Ascential Software Moves Up Market
by Marcia Kaufman
With $1 billion in cash from the sale of the Informix database in 2001, Ascential Software has spent the past 3 years systematically executing a strategy of acquiring, building, and marketing its way into position as a leading player in the data integration market. While it may have seemed like a bold move to sell off a portion of the company that represented 80% of the revenue stream, Ascential’s heritage of expertise and creativity in the development of data tools were left behind to form the basis for the new company. Ascential is doing many things right. It has focused on a single area of technology – data management and has employed an architectural approach to create a unified product line from the parts it has bought. It has done a good job selecting companies that meet its long term strategic vision of data management and integration. Now the challenge for this emerging company is to leverage these assets in order to grow faster in a highly competitive market. One indication that Ascential is on the right path is its newly announced OEM partnership with PeopleSoft. This combined with its long standing relationships with IBM and HP point to a company that is well positioned for growth. Ascential’s long term goal is to increase their indirect channel to 20% by the end of 2006. Today only about 3% of revenue comes from indirect channels.
PeopleSoft intends to embed Ascential’s DataStage and MetaStage products into PeopleSoft’s EPM (Enterprise Performance Management) solution. EPM is PeopleSoft’s environment for providing analytics to support its packaged offerings. PeopleSoft will use Ascential’s DataStage, data integration middleware, as a way to make this integration of third party analytics tools more seamless. Later in 2004, PeopleSoft will also integrate Ascential’s MetaStage, a metadata management product, into the EPM product offering. We expect to see Ascential gravitate towards this type of partnership over the coming year because it expands their channel reach beyond what they can do with a direct sales force.
This new partnership is part of a greater plan by Ascential to propel the company into a leadership position in a very competitive market. In addition to a broad partnership and ISV strategy, Ascential has made a series of acquisitions completed from 2001 through 2003. The common theme with all of the acquisitions was to form a company focused on enterprise data integration. Ascential’s most recent and most ambitious acquisition was Mercator Software, a transaction valued at approximately $106 million, in September, 2003. Mercator rounded out the Ascential Enterprise Integration Suite with enhanced real-time data transformation and routing solutions. Ascential found Mercator a particularly attractive addition due to the strength of its Fortune 500 customer base. The Mercator acquisition added 800 corporate customers to increase Ascential’s client base to 3000 customers. Now with a set of products ranging from data profiling, data quality (i.e., cleansing), and data transformation, to metadata management and connectivity offerings, Ascential is hoping to position itself as the leading player in this market. With steady growth since 2001, the company reached 113 million in revenue for 2002 and is likely to report impressive growth of over 60% when 2003 revenue is announced at the end of this month. Ascential will have its work cut out for it if it hopes to attain its goal of becoming a $1 billion company.
One of Ascential’s great challenges in achieving this goal will be to gain acceptance at higher levels in corporations. Because Ascential has primarily sold operationally oriented ETL tools, it tends to sell at a lower level in the organization than it would like. To be successful long term, Ascential will have to move up and grab the attention of upper management. It will only be able to accomplish this by creating management interfaces for its products so that they are meaningful to the C-team. Given the company’s focus and ability to both build and buy technologies this should be an achievable goal.
Thus far, Ascential has made a lot of the right moves including its acquisitions and its partnerships. With more than a half-billion dollars still in the bank, we expect that Ascential will make more acquisitions to grow revenue and close the gaps in their product line. For example, we anticipate that Ascential will add support for RFID as well as federated data management. This will be particularly important in a highly competitive marketplace where Informatica, Ascential’s closest competitor, is pursuing a similar strategy.
Marcia Kaufman is Principal and Senior Consultant of Hurwitz & Associates, a consulting, research, and analyst firm focused on emerging software markets. She can be reached at email@example.com.