Data Integration: OEM Strategy and Competitive Edgehosteddocs.ittoolbox.com/onstrategies.pdf · resource. They must focus their efforts on true differentiators, while leveraging off-the-shelf

Data Integration: OEM Strategy and Competitive Edge

Informatica

AN ONSTRATEGIES REPORT

PREPARED BY TONY BAER PRINCIPAL, ONSTRATEGIES

MARCH 2008


©2008 onStrategies, All Rights Reserved Reproduction in whole or part without written permission is prohibited 2

Abstract

The window of opportunity for ISVs has grown shorter than ever. Thanks to factors such as globalization or Software-as-a-Service (SaaS), ISVs and their rivals can leapfrog each other more rapidly than ever when it comes to delivering innovation to the market. Consequently, when charting product development strategy, ISVs cannot afford to waste time or resource. They must focus their efforts on true differentiators, while leveraging off-the-shelf technology for the rest.

In the case of data integration, the answer is clear: ISVs can more rapidly build their value proposition, accelerate time to market, and protect competitive edge by incorporating the data integration technology that is already available off the shelf.

As a company that has built its name on its ability to deliver connectivity to data wherever it resides, on whatever platform, in whatever form, Informatica has always been a natural original equipment manufacturer (OEM) partner. The company has a long history of OEM partnerships with the core of the enterprise software industry. Over the years, Informatica has grown its presence with astute acquisitions that steadily expanded the company from its origins as an extract, transform, and load (ETL) provider to a platform covering all major enterprise data sources and all aspects of the data integration life cycle. Admittedly, the data integration market is now awash with alternatives to Informatica’s offerings, when it comes to dealing with the obvious sources. Nonetheless, Informatica remains the go-to database, application, and platform-independent provider for all aspects of data integration, covering all data sources.

Informatica’s new INFORM for OEMs partner program represents an aggressive effort to broaden OEM opportunities. The program features a flexible licensing policy that is making the Informatica data integration platform more accessible to ISVs than ever before. With flexible bundling of data integration, data quality, and complex data exchange, plus licensing that can be right-sized to the ISV’s market, Informatica offers OEM solutions that can grow with the scope of the ISV’s business.



Focusing on the Core Enterprise

It sounds like an elementary principle: To succeed, a business should focus its resources on the functions, processes, or product capabilities that truly distinguish it in the market. Yet for software vendors, navigating a competitive environment where the pace of innovation and industry consolidation keeps accelerating, making the right investment decision typically becomes a challenge akin to pinning down a moving target.

In his latest book, Dealing with Darwin,1 noted business consultant Geoffrey Moore distills the issue to a deceptively straightforward concept: Enterprises should ask themselves what functions are core to differentiating their business versus what activities are part of the context that support the business. Moore concludes that most new small businesses die within four years because they become so distracted by context activities that they lose their competitive focus.

Identifying what is core and what is context to your business has significant ramifications, not only for which projects or activities are pursued, but on human capital management as well. With the help of the Internet, today’s economy presents companies new options for outsourcing their context in order to focus on the core of their enterprises.

For independent software vendors (ISVs), defining what's core and what’s context can be challenging. For instance, a Web commerce ISV whose early customer base is centered on Microsoft SQL Server database users will likely draw new competition as its core market matures. At that point, it must either deepen its functionality, such as adding new analytics or scalability, or broaden its market, such as adding support of database targets.

Consequently, while developing an adapter to SQL Server may have initially been deemed core to the business, remaining in the database adapter business over the long haul would divert resources that could otherwise be invested in developing new analytics features that preserve a competitive edge. By taking advantage of licensing off-the-shelf data integration technologies, the ISV eliminates the legwork that is arguably part of the context of its business. Additionally, by leveraging integration offered on-demand through a Software-as-a-Service (SaaS) provider, the ISV could further address its core by expanding the breadth of service available to its customers.

Identifying what is core and what is context to your business has significant ramifications, not only for which projects or activities are pursued, but on human capital management as well.



Data Integration Remains Pivotal for Enterprise ISVs

Along with people and processes, information is key for running a successful enterprise. As a critical enterprise asset, information provides the visibility that empowers people and drives business processes Delivering the right information to the right people at the right time is an essential ingredient for keeping enterprises agile.

