Private Cloud Analytics Is A Major Trend

Based on our TLCC interviews, it is evident that cloud analytics is a major trend. My conversations with IBM’s Ric Telford and Pat Toole clearly demonstrate IBM’s strategy of building a private cloud offering for analytics to cater to large enterprise needs. Today, we analyze Informatica’s prospects against this backdrop.

Informatica’s Financials

According to the Gartner 2009 Data Integration Tools Magic Quadrant, the data integration tool market was worth $1.34 billion by the end of 2008 and was projected to grow at 9.4% annually over the next five years. The report named Informatica (NASDAQ:INFA) as a clear leader in the segment by offering products such as Informatica 9 and Business Glossary. Informatica’s recently reported Q2 performance also saw significant growth. Revenues grew 33% over the year to $155.7 million, with license revenues growing a record 44% to $70 million.  The market was expecting revenues of $143.7 million. EPS for the quarter of $0.25 also managed to exceed the market’s expectation of $0.23.

Analytics and Cloud Computing

Informatica’s cloud offering continues to do well; the company has registered over a thousand customers and become the most often downloaded application from Salesforce’s AppExchange. However, combining analytics with the cloud is becoming the next big business model. IBM is already seeing a powerful business case in the combination through its Blue Insight Project, an in-house IBM analytics cloud with the ability to run reports on a union of data that their internal businesses were already looking at. IBM is projecting that over 130,000 employees will be able to access Blue Insight by the end of the current year and expects to realize tens of millions of dollars in savings over the next five years through its deployment.

Informatica has made some progress in the direction by signing up with Teradata, Samsung SDS, and MicroStrategy to jointly develop a private cloud computing solution which will offer advanced analytics of business forecasting and management to be performed in the cloud. Its earlier acquisition of Siperian also helped it to expand into the master data management (MDM) space, through which it is now offering Informatica MDM, a solution that provides access to business critical data, recognizes and resolves inconsistencies, and feeds the data to the business intelligence system. In addition, its existing cloud computing services have expanded with Informatica Cloud Summer 2010 release, which broadens its existing data integration solution with pre-packaged plug-ins that enable data quality and business-to-business (B2B) data transformation in the cloud, making the company a big player in the cloud.

Within analytics, the other players have already made big acquisitions; IBM acquired Cognos, Oracle acquired Hyperion and SAP acquired Business Objects. Meanwhile with HP appointing ex SAP AG chief Leo Apothekar as their CEO, there are suggestions that HP may be looking at acquiring SAP. For Oracle to continue to compete with HP and IBM, Oracle needs to offer analytics in the cloud in a big way. Oracle’s desire to compete with HP was evident in the recent appointment of ex HP CEO, Mark Hurd as Oracle copresident. Oracle should therefore look at acquiring Informatica to build on its in-house data quality, profiling, or metadata solutions and strengthen its cloud strategy in analytics. In a recently conducted opinion poll, many others also believe that Oracle’s next buy out will be Informatica, a move that I too have been talking about.

Informatica’s stock is trading at $37.51 with a market capitalization of $3.5 billion. It touched a 52-week high of $39.05 earlier last week.