SWOT: Informatica’s Quality Acquisition

Many analysts expected Informatica to acquire long-time partner Firstlogic, but the conventional logic was wrong, as Similarity Systems found out.

Informatica’s acquisition of Similarity Systems, a data quality vendor that acquired Evoke Software and its data profiling technology from CSI International in July 2005, provides data quality and additional data profiling technology that should increase Informatica’s already strong competitive position in the data integration market. Adding to its credibility were the strong financial results that Informatica reported for FY 2005 shortly before the acquisition was announced.

Strengths:

  • Informatica will now be in complete control its own data quality technology and be able to determine its future direction rather than having to rely on the functionality of partners.


  • Similarity has several industry-specific data quality solutions including financial services, consumer packaged goods, telecommunications service providers, and utility companies. Similarity’s data cleansing is designed for use with both name-and-address and non-name-and-address data and, since the company was founded in 2001 is built upon a modern technology foundation with no legacy components.


  • Informatica will integrate Similarity’s data quality technology with PowerCenter 8. PowerCenter 8 is expected to be generally available in April 2006.


  • Informatica will retain all of Similarity’s staff and its CEO will become the general manager of a new Informatica data quality division.


  • The acquisition did not require regulatory approval and is now complete; integration efforts between Informatica’s and Similarity’s technology can begin immediately.


  • The acquisition was announced the same day that Informatica reported strong financial results for Q4 FY2005 (period ending December 31, 2005) with GAAP revenues of $79.8 million and profits of $13.6 million versus Q4 FY2004 revenues of $60.0 million and a loss of $98.7 million.

Weaknesses:

  • Similarity and Informatica appear to have no previously existing partnership and the two companies will find themselves working together for the first time.


  • Packaging and pricing options for the integration Similarity’s technology and Informatica PowerCenter 8 solution have yet to be announced.


  • Informatica currently offers a PowerCenter Data Profiling option and it will need to explain how this fits with the Evoke data profiling technology it now has with the acquisition of Similarity.


  • There was no letter confirming continuation of customer support for Similarity customers at either the Informatica or Similarity Web sites. This is almost a checklist item in most acquisitions and, while it may be a simple oversight, it could raise concerns within Similarity’s installed base.

Opportunities:

  • Informatica will be able to credibly market its technology as a complete, single-source solution including data quality, data profiling, and data integration across a wide variety of sources and destinations.


  • Specifically, Informatica will be able to counter claims by arch-rival IBM (Ascential) that it does not offer a complete solution. Informatica should position itself as a strong, if not superior, alternative.


  • Informatica should be able to cross-sell its technology to existing Similarity customers while using Similarity’s industry-specific solutions to target financial services, CPG, telecommunications service providers, and utility companies.


  • Informatica will have the opportunity to cross-sell Similarity’s data quality technology to existing PowerCenter customers and should weigh the pros and cons of targeting Firstlogic and Trillium customers for migration to Similarity’s technology.

Threats:

  • Informatica OEM partners Firstlogic and Trillium will likely fight aggressively to retain their installed bases in Informatica accounts. Both companies partner with Ab Initio, an ETL vendor they now might recommend over Informatica. Innovative Systems is another Informatica data quality partner that now finds itself competing with it.


  • In December 2005 Similarity Systems announced a partnership with ETL vendor (and Informatica competitor) Sunopsis; this partnership is also clearly at risk.


  • Data integration vendors without their own data cleansing technology (e.g., Ab Initio, Business Objects, Sunopsis) are likely to position Informatica as favoring its own data cleansing technology in accounts that already deploy a commercial data quality solution. They will highlight their openness to third-party data cleansing technology and how this protects existing customer investments.

Other Considerations:

  • Firstlogic, which along with Trillium have their data quality technology OEMed by Informatica, will likely find future Informatica-related revenue significantly reduced.


  • Additionally, when Firstlogic’s pending acquisition by Pitney Bowes was called off in November 2005, I expected it to be back on the sales block seeking another suitor. I had previously speculated that two potential suitors were Business Objects and Informatica; the elimination of Informatica as a potential Firstlogic suitor will likely decrease the price that other suitors might be willing to pay for the company.


  • As consolidations continue within the industry and data quality vendors continue to be acquired by others, it will be interesting to see if small data quality vendors like DataMentors and DataLever will be able to retain their independence; if not, will today’s potential acquirers already have obtained this technology elsewhere?

About the Author

Michael A. Schiff is a principal consultant for MAS Strategies.