Look out IBM, Oracle and SAP — you’re about to lose a bit of your dominance in the master data management (MDM) market to Informatica. On January 28, 2010, Informatica announced that it acquired Siperian for $130 million (representing the largest acquisition Informatica has made to date). Siperian is a multi-domain operational MDM vendor that Forrester named as a leader in our last Forrester Wave for Customer Hubs in Q3 of 2008 (see graphic).
Source: August 2008 “The Forrester Wave™: Customer Hubs, Q3 2008”
I first suggested the likelihood of this acquisition back in April 2008 in a blog post after Informatica acquired Identity Systems — the core identity resolution/match engine OEM’d by Siperian. I even more strongly reiterated this prediction in June 2009 when Informatica next acquired AddressDoctor, which is the core postal address verification solution used by Siperian.
What this means for the MDM Market:
The impact this acquisition will have on the MDM market should be extraordinary to say the least.
On the competitive front, Oracle’s Siebel Universal Customer Master (UCM) and D&B Purisma MDM products currently OEM Identity Systems matching technology as the core to their MDM engines. On the postal address data quality front, MDM competitors DataFlux, IBM, and Initiate Systems either OEM or resell Informatica’s AddressDoctor technology. And in addition, Oracle also partners with Informatica to provide its Informatica Data Quality software as an option for its MDM clients.
Oracle may likely be the most significantly impacted, so what does this mean for them? In the short term, I’m sure Informatica will be more than happy to continue to collect revenue from Oracle while keeping this partnership alive, but don’t expect future negotiated contracted terms to remain very reasonable as Informatica gains traction with its MDM strategy. No matter how often Oracle says how happy they are to maintain a friendly state of co-opetition with strategic partners, I don’t anticipate they will want to run the risk of a competitor pulling the rug out from under its aggressive MDM strategy. Most likely near-term steps for Oracle include:
- Finding a new match engine to replace Identity Systems. UCM, along with Oracle Customer Hub (OCH), are packaged together to account for Oracle’s customer data integration (CDI) offering. UCM is critically important to Oracle’s go to market strategy though because it is more widely adopted in non-Oracle apps environments than OCH. While it can of course leverage its native match engine found in OCH, I would instead recommend acquiring an attractive match engine target such as the easily embeddable Netrics, whose current MDM OEM partners include Data Foundations, Kalido and TIBCO.
- Replacing AddressDoctor for postal address verification. In truth, the postal address capabilities are fairly commoditized in the market with many vendors doing this well, and with functionality more easily interchangeable across one partner to another. Another partnership with firms like Experian’s QAS or Pitney Bowes Business Insight could fill that gap for Oracle without much impact to its end customers.
- Bringing data quality software in house. But for more advanced data quality rules engines - especially for customer data — Oracle needs to say goodbye to its data quality partnership strategy. Today Oracle is most reliant on Informatica and Harte-Hanks’ Trillium Software, but they should move to bring these capabilities in house — just as they did for product data quality in the beginning of January when it announced its acquisition of Silver Creek Systems. Oracle might look to one of the many data quality vendors still available in the market such as Datactics, DataMentors, or Datanomic, or even a long shot acquisition of current partner Trillium Software if parent Harte-Hanks considers cashing out to focus entirely on its much larger direct marketing services business.
Oracle remains an extremely tough competitor with a strong MDM portfolio, and significant existing market share, so don’t expect them to lie down and let Informatica walk all over them. But Informatica’s entrance into the MDM market will require Oracle business development, sales and marketing to up their game a bit.
What this means for end users shopping for MDM solutions:
This is only goodness for all MDM professionals.Now they have a truly application- and database-agnostic MDM giant they can consider as a viable alternative to the big three. In the past, Oracle apps shops could only consider Oracle and IBM as the safest bets, perhaps considering the riskier MDM pure plays such as Siperian or Initiate Systems as a backup. Ditto for SAP apps shops. And while IBM doesn’t have an apps bias like Oracle and Siebel, they certainly have a platform bias for clients heavily invested in IBM hardware and software footprints.
This is not to say that Informatica is completely comparable with these other technology giants. Informatica brings in about an estimated $500 million in revenue a year compared to $100+ billion for IBM, $23+ billion for Oracle, and $16+ billion for SAP. In reality, any one of these technology behemoths could acquire Informatica if they so desired (anything is possible — Oracle could always acquire Informatica to fill in its data quality gap, right?).
