technology.

But sheer pervasiveness does not a commodity make, notes Wayne Eckerson, research and services director of TDWI. “[C]ommodization is not the issue. It's more that they [data quality technologies] are taking their rightful place in an integrated data integration suite,” Eckerson points out.

There’s a reason for this, Russom argues. These days, he says, data quality and data integration are “flip sides of the same coin.”

This has not historically been the case—at least, not to the degree that it is today. But then, the enterprise applications space is itself in the midst of substantive transformation—driven in large part by the identification of new business requirements (such as a growing need for “right-time” access to data) and the emergence of new user constituencies.

“One of the reasons data-quality usage is spreading is that it is often piggy-backed atop related initiatives, which carry it across the enterprise. Just about any data-intensive initiative or software solution will ferret out data-quality problems and opportunities,” Russom says. “Over time, IT and business sponsors have realized this, so it’s become commonplace to include a data-quality component in initiatives.”

The upshot for data quality adopters, Russom says, has been verifiable improvement in key business initiatives.

“Anecdotal evidence suggests that data quality gives these initiatives better planning, a more predictable schedule, and a higher quality deliverable,” he indicates. According to TDWI research, data-quality software is typically integrated with software for other solutions, such as data warehousing and BI (79 percent of initiatives), customer data integration (38 percent), migrations and consolidations (35 percent), and master data management (35 percent).

Questions, Questions, and More Questions

Before data quality takes its place in the core data integration feature-scape of today, a number of lingering questions must first be addressed. On the ETL front, for example, how will data quality have-nots—vendors such as Ab Initio, DataMirror, Pervasive, and Sunopsis, to name a few—compete with data quality haves such as Business Objects, IBM Corp., Informatica, and SAS Institute Inc.?

By the same token, what—if anything—does the Firstlogic acquisition mean for Business Objects’ core BI competitors—companies such as Cognos Inc., Hyperion Solutions Corp., and MicroStrategy Inc., which haven’t articulated data integration or data management strategies of their own?

There are a couple of other important questions, too: Which users want—and which don’t want—integrated data integration or BI software stacks in the first place? Business Objects, Cognos, Hyperion, and MicroStrategy say the platform’s the thing—Informatica, for its part, has a similar (self-serving) take on data integration—but best-of-breed vendors aren’t exactly quaking in their boots, are they? Do they know something we don’t?

We’ll explore these and other issues in greater depth over the coming weeks.