Doubling Down on Data
November 20 2009 by ChiefExecutive.net
How an ever-more-digital world will impact various industries is up for debate, but one thing is clear: The business world is amassing a monumental amount of data. Every piece of information gathered, from customer preferences and spending patterns to financial and health records, needs to reside somewhere and, ideally, be accessible in a usable way to the businesses that are collecting and storing them. In theory, that data revolution spelled good news for companies like Informatica, which has been providing data integration software and services that help companies access their information assets since its inception in 1993.
Yet, despite the mounting need for its services, Informatica was struggling by the time Sohaib Abbasi took the company’s helm in 2004. Between 2001 and 2004 the company’s product license revenue growth had declined in 10 out of the previous 12 quarters.
Why the disconnect between the RedwoodCity, Calif.-based company’s potential and its reality? Simple, says Abbasi, whose industry experience includes a 20-year stint at Oracle. “Informatica had incorrectly assumed that its core market—data warehousing— was saturated and becoming increasingly competitive,” he explains. As a fix, the company decided to branch out from its core data storage capability into analytic application software— a move that involved selling solutions to business users in various departments rather than working exclusively with IT departments.
To Abbasi that idea was a nonstarter. Reaching this new customer base meant incurring significant costs and jeopardizing current relationships. “It was a stretch—and one that conflicted with the company’s neutrality, and therefore its ability to partner with other vendors,” he explains.
A better bet? Pulling the plug on the analytical application software project to focus on its core business—traditional data warehousing—and a more closely related growth area—operational data integration. Rather than simply house data, Informatica would help its customer’s leverage that information to grow revenues, improve profitability and increase customer loyalty. The move gave the company a badly needed boost. Revenues climbed by 22 percent in 2005 and increased steadily, hitting $456 million in 2008, double what they were in 2004.
Today, Informatica’s data integration clients use the company’s open, platform-neutral software to access and reconcile data regardless of which application, database or data silo the information resides in. Data sources may range from on-premises computers to cloud computers (data centers or computer services rented as needed and accessed via the Internet rather than bought). “The fundamental challenge when customers adopt cloud computing is that they lose control over their data because it’s no longer in their IT systems,” explains Abbasi. “It resides in some other vendor’s computers in the cloud on the Internet. Most companies cannot afford to lose control over their data, and what we provide is the technology to access that data over the Internet in a secure manner, discover the relevant information, improve the quality of that information and integrate it.”
Whether its clients use geographically dispersed data centers or a combination of legacy data warehousing and cloud computing, Informatica seeks to add value by providing timely access to critical information.
Abbasi points to Tricare, the healthcare provider for members of the armed forces, as an example. “One of their challenges in terms of managing the cost and quality of healthcare has been that their information about military personnel was fragmented and located in a variety of different data sources,” he says. “They have now integrated and are managing all of the medical records of military personnel using Informatica. That adds significant value to them—improving the quality of care while also reducing the cost of care.”
Growing awareness and recognition that effectively leveraging data can provide a strategic opportunity has enabled Informatica to continue to thrive in today’s difficult environment. Revenues for the third quarter of 2009 were $123.4 million, up 8 percent from the $113.8 million recorded in the third quarter of 2008. What’s more, income from third quarter operations was $22.3million (GAAP), a 26 percent jump from the same quarter in 2008.Abbasi says the increasingly data centric business world will continue to drive growth going forward. “We believe demand will allow us to sustain the kind of growth rates we’ve experienced in the past few years,” he says. “As long as organizations seek to become more effective and more efficient, there will be greater and greater demand for data and, more importantly, data integration. Data integration has a higher sense of purpose and urgency than ever before.