Yet, simply providing access to data is not sufficient for enabling enterprise agility or fulfilling compliance mandates. Lacking a data integration strategy, these solutions at best reinforce the silos that already divide customer organizations. Solutions as varied as improving the customer interface and managing regulatory compliance rely on a core assumption: They must consume and coexist alongside increasingly diverse pools of data built from existing applications, which reside on an increasingly broad variety of platforms maintained inside and outside the customer’s enterprise. Examples include:

Partner Management. As insurers optimize their channels, processes such as sales force compensation grow more complex; they involve modeling different quota and territorial assignments, fed by comprehensive historical data plus reliable pipeline forecasts. Solutions require seamless integration of data among sales force automation, order management, HR, payroll, and back-end accounting systems that may reside locally and with channel partners.

Customer Experience Management. When tracking the customer experience, email, telephony, Web, radio, and video communications become just as essential as order history from transaction databases.

Operations Management. With electric utilities caught in a wave of spiraling energy and material costs, generating facility operators are extending their fixed-asset management systems to provide real-time performance management. This dictates flexible integration strategies that supplement batch with real-time or near real-time data feeds, providing business intelligence that can be used for resetting goals, adjusting operating strategies, or taking immediate remedial actions to lower operational costs as energy supply, equipment readiness, and demand fluctuate.

Just as a chain is only as strong as its weakest link, the innovations delivered by ISVs are only as effective as the quality, lineage, and completeness of the data that they

Lacking a data integration strategy, data access solutions at best reinforce the silos that already exist within customer organizations.



consume. Imagine a healthcare outcomes management system where the currency and consistency of data across clinical systems has not been validated. Using the results to build empirical knowledge to improve care delivery, the very effectiveness of these systems — not to mention the quality of patients’ lives — could be seriously compromised without ensuring adequate data quality.

Build Versus Buy

Despite the obvious difference in their core businesses, ISVs face similar build versus buy decisions as their customers: Should they buy an off-the-shelf product and customize it to their needs, or start from scratch and build their own? In both cases, the goal is finding the right solution at the right cost, and delivering the fastest time to benefit.

Obviously, no single answer applies to all scenarios. For instance, if the business need is unique and no off-the-shelf product exists, or the interface is so complex that it is more expedient to write the software from scratch, a build approach might be best.

But are the requirements truly unique? In the words of one IT consultant, the organization might be simply “paving the cow path,”2 automating a cumbersome process that could readily be streamlined by off-the-shelf alternatives. For instance, an ISV developing a fraud detection application must recognize that its customers are part of a global financial system that is growing increasingly interconnected. Identifying patterns of fraud that could originate from point-of-sale transactions, intermediaries, or internal attacks, requires solutions that aggregate, parse, transform, and analyze data from multiple sources — inside and outside the firewall — to detect those subtle, but unique events. Clearly, fraud detection solutions are differentiated not by their ability to integrate the data but by the way they design and apply their domain-specific, pattern-matching algorithms.

Then there is the cost of maintenance. It has been estimated that up to 70% of software costs over its entire lifecycle come after implementation, an expense that is borne entirely by the vendor if the functionality is internally developed.3

Another IT consultant outlined a multistep process for vetting the build versus buy decision, comparing factors such as whether off-the-shelf solutions on the short list are sufficiently aligned with the organization’s business and technology strategy; whether the functionality is likely to be used; and



whether the vendor offers adequate support and the customer (or service provider) has the necessary skills and resources to maintain the solution.4 Vendor support is especially critical for ISVs considering an OEM strategy because as software providers themselves, their business literally depends on it.

However, the fact that ISVs are in the software business can easily cloud the build versus buy decision. Compared to corporate IT organizations, ISVs have access to deeper development staffs and often fall prey to the misperception that internal development will be less expensive than paying the freight for commercial software licenses or subscriptions. Regardless of how attractive the economics of internal development initially appear, several hidden factors could drastically skew the actual result, including:

Opportunity Costs. The cost of development for software that could otherwise be sourced commercially must also account for the reality that, with development budgets (and staffs) being finite, resources directed toward one project preempt resources that could be invested more productively into the core product.

Growth Potential. If the ISV has already developed a simple program for the task, could it support additional use cases in the future or scale to meet anticipated growth in end-user demand?

Skills. Does the staff possess the necessary skills, or will they require significant retraining?

Maintenance. Because software must be maintained, will it remain economical for the ISV to continue dedicating resources to fix or update software over the long run? The question is especially pressing for data integration because as customers demand support for additional data sources or improved scalability, maintenance burdens quietly multiply.

