It probably marks the end of Ascential as a brand, as Angus Falconer, EMEA marketing manager for DB2 Information Management told ComputerWire: [Ascential] will certainly go into the Information Management software group. The brand itself will likely diminish somewhat. Whether it turns into a product name or not, it is too early to be sure.
But Ascential, a long-time IBM partner, is widely regarded as the leader in the art of extract, transform and load (ETL), the heavy-lifting of the data world, which enables large volumes of data to be moved in and out of databases and data warehouses. Ascential also has technology that enables data to be cleaned of errors and duplications, and subsequently managed more effectively. Partly via acquisitions of its own, Ascential has built up what it calls the Ascential Enterprise Integration Suite, combining data modeling, cleansing, movement and management functionality.
The acquisition is subject to Ascential shareholder and regulatory approvals and other customary closing conditions, and is expected to close in the second quarter of 2005. IBM’s shareholders have so far shown themselves rather neutral to the announcement, its shares at the time of writing at $91.65, up only marginally on their close of $91.51 before the deal was announced.
Ascential was by no means in trouble. In its latest quarter ended December 31, 2004 it posted sales up 21% to $78.2 million. For the full year, sales rose 46% to $271.9 million. In the fourth quarter net income, excluding a tax benefit, was $6.6 million, compared with net income in the year-ago period of $0.8 million, also excluding a tax benefit.
But as Ascential’s Peter Gyenes, chairman and chief executive put it: This transaction offers Ascential Software shareholders solid appreciation over recent trading prices of our stock, without the execution and business risk. In other words, cash is king.
IBM’s decision to turn Ascential from a close partner – the pair have 550 joint customers already – into an acquisition target, appears to have been driven by the increasing importance being ascribed to data quality. Companies are realizing that their data warehousing, business intelligence and even business performance management projects are of little value if all they are doing is moving and analyzing dirty data – data that contains errors or duplications. IBM’s software and services divisions were already bringing Ascential into plenty of deals, since IBM has until now lacked Ascential’s particular skills.
But Ascential was not IBM’s only partner for data quality and movement. It had a similar arrangement with Informatica, which has recently been busy de-emphasizing its applications business to concentrate on data integration just like Ascential. IBM’s Mr Falconer said the company plans to maintain the Informatica partnership despite the Ascential acquisition: This will not stop us working with Informatica, he said. We will pursue a policy of openness.
Mr Falconer maintained that there is little overlap between IBM’s existing WebSphere Information Integrator product, targeted at application-level and SQL-based data integration tasks, and Ascential’s software at the lower ETL layer. For that reason he said there are unlikely to be many staff layoffs. Ascential’s senior management including Mr Gyenes, chairman and CEO, Pete Fiore, the president, and even Robert McBride, the chief financial officer, are all said to be joining IBM and reporting into Janet Perna, general manager of IBM’s Information Management business.
That Information Management business claims it saw triple digit sales growth in 2004. It includes the DB2 database and tools, business intelligence, content management and information integration, though this is largely from the WebSphere software group. Mr Falconer said the company would be likely to do some integration of Ascential and other IBM Information Integration products at a code-level as well as just at the marketing level, but he said it is too early to know exactly how this will come about.
Ironically, the move may be good news for Ascential’s closest competitor, Informatica. As well as IBM saying so far that it will maintain its partnership deal with the company, Informatica may just be a more attractive supplier for customers and other partners who prefer not to source their integration software from IBM for whatever reason.
On the other hand, Informatica now has IBM to contend with, and must face the question of whether IBM’s software and services divisions are more likely to bring Ascential or Informatica to the table in future data quality projects. Other competitors in the data quality space include Harte Hanks’ Trillium division, SAS’ Dataflux and UK-based Datanomic. All will also have to face the question of whether data quality is likely to remain as a standalone software category now that one of the giants has gone.
IBM’s relationship with Ascential and Informatica has proven an interesting dynamic: in July last year Informatica claimed it was getting the upper hand on Ascential in the relationship because IBM had stopped giving commission to IBM Software Group sales reps when they sold Ascential software, and instead only paying commission when the software was sold though its Business Consulting Services (BCS) division.
This had been the way Informatica’s products had been sold by IBM, and Informatica said that the change leveled the playing field for both companies. Whether that move was designed to keep Informatica sweet in advance of IBM going into direct competition with it by buying Ascential, or whether IBM was at that time leveling the playing field to see more clearly which products were in highest demand and hence which company to snap up, we will probably never know.
