In-Depth

Baby Steps: Teradata Verges Closer to Independence

Teradata users have been cautiously optimistic all along, and as things come down to the wire, user optimism seems to be growing.

• By Stephen Swoyer
• 07/11/2007

Long-time NCR Corp. subsidiary Teradata came one step closer to independence this month, when Teradata Corp. completed its SEC Form 10 filing. NCR’s Board of Directors has already approved the distribution of all of the shares of common stock of Teradata Corporation through a stock dividend.

The upshot? Teradata is on track to complete its spin-off later this year.

In the past, Teradata users expressed cautious optimism about the looming split. Many seemed enthusiastic about the idea of an unfettered, unlimbered Teradata (http://esj.com/business_intelligence/article.aspx?t=y&EditorialsID=8319). They said an independent Teradata will be better equipped to compete in the bread-and-butter data warehousing segment—as well as explore new opportunities in the data warehousing low-end and mid-market.

"I was not surprised to hear this," said Teradata administrator Jeff Ohlman, who asked that his company not be named. "I think the jury is still out as to whether this will benefit Teradata. Obviously it will allow NCR to focus on its core business, but I think the danger of Teradata being destroyed in a buy-out is high.”

As things come down to the wire, Teradata users seem no less enthused about the upcoming split. Take Joseph D’silva, a veteran Teradata administrator who asked that his employer not be named. “Overall, this must [be] good ... for Teradata, though it might take a while for them to get around with their internal administration and support logistics setup as they have been banking on NCR all the while for it,” he comments. “I think both the acquisition and spin-off was a necessity of its own times. NCR was the cash cow for Teradata's development and research all the while it was making its baby steps. Now that Teradata has grown to a full-fledged database company, [a] market leader, [with] profits in the [bank] and a well laid out road map, I think it's the right time the teenager moved out of his parents’ house and started on his own.”

Vincent McBurney, a Teradata expert with consultancy and services specialist BearingPoint, agrees. McBurney says the split will be good for Teradata, good for Teradata’s customers, and—finally—good for data warehousing and business intelligence (BI) pros, too. He cites Teradata’s SEC Form 10 filing, for example, which discloses plans to recruit and hire additional employees—in both sales and technical positions—by the end of the year. That’s just the beginning, though, according to McBurney, who notes that the newly independent Teradata will get a fresh, debt-free start, thanks to $200 million from NCR and $300 million in operating income. And that doesn’t even factor in tax breaks, either, he says: Teradata’s 37 percent tax rate was higher than NCR’s average, McBurney notes—in part because Teradata itself is encumbered by a tax strategy that’s designed to benefit NCR. Once Teradata spins off, its net income (which has actually declined, thanks to its tax liability) should once again spike.

Elsewhere, says Teradata veteran D’silva, communication from Teradata has been both consistent and positive. From a customer point of view, he says, that’s undoubtedly a good thing. “’[T]here hasn't been any concern and actually the vibes have been [very] positive, Teradata as a product had been unchallenged and has been a star among its customers for its reliability and completeness of vision; now that it's all set to become an independent, full-fledged IT company, the general expectations are on par with the peers in the market place.”D’silva, like other users, waxes optimistic that an independent Teradata will improve on (or at least change) some of the more frustrating aspects of the combined NCR/Teradata. “We are hoping that the general processes… built around NCR's way of doing things, [such as] long invoices for a multitude of parts costing a few dollars each… [that] there would be a change of spectrum in how they dealt [with those] things. It's going to be much quicker, robust and more ‘IT’-like—and hopefully we will get to see more acquisitions and partnerships emerging down the road,” he comments. “This spin-off must help it unleash its full potential against emerging competitors in the data warehousing [database] market, where it has been a pioneer and a leader all [along].”

Other users echo D’silva’s sentiments, too. In an interview earlier this year, user Ohlman was enthusiastic about an independent Teradata’s ability to focus solely on evolving and enhancing its relational database, warehouse, and universe of associated tools. “NCR has neglected Teradata for years. As a result, the functionality in comparison to other RDBMSes is way behind,” he argued, citing two among several relevant pain points: “[Teradata’s support for] stored procedures and [its] user interfaces are weak at best.”

Ditto for Teradata administrator Nolan Madson, who likewise requested that his organization not be identified. Unlike some users, Madson—who participated in an email interview earlier this year—doesn’t seem to feel that NCR has been a bad corporate parent to Teradata, although he notes: "Teradata hasn’t been [NCR’s] only focus." Madson, like D’silva and other users, says that should change once Teradata becomes its own boss. And Madson, like a lot of users, says he hopes that the newly independent Teradata will competitively price its data warehouse solutions. "[M]y organization is running into real budget problems, and the expense of Teradata storage is consuming time that could be better spent on solving business problems," Madson comments.