Given the high velocity and narrow market windows for new software introductions, the stakes over the make versus buy decision are higher than ever. In today’s competitive playing field, gaining the ability to reuse data integrations is essential. When addressing different clients, who have varying mixes of relational and legacy environments and batch and real-time data integration needs, the ISV that reuses core integration logic can deliver time to benefit for its customers far more rapidly compared to hand coding and custom development. The need for delivering rapid time to benefit has never been more

The fact that ISVs are in the software business can easily cloud the build versus buy decision.



urgent. As enterprise software providers focus on specialized applications that bolt onto core enterprise transaction backbones such as ERP, the time to market should be faster compared to developing an entire enterprise transaction system from scratch.

Other factors such as the emergence of SaaS and open source are enabling ISVs to leapfrog into the market by reusing publicly available components and commercially available software delivery channels. In today’s software market, the wrong make versus buy decision can cause an ISV to miss its window of opportunity.

Why Informatica

Comprehensive Data Integration Platform

Because Informatica has built its name on its ability to deliver connectivity to data wherever it resides, on whatever platform, in whatever form, it has always been a natural OEM partner. The company has a long history of OEM partnerships with the core of the enterprise software industry, from the largest ERP, CRM, and BI vendors to best-of-breed providers ranging from supply chain optimization to governance, risk, and compliance; enterprise asset management; strategic service management; healthcare information systems; sales force automation; and other areas.

Over the years, Informatica has grown its presence with astute acquisitions that steadily expanded the company from its origins as an ETL provider to a platform covering all major enterprise data sources and all aspects of the data integration life cycle. Informatica has extended its data integration platform with acquisitions of:

Striva, which provided mainframe data integration and change data capture capabilities;

BMC’s mainframe data propagation capabilities, which added support for high-performance streaming data from legacy sources;

Similarity Systems and Evoke, offering data quality and data profiling solutions; and

Itemfield, complementing Informatica’s base in structured data with complex data integration capabilities covering unstructured data



The result is a comprehensive, modular suite of products that is the widest of any platform-neutral offering, addressing:

Data Access. Providing full retrieval capabilities covering structured and unstructured data, Informatica supports the classic batch-driven ETL capabilities of PowerCenter® plus the change data capture capabilities of PowerExchange® that enable scheduled or event-driven “trickle feeds” that selectively update database targets as often as necessary for the application.

B2B Integration. PowerCenter’s complex data integration capabilities have expanded to support the 80 percent of enterprise data that is unstructured, ranging from emails to Word and Excel files, XML, EDI, and vertical industry formats such as HL7 (healthcare), SWIFT (financial services), Accord (insurance), and RosettaNet (high-tech electronics manufacturing).

Discover. Offering tools for planning data integration, Informatica Data Explorer™ helps you understand the quality, consistency, interdependencies, and potential overlaps in potential target data sources. By scanning and analyzing the nature of the data, Informatica provides a complete solution that makes the overall data quality process manageable.

Cleanse. Providing fresh validation to the expression “garbage in, garbage out,” Informatica Data Quality™ automates the labor-intensive process of correcting inconsistencies in data. Originating as a process for harmonizing customer name/address listings, data quality now plays critical roles in applications as varied as master data management to patient medical records consolidation, financial industry regulatory compliance activities, and vendor relationship management.

Integrate & Deliver. PowerCenter, Informatica’s core offering, provides the integration hub for accessing business data from any platform, in any format, ranging from relational to mainframe databases, files, message queues, and a variety of unstructured formats. Within the same engine, PowerCenter can process data from real-time, change data capture, or batch feeds. PowerCenter can scale for any scenario, from workgroup to enterprise, to virtual federated topologies that integrate data across site or enterprise boundaries.

The result of Informatica’s acquisitions is a comprehensive, modular suite of products that is the widest of any platform-neutral offering.



Informatica’s Data Integration Platform covers the full life cycle (Source: Informatica)

PowerCenter meets the rigorous performance and scalability demands of today’s real-time enterprises with full support of high availability/failover, grid computing, and dynamic partitioning. Additionally, Informatica is supporting increasingly popular SaaS platforms. For instance, PowerCenter and Informatica Data Quality provide bidirectional data integration and quality management of Salesforce.com data that can be managed through a standard Web browser front end.

