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Informatica partners assess impact of leveraged buyout

Informatica's channel partners consider how the leveraged buyout by private equity will impact their businesses and discuss the company's transition to the cloud.

Channel companies are watching with interest the pending $5.3 billion sale of Informatica Corp., which has historically partnered with systems integrators, resellers and OEMs.

Informatica makes software tools that partners employ in a range of tasks including cloud integration, data management, big data analytics and application migration. On April 7, Informatica announced an agreement that will see the company acquired by two private equity firms. The transaction, subject to shareholder and regulatory approval, is slated for completion in the second or third quarter of 2015, according to Informatica.

Bloomberg pointed to the deal, which makes Informatica a private company, as the largest leveraged buyout thus far this year. Informatica's new owners expressed enthusiasm over the company's transition to the cloud and subscription-based services as well as its pursuit of next-generation analytics. But some Informatica partners and other industry observers suggested the buyout story may not end there.

Jared Hillam, enterprise information management practice director at Intricity LLC, an IT services company based in New York that partners with Informatica, said he believes the Informatica buyout may prove to be the prelude to its eventual sale to a larger technology vendor. He suggested the company might follow a trajectory similar to Crystal Decisions, which Business Objects (now part of SAP) acquired for $1.2 billion in 2003, in another sizable business intelligence-related transaction.

The impact of Informatica's sale on the company's partnering strategy has yet to be determined, Hillam noted.

To the extent this move helps Informatica focus more on their cloud-based subscription revenue sources, we're enthusiastic about the news.
Prabhu Palanisamysenior director of integration and analytics, Appirio

"We are in wait-and-see mode," he said.

Informatica partners, in general, find themselves in that position. The company's allies are hopeful that the transaction will bode well for the channel. As recently as February, Informatica in its 10-K statement pointed to a number of strategic contributions from partners: They help reduce sales cycles, assess customer needs, provide vertical market expertise and bundle Informatica's products within broader service offerings, among others.

Prabhu Palanisamy, senior director of integration and analytics at Appirio, a cloud consulting firm based in San Francisco, said he looks forward to a continuation of Informatica's cloud moves. Informatica unveiled its cloud data integration roadmap in 2006.

"Informatica was one of the earliest movers among integration vendors to a true cloud-based solution, and [it has] won a well-earned reputation as leaders for cloud-to-on-premise and cloud-to-cloud integrations," Palanisamy said.

Appirio, he said, has helped many customers implement Informatica as part of public cloud migration initiatives.

"To the extent this move helps Informatica focus more on their cloud-based subscription revenue sources, we're enthusiastic about the news," Palanisamy said.

A former Informatica partner, however, is more ambivalent regarding the company's cloud activities. Stan Duda, CEO of Alpine Consulting Inc., a Schaumburg, Ill., company with a specialization in information management, said Alpine had been an Informatics partner for a couple of years, reselling its technology on several occasions.

Duda said Informatica was looking for a way to transform its extract, transform, load (ETL) tools and had done a nice job deploying them to the cloud.

"But at the end of the day, it was truly just ETL and relegated to be a commodity when you look at the marketplace," Duda said.

Alpine, meanwhile, has opted to invest more in its partnership with IBM. The consulting firm, for example, works with IBM's InfoSphere Information Server in the information integration arena.

Duda said IBM had been second to Informatica in that space, but has caught up via acquisitions.

"When you look at the breadth and depth of IBM's offering, and comparing and contrasting that to Informatica … they, frankly, beat Informatica at their own game by adding an entire data management strategy to their portfolio rather than point solutions."

Duda said his company decided its efforts were best spent focused on expanding its solutions and offerings around the IBM stack.

Brad Shimmin, service director for business technology and software at market researcher Current Analysis, suggested that IBM and other vendors such as SAP, Microsoft and Oracle may have gotten ahead of Informatica, but not by much. He said vendors of all stripes find it difficult to get their products to the cloud, noting that IBM is still in the process of moving its InfoSphere middleware to the company's SoftLayer cloud.

As for Informatica, the company's buyout may be coming at the right time.

"The timing might be really good for this, because the areas that Informatica specializes in … are the key touch points within the enterprise: data quality and data security and data integration in support of big data projects," Shimmin said.

Those are also touch points in which Informatica partners can play a role going forward.

"[Informatica] relies on their channel to provide value-add for a given vertical market or even specific use cases within that vertical," he said.

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Compared with its competitors, what benefits does Informatica offer as a vendor partner?
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We're seeing a lot of companies being bought up and then split up into pieces. Being acquired by an equity firm -- let alone two of them -- certainly doesn't bode well for any company's existence in its current form. At some point, investors are going to want to get their money back.
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Thanks for the feedback, Sharon. Veritas/Carlyle is another large private equity deal in IT this year. Veritas has four core product lines. Informatica has about eight.
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Thanks for your observations, Sharon. Another major private equity deal this year is Veritas/Carlyle. Veritas has four core product lines, while Informatica has about eight.
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