Informatica Shaping Up As Likely Acquisition Target

Consolidation isn't just something that happens to physical things like data centers. It's also a phenomenon affecting financial services and other industries that are among the biggest consumers of IT products and services.

Ivan Chong, general manager of Informatica's data quality business unit, explained that different financial services companies can have up to seven different definitions for "price;" it can mean a stock's settlement price for one and the closing price for another.

Customer records can be inadvertently duplicated if a name is misspelled by a single letter.

These kinds of problems can be compounded when newly-merged businesses struggle with reconciling data residing in incompatible data warehouses and applications.

That's where a company like Informatica comes into play. Informatica makes data quality and data management software to help customers maintain the accuracy of data such as customer records.

I caught up with Chong at the Financial Information Management conference in New York this week, where he told me that the company's data quality business has not only quadrupled over the past two years, but is continuing to accelerate.

This kind of technology can be very attractive to technology platform vendors, especially when they're already likely to have an existing presence in either the acquiring company or the target. It should be no surprise, then, that SAP and Oracle have acquired or built their own data management capabilities in the past several years. And IBM spent approximately $10 billion between 2005 and 2008 in data management-related acquisitions.

There are thus few independent data management software vendors of Informatica's size ($455 million in 2008 revenues and a market cap of $1.2 billion), in large part because most platform players have already scooped them up.

Ray Wang, an enterprise software analyst with Forrester Research, told me that Informatica is, "definitely a hot company and it would be attractive to other companies either for a partnership or an acquisition."

Wang noted that this technology would make a good fit for HP as it extends its business intelligence offering, as well as EMC, which could use it as a complement to Documentum and its 2007 acquisition of deduplication software vendor Avamar.