Informatica’s highly visual, codeless development environment has been proven to speed developer productivity, which is a critical benefit for ISVs seeking to reduce time to market. That same visual environment also reduces maintenance burdens compared to hard coding, thereby freeing ISVs to concentrate on the core of their business. And because Informatica’s data integration engine abstracts the logic of data integration from its physical implementation, ISVs can readily reuse integration logic throughout their solutions, enabling them to serve a broader range of customer requirements faster.

Flexible OEM Program

With dozens of ISV technology partnerships, Informatica is hardly any stranger to the OEM world. Its recent announcement of the INFORM for OEMs global partnering program, part of an umbrella that covers all of Informatica’s third-party relationships, is a reaffirmation of a partner and OEM strategy whose options are being expanded.



For ISVs, the benefits are obvious. They are freed from the time, cost, and hassle of developing and then maintaining functionality that is peripheral to their value-add. By gaining the flexibility to embed just the right elements of the industry’s broadest data integration platform for their solution, they are better able to direct their resources toward the core of their business.

The differentiators of Informatica’s OEM program include:

Breadth of Informatica’s solutions, spanning the full life cycle of data integration;

Platform independence, ensuring that no database, application, or OS is the preferred platform;

Flexibility, enabling ISVs to pick the pieces of Informatica’s data integration solutions that are appropriate to their offerings;

A fast onramp, made possible through Informatica’s codeless software development kit (SDK);

Reusability of data integrations, helping short-cut lead time for ISVs seeking to deliver next-generation solutions to market; and

Proven scalability, assuring ISVs that their solutions will deliver the right performance that their customers need.

Informatica is now expanding the options for third parties to gain access to its data integration technologies, so ISVs can mix and match the pieces they require. They can start with core data integration offerings that bundle PowerCenter and PowerExchange; add a data quality option with Informatica Data Quality; or focus on unstructured data with Informatica Complex Data Exchange™. Furthermore, Informatica is right-sizing its OEM offerings. For instance, ISVs can start modestly, installing Informatica’s offerings in a single blade-like appliance—with or without the help of Informatica’s professional services organization—and get their customers into production within a few weeks. And as ISV customers make new demands, such as integration with additional data sources, higher performance, and more scalability, or require additional capabilities, such as data quality or data profiling, they can add licenses on a pay-as-they-grow basis.

Informatica is now expanding the options for third parties to gain access to its data integration technologies, so ISVs can mix and match the pieces that they require.



This flexibility supports OEM scenarios such as the following:

Healthcare information management providers that initially focus on data quality and integration of SQL and HL7 format data, while adding mainframe data access later.

ISV startups that initially address customer bases with modest data volumes and, therefore, don't require the multi-threaded, high-availability features of today’s PowerCenter; however, as ISVs serve larger customers, they eventually need access to more of those PowerCenter options.

CRM vendors that serve large enterprise customers with data quality, data profiling, and high-availability capabilities and later add the ability to integrate unstructured data to cover emails and instant messages that make up the last mile of customer interaction.

The onStrategies Perspective

As the industry’s leading vendor-neutral, one-stop shop for data integration, Informatica delivers unparalleled flexibility to its customers. With a range of offerings covering the entire data integration life cycle, providing access to the right data at the right time, with the right method, Informatica offers the widest range of data connectivity options not tied to an application, database, middleware, or operating system platform. Simply stated, data integration is Informatica’s only business.

With more than 15 years of experience in the data integration business, Informatica was the first company to deliver a visual, metadata-driven platform that enabled customers to reuse data integrations, freeing them from the repetitive coding and mapping steps traditionally associated with the task. Informatica has since drawn plenty of competition, yet it continues as an industry leader based on the size of its installed base, level of customer satisfaction, and rate of renewals. Because of its platform neutrality, breadth of offerings, and proven scalability, Informatica continues to furnish a very attractive OEM proposition for enterprise ISVs seeking the best of both worlds: access to an industry-leading platform, minus the drag of development and maintenance.

Informatica’s new INFORM for OEMs partner program aims to level the playing field and broaden OEM opportunities. That initiative is a logical response to the company’s market position. Since IBM acquired its major rival, today Informatica also competes with open source or niche tool providers, along with a

As the industry’s leading vendor-neutral, one-stop shop for data integration, Informatica delivers unparalleled flexibility to its customers.



who’s who of enterprise software brands that, in many cases, also continue OEM relationships with Informatica.

