Behind the Ascential/PeopleSoft Agreement

Ascential can now claim to be the data integration vendor of choice with both SAP and PeopleSoft.

Licensing deals between vendors are a dime a dozen, admittedly, but an agreement between an embattled PeopleSoft Inc. and data-integration pure-play Ascential Software Corp. may offer more than meets the eye.

Last week, Ascential announced a new OEM licensing agreement with PeopleSoft. Under the terms of the agreement, PeopleSoft is to license Ascential’s data integration technologies for use with its enterprise performance management (EPM) products. PeopleSoft will also resell Ascential’s “Packaged Application Connection Kits” (PACK).

What makes this agreement so special? One inescapable consequence is that Ascential’s win comes at competitor Informatica Corp.’s expense. After all, Informatica notched an agreement with PeopleSoft half-a-decade ago in which Informatica’s PowerMart was to be included with PeopleSoft’s EPM products. Although tools from other extraction, transformation, and load (ETL) players were certified for use with PeopleSoft’s EPM stack (Ardent, Ascential’s predecessor company, was one of them), the agreement gave Informatica a competitive leg up. The arrangement between the two companies survived even as Informatica expanded into non-traditional markets—such as business intelligence and business analytics—which placed it in competition with some of the same companies that licensed its ETL technology. For the record, Informatica officially exited the analytics space last August.

Informatica’s close ties with PeopleSoft were to some extent checked by Ascential’s relationship with German ERP giant SAP AG. The two companies cemented a pact in early 2001 whereby SAP was to resell Ascential’s DataStage ETL tool for use with its Business Information Warehouse (BW). Once again, although products from other ETL vendors (including Informatica) were certified for use with BW, Ascential was viewed as most closely aligned with SAP.

The new arrangement upsets that balance, and, some say, gives Ascential bragging rights in the ongoing rivalry between these two data integration stalwarts. “With the signing of this agreement, Ascential can now lay claim to being the data integration vendor of choice with both SAP and PeopleSoft, and leverage this position to attract other application vendors while growing its presence in SAP and now PeopleSoft accounts,” writes Mike Schiff, a senior analyst with consultancy Current Analysis Inc.

Ascential and PeopleSoft announced a no-cost conversion program—which includes on-site consulting support—designed to migrate Informatica PowerMart customers to Ascential’s DataStage platform. Although both companies have tried to downplay the potential for disruption as customers transition from Informatica to Ascential, analysts cautiously demur. First of all, writes Jack Hafeli, an analyst with Ventana Research, customers must ship their repositories to an off-site conversion facility, a requirement that, while “onerous,” he concedes is probably prudent.

The conversion process is only part of the story, Hafeli asserts. “Depending on your organization’s data integration architecture, conversion to DataStage from the existing Informatica offering could be a tough process, but not converting could be tough as well,” he wrote in a research bulletin last week.

What’s involved in a conversion? According to Hafeli, “It is likely that the entire system (databases, workflows, processes, networks, etc.) will need tuning, support resources will face a learning curve, and human and financial resources will be consumed in meaningful quantities. The conversion program addresses only some of these issues.” Customers who expect to stick it out on Informatica’s PowerCenter must endure the loss of frontline support from PeopleSoft, and, in all likelihood, increased licensing fees from Informatica.

It’s not just PeopleSoft customers who stand to be affected by the switch. Because Informatica notched a similar OEM agreement with mid-market ERP solutions provider J.D. Edwards, users of that company’s software face some tough choices, as well. PeopleSoft acquired J.D. Edwards in June of 2003.

For his part, Ron Papas, senior vice president of alliances and business development with Informatica, says that PeopleSoft decided to make the switch after a protracted negotiations process during which, he claims, Informatica agreed to a number of concessions—including access to PowerCenter and flat-fee licensing terms—before Ascential tendered its can’t-miss offer. “The complication happened when somewhere around the middle of the year when basically Ascential came to them with an offer that was substantially lower, an order of magnitude basically lower than what we were receiving from them on a yearly basis,” he comments.

Representatives from Ascential and PeopleSoft could not immediately be reached for comment.

Other Factors Behind the Split

At the same time, notes Current Analysis’ Schiff, the accord between Ascential and PeopleSoft begs the question of whether Informatica’s efforts in non-traditional markets have hurt it in the pure-play data integration space. He stresses, however, that details of the negotiations between Informatica and PeopleSoft simply aren’t known, so it’s entirely possible that the two vendors parted ways for other reasons, such as over licensing costs. This isn’t entirely unprecedented, Schiff writes: Oracle and Informatica failed to reach a similar accord in 1996 because of squabbling over licensing, and ETL provider Sagent walked away with the deal. “Informatica hasn’t been afraid to walk away from a deal when it doesn’t like the terms,” he observes.

Ventana Reseach’s Hafeli accepts Informatica’s claim that the split is the result of a particularly brutal negotiating process—to a point. “In a pitched battle for a lucrative partnership agreement, many issues come into play: what products will and will not be included and under what pricing and royalty terms; how will sales and delivery channels interact and be compensated; how will PeopleSoft customers be treated and by whom?” he says.

Nevertheless, Hafeli writes, other considerations almost certainly factored into the mix, including Informatica’s presence in non-traditional markets, such as analytics and BI. “Ascential and Informatica each have a thorough vision for data integration, but in Ascential’s case, the vision is solely centered on data integration,” he concludes.

Similarly, Current Analysis’ Schiff suggests that the agreement between Ascential and PeopleSoft serves as a warning that “long-term partnerships can be endangered when a partner in one market becomes a competitor in another and could lead other vendors to reevaluate existing relationships in that light.”

Not surprisingly, Informatica’s Papas doesn’t buy this argument. He says that Informatica briefed PeopleSoft ahead of time on its decision to exit the analytics space and to refocus its efforts on data integration, and believes that the company has successfully communicated this non-competitive strategy to many of its larger OEMs, such as Siebel Systems Inc. and i2 Technologies.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.