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.

Turnaround Time Arrives
Fueling the skepticism, some experts predicted a bleak outlook for Informatica's core market: data warehousing, also known as the ETL market. In October 2004, a financial analyst published a report titled "dark days ahead for ETL" and concluded that there was little potential for "meaningful growth" and rated Informatica "underweight."

Despite this skepticism, based on our conviction in the customer demand, we made the decision to refocus the company on the core business. We defined a five-step plan to turn around our business.

1. Establish a clear mission
2. Develop a focused growth strategy
3. Align the organization
4. Deliver continual product innovation
5. Strengthen partnerships

1. Establish a Clear Mission
The challenges of the previous dual market strategy underscored the importance of having a clear mission for the company.

Specifically, it was important to precisely define our market and exit any other markets. Refocusing on our core technology, our company mission simply became "To establish Informatica as the dominant leader in the enterprise data integration market."

2. Develop a Focused Growth Strategy
Our next step was to expand the addressable market beyond the traditional data warehousing market. Informatica's customers almost exclusively used the core technology to automate data warehousing or analytic data integration projects. Turns out, the core technology was versatile enough for additional purposes, collectively known as operational data integration. By automating the operational data integration projects, customers gain even more business value from all their data. But was this customer demand sustainable?

Several lasting top business imperatives drive the demand for operational data integration: regulatory compliance, modernization, post-merger integration, improving financial results and business process outsourcing. The related IT initiatives, for the most part, are being implemented through labor-intensive manual development. Our focused growth strategy was to convince our customers to use Informatica to automate operational data integration as well as the traditional data warehousing projects. In other words, by automating the data integration lifecycle, we deliver a better alternative to manual, in-house development for a broad array of top-priority enterprise-wide projects. A survey, conducted in 2005, validated that customer demand.

By growing from data warehousing to enterprise data integration, Informatica expanded its market opportunity five-fold, according to one industry analyst firm, IDC.

3. Align the Organization
To execute on our focused