But until then, Informatica is in a unique position in that they are small enough to be truly focused on data management — their portfolio now includes all the necessary components of my MDM Maturity Model (see graphic), but large enough to have a global presence, strong sales and marketing support, and committed relationships with many major Global SI influencers around the world. While Siperian was doing very well on its own, it was primarily finding growth in North America and still had its strongest presence in its legacy Life Sciences/Pharma sector. With Informatica’s very loyal cross-region and cross-industry install base of data integration and data quality customers, the number of cross-sell and upsell opportunities should be large. At the very least, Informatica will often be invited to participate in the RFP process of existing IBM, Oracle and SAP clients with the opportunity to win deals — something Siperian couldn’t always accomplish alone.
Source: October 2009 “Trends 2009: Master Data Management”
What this means for existing Siperian clients:
All of Siperian’s customers knew they ran a risk of Siperian being acquired when they chose this solution. If a vendor like Microsoft acquired Siperian, it could have been taken off the market and repurposed as Microsoft did with its acquisition of Stratature in June of 2007.
But luckily, Informatica should want nothing more but to double down the R&D, services, sales, and marketing investments in the Siperian MDM technology — which already is deeply integrated with Informatica’s identity resolution and postal address technology. In addition, there is a significant overlap with Siperian MDM customers using Informatica for data integration and data quality, meaning there is a lot of existing experience and know-how on integrating Informatica’s portfolio with Siperian.
Both Siperian and Informatica customers should expect more seamless integration and interoperability between all components of Informatica’s data management portfolio over the next 12 to 18 months.
Okay, time for the next set of predictions: You never know...
I would expect additional acquisitions in the data quality and MDM space in the imminent future from vendors that may include EMC, HP, IBM, Microsoft, Oracle, SAP, Software AG, Tibco, and others.
I also don’t expect Informatica to consider their M&A journey “finished” just yet. As they have continued to expand its data management stack beyond data integration through to data quality (Similarity, AddressDoctor), MDM (Siperian), identity resolution (Identity Systems), unstructured data management (Itemfield), complex event processing (Agent Logic),and ILM (Applimation), Informatica is clearly redefining its own borders. I would expect additional Informatica acquisitions in:
- Analytical/governance-driven MDM. While Siperian brings significant expertise in the operational MDM Hubs market, it doesn’t fill the gap in delivering version-controlled master views of reference data used most often in analytical environments. To compete with Oracle’s Hyperion DRM and Microsoft’s Stratature technology, Informatica could consider an acquisition of either Kalido or France’s Orchestra Networks.
- Business Process management. I recently posted a blog with my colleague Clay Richardson, who covers BPM for Forrester, entitled “Process Data Management: Like Your Brain And Your Heart, BPM and MDM Can’t Survive Independently”. Check out the blog post and our accompanying research for more on our Process Data Management theme and our rationale for this convergence, but suffice to say we believe a strengthening of BPM workflow capabilities to be the next frontier for many MDM vendors. While I’m less familiar with the key BPM vendors available, recent acquisitions of Lombardi by IBM and Savvion by Progress Software hint at a feeding frenzy, perhaps with BPM vendors like Appian and Polymita as attractive targets.
- Data warehousing. There’s a laundry list of potential DW partners that Informatica could consider including Greenplum, Netezza, and even HP’s Neoview if HP chooses to focus more on its much larger data management services business and less on its data management software. Of course Informatica runs the risk of alienated many of its other DW partners if it were to make such an acquisition, so this one remains more of a long shot. But with continued consolidation in the DW/BI space, Informatica may eventually have to make such a move.
The most intriguing rumor out in the blogosphere says that IBM may be on the verge of acquiring Siperian’s primary MDM pure play competitor, Initiate Systems. That would be much more of a surprise since IBM already has a comprehensive MDM solution (two in fact if you include both its MDM Server and MDM Server for PIM products). But it’s not so out of the realm of possibility for the following reasons:
- Initiate has an extremely strong presence in Healthcare with a growing presence in Public Sector. Both of these verticals are expecting major federal stimulus funding, with IT spending and data management as a high priority. Initiate could help IBM take ownership of these verticals.
- By acquiring Initiate as a defensive move, IBM will eliminate the risk of another vendor (EMC, HP, Microsoft, SAP) from strengthening or entering the MDM market as a tough competitor.
As an interesting aside, Informatica actually has an investment stake in Initiate Systems, having participated in its last round of funding in June 2008, which means Informatica should be nicely compensated in the event of Initiate’s sale.
The rumor implied that this IBM/Initiate acquisition announcement could be imminent so stay tuned for part 2 of this posting if that does in fact occur.
What do you think of this acquisition and my predictions for the future? Would love to hear from you!
Rob Karel also blogs at http://blogs.forrester.com/business_process/.