5 Steps to a Business Turnaround
Here is how Informatica turned around its business to become a category leader delivering record results.
By Sohaib Abbasi, Informatica
Oct. 23, 2006
After impressive growth in the early years, Informatica's business reached a plateau in 2001. Growth remained elusive, despite attempts to pursue new markets.
Shortly after I joined Informatica in July 2004, we refocused the company on our core market. We defined a five-step plan for the business turnaround. By executing on this plan, we achieved record financial results: significantly growing both revenue and operating income.
A Look Back
Informatica was one of the pioneers in the data warehousing infrastructure software market. As a technology leader, it helped define and grow the data warehousing market. Informatica benefited from its initial focus as more and more customers automated data warehousing projects to gain better business intelligence. As a result, Informatica reported spectacular revenue growth. During the IT hyper-growth years, from 1996 to 2000, Informatica appeared on track for sustained growth.
Inspired partly by the lofty market valuation of a new breed of application software companies, such as Ariba and Broadvision, Informatica entered a new application software segment: Analytic applications. Analytic applications are built using Informatica's core technology but require industry-specific knowledge for selling to a new type of customer: the business users in various departments rather than the IT department.
In retrospect, Informatica underestimated the complexity of pursuing both the infrastructure and application software markets. Both the customers and their expectations are different in these two market segments. Executing on such a dual market strategy necessitates two distinct company cultures in order to pursue these two distinct markets.
Worse yet, such a strategy can strain partnerships and can often hurt the core business. An infrastructure software company benefits from OEM partnerships with application software companies. Not surprisingly, Informatica's entry into the analytic applications market concerned its partners in this segment. The fears of one such partner were confirmed when they lost a deal to Informatica. Their partnership with Informatica came to an end.
The foray into analytic applications turned out to be an expensive experience for Informatica. The additional cost to build and sell two product lines exceeded the incremental revenue. Arguably more expensive, the competition with former partners hurt the core business.
The IT downturn coupled with the complexity of this dual-market strategy ended the multi-year streak of impressive growth. From 2001 and 2004, Informatica reported negative year-over-year license revenue growth in ten of the twelve quarters.
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Shortly after I joined Informatica in July 2004, we refocused the company on our core market. We defined a five-step plan for the business turnaround. By executing on this plan, we achieved record financial results: significantly growing both revenue and operating income.
A Look Back
Informatica was one of the pioneers in the data warehousing infrastructure software market. As a technology leader, it helped define and grow the data warehousing market. Informatica benefited from its initial focus as more and more customers automated data warehousing projects to gain better business intelligence. As a result, Informatica reported spectacular revenue growth. During the IT hyper-growth years, from 1996 to 2000, Informatica appeared on track for sustained growth.
Inspired partly by the lofty market valuation of a new breed of application software companies, such as Ariba and Broadvision, Informatica entered a new application software segment: Analytic applications. Analytic applications are built using Informatica's core technology but require industry-specific knowledge for selling to a new type of customer: the business users in various departments rather than the IT department.
In retrospect, Informatica underestimated the complexity of pursuing both the infrastructure and application software markets. Both the customers and their expectations are different in these two market segments. Executing on such a dual market strategy necessitates two distinct company cultures in order to pursue these two distinct markets.
Worse yet, such a strategy can strain partnerships and can often hurt the core business. An infrastructure software company benefits from OEM partnerships with application software companies. Not surprisingly, Informatica's entry into the analytic applications market concerned its partners in this segment. The fears of one such partner were confirmed when they lost a deal to Informatica. Their partnership with Informatica came to an end.
The foray into analytic applications turned out to be an expensive experience for Informatica. The additional cost to build and sell two product lines exceeded the incremental revenue. Arguably more expensive, the competition with former partners hurt the core business.
The IT downturn coupled with the complexity of this dual-market strategy ended the multi-year streak of impressive growth. From 2001 and 2004, Informatica reported negative year-over-year license revenue growth in ten of the twelve quarters.
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