By Stuart Lauchlan, News and Analysis Editor, MyCustomer.com
Data integration firm Informatica posts increased profits as its value proposition to 'do more with less' and its extension to software as a service pay off, despite the softer economy. But will this only serve to make Informatica more ripe and attractive for the picking?
Informatica saw second-quarter profit increase 10%, driven by strong demand for its data integration software and services. For the latest quarter ending June 30, the firm reported earnings of $11.5 million, compared with $10.5 million in the second quarter of last year. Revenue climbed 21% to $113.8 million from $94.3 million in the year-ago period.
Informatica chairman and chief executive Sohaib Abbasi said the company's "value proposition for information technology organisations to 'do more with less' has promoted even broader customer adoption of our products and services in the current macro-economic environment."
“As a result of this growing trend, 48% of our deals over $100,000 were with customers that plan to use Informatica for more than data warehousing. In addition, in the second quarter, 69% of our professional services fees were from consulting engagements beyond traditional data warehousing, primarily data migration projects. Based on our unique value proposition in each of the four technology categories we won important customer decisions in the second quarter.
"Our value proposition for information technology organisations to 'do more with less' has promoted even broader customer adoption of our products and services in the current macro-economic environment."
Sohaib Abbasi, CEO, Informatica
“Customer adoption of the latest Informatica data integration release continues to grow. Hasbro, the leading toy maker, selected Informatica for our proven high performance and cost effective scalability. Electrolux, premier manufacturer of appliance, chose Informatica for their universal data access required by their project to migrate data into an SAP application from 20 systems.”
He cited international business as being particularly healthy. “In Europe, a leading logistics provider, Deutsche Post World Net, has adopted Informatica across all three lines of business: DHL, the German mail system, and Post Bank,” he said. “Deutsche Post adopted Informatica to expedite results across a broad range of projects, including consolidation of customer applications and data quality projects.”
But not all of Europe is doing as well as Abassi might like. “Within Europe we continue to benefit from very strong performance in Germany,” he said. “We are very pleased with the consistent performance that we have attained in Southern Europe, primarily in France. We are also very pleased with the progress we have made in Germany. In terms of the macro economic impact, we have not seen that across all of Europe. Clearly we have not seen any of that in any of the Eastern European economies. The closest that we have seen any signs that there might be an impact would be in the UK. However, overall, Europe continues to do extremely well for us.”
A step beyond
Overall, Abassi said there was no sign of a slow down in buying decisions. “We commented that we had seen some different patterns in the buying behaviour of our customers and we took steps in order for us to adjust our processes and our organisation,” he noted. “The team has done an exceptional job having the discipline to have much better linearity in the second quarter. We set regular weekly targets and it went a long way in ensuring that we had a better linearity. And we closed the deals throughout the quarter. That is a great testament to the value proposition, that our customers didn’t wait until the very end of the quarter in order to actually get the deals done.
"In fact, we closed some of the larger transactions much earlier in the quarter. We expect that our customers will continue to have a little more scrutiny in terms of the purchasing process. However, as our value proposition is for customers to do more with us, we find that our customers find that particularly appealing in times like this where they are looking for operational efficiency.”
"Another record quarter under its belt will only serve to make Informatics more ripe and attractive for the picking. Possible suitors? We believe it's the usual enterprise software suspects. But the dark horse could be Microsoft."
Madan Sheina, Ovum
The firm continues to see the shift towards software as a service (SaaS) as an opportunity. “The software as a service trend was one that we were the first among the data integration of vendors to recognise,” said Abassi. “In fact, we are years ahead of our competition. No one else has even articulated a strategy to provide integration of the service. Not only have we delivered products, extensions to our flagship products, that are now being used by over 55 customers. Some of the largest customers that are using software as a service offerings from vendors like Salesforce.com now rely on Informatica to retain control over that data.
“But we went a step beyond that. We actually now have delivered the third integration as a service. I commented on a few customers that have subscribed to it and there is a huge interest in the third service that we announced, called Data Loader, which provides bi-directional integration between Salesforce.com and any other source, including Google docs. And that is generating a lot of excitement. It gives us a very tier differentiation versus every other data integration vendor. We are the only one that provides a complete enough solution to integrate both on-premise as well as off-premise data.”
In conclusion, Abassi approaches the future with what he calls “prudent optimism”, albeit striking a note of caution. “We have validated our strategy, we have repeatedly demonstrated the operational discipline, we have confirmed the customer demand, we have diversified our business across the geographic regions, we have diversified it across the various verticals. We have the strongest product line that we have had, ever, with the 8.6. And all of those things give us a lot of reason to be optimistic. However, the macroeconomic uncertainty clearly provides reason to be prudent.”
That's wise, reckons Ovum's Madan Sheina. “Informatica might look financially solid, but it's not an immovable oak as yet,” says Sheina. “It hasn't been entirely immune to a soft economy, which has resulted in a see-sawing North American financial services business, Informatica's strongest vertical, over the past year. Informatica executives dismissed it as a temporary slip - “it kind of dropped and then maybe you had a kind of bounce, and then just kind of stayed there for a while” was how Informatica executives described it.
“Ironically, another record quarter under its belt will only serve to make Informatica more ripe and attractive for the picking. Possible suitors? We believe it's the usual enterprise software suspects - Oracle, SAP and even IBM - as well as some newer suspects - HP, which recently got heavy in data warehousing with its NeoView platform. But the dark horse could be Microsoft, which is in a buying mood these days and seems to have developed an appetite for data management software.”
About the Author
Stuart Lauchlan is a freelance business and technology journalist with 15 years experience of writing about the technology, management and business sectors, both in Europe and the US.
For the past five years, he has been freelance, contributing to a variety of print and online publications on both sides of the Atlantic, including being a regular columnist/contributor for MIS magazine, editor of Outsource magazine and News Editor for MyCustomer.com. He is also a partner in media and editorial services consultancy Darksome Media - www.darksome.net. You can contact Stuart by email at email@example.com.