By formally raising the profile and expanding its OEM program, Informatica is actively countering several industry misconceptions. For instance, because ISVs already have access to development staffing, the conventional wisdom is that it must be less expensive to develop internally. For data integration technology, that argument might stick if an ISV deals only with the usual suspects: SQL databases and the most popular enterprise applications. However, when ISVs expand their market footprint and encounter legacy or other proprietary data sources whose APIs are not well documented, ISVs must then bear the burden of maintaining those interfaces, which drains effort from advancing their core products. At some point, most enterprise ISVs realize that the so-called expedient choices aren't as expedient as they originally thought.

Another misconception concerns open source. Although success stories from Linux and niche Web infrastructure tools have proven the viability of open source, that doesn't necessarily mean that open source will always be cost-effective. Open source has succeeded with commodity technologies; however, data integration beyond the modest-sized instances of obvious sources (e.g., SQL Server, MySQL, Oracle) is hardly commodity.

Consequently, open source might be a good place to begin a data integration strategy, but at this point, it offers little headroom for growth. It lacks tooling that covers the breadth of data sources likely to exist in a diversified enterprise and a platform that addresses the rest of the integration life cycle beyond core ETL. Furthermore, open source technology is not free. If ISVs expect to support their customers, they must pass along the price of open source subscriptions if commercial support for the technologies is actually available.

Finally, due to its reputation as a provider of highly scalable, enterprise-class offerings, Informatica is battling the misconception that its products are unaffordable for ISVs. It is countering that with an extremely flexible licensing and bundling policy that allows ISVs to acquire only the pieces that they need today, with the option to grow in the future. Although it has not rolled out “light” versions of its flagship PowerCenter offering, Informatica will not let packaging stand in the way of offering right-sized licensing and bundling agreements with ISVs that allow them to gradually grow their use of the platform.



Admittedly, the cliché of being “Switzerland” has been overused by integration vendors. However, in Informatica’s case, the label remains apt because data integration platforms are the company’s sole product. Unlike its largest rivals, Informatica does not tie its integration platform to a specific database, enterprise application, or operating system. That makes Informatica an especially suitable OEM partner for ISVs seeking to literally keep their options open.

Recent consolidation of the integration marketplace has concentrated Informatica’s mind when it comes to OEM partnerships. Going forward, OEM will become a major component of Informatica’s go-to-market strategy. We consider the INFORM worldwide partner program as simply the first step of a strategy that could expand OEM opportunities in several significant ways. Potential options might include formal release of “light” versions of Informatica products such as PowerCenter or Data Quality that would actively acknowledge the company’s commitment to “right-sized” product licensing. Such a strategy could also open the door to an even more flexible “Informatica Inside” strategy that embeds components of its platform inside ISV partner offerings. Additionally, Informatica’s forays with Salesforce.com could provide an obvious path for SaaS support that would further lower the entry bar for OEM deals.

Nonetheless, the market is awash with alternatives to Informatica’s offerings when it comes to dealing with the obvious sources, such as SQL Server, Oracle, or Excel spreadsheets. Informatica’s cornerstone innovation, providing a visual, metadata-driven strategy that eliminates traditional manual scripting has now been imitated by a score of followers providing low-cost point tools targeting the low-hanging fruit. Although large enterprises have a variety of information sources, many of them are increasingly embracing virtual business strategies that increase the degree of integration with business partners. That requires a more comprehensive, life-cycle approach that validates data and provides multiple paths of access and integration. Consequently, as ISVs support installed bases that embrace their own virtual, interconnected business strategies, data integration will never become a commodity.

We consider the INFORM worldwide partner program as simply the first step of a strategy that could expand OEM opportunities in several significant ways.



Endnotes

1. Geoffrey A. Moore, Dealing with Darwin (New York: Penguin Group, 2005).

2. Jerry Loza, “Consider These Points When Making the Build vs. Buy Decision,” TechRepublic, Mar 28, 2002, http://articles.techrepublic.com.com/5100-22-1045594.html

3. Polly S. Traylor, “To Build or to Buy IT Applications,” Infoworld, February 13, 2006 http://www.infoworld.com/article/06/02/13/74880_07FEbuildbuy_1.html

4. Dan Oliver, “Buy vs. Build: Six Steps to Making the Right Decision,” TechRepublic, April 22, 2002, http://articles.techrepublic.com.com/5100-10878-1038857.html?tag=rbxccnbtr1



About Onstrategies

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Data Integration: OEM Strategy and Competitive Edgehosteddocs.ittoolbox.com/onstrategies.pdf · resource. They must focus their efforts on true differentiators, while leveraging off-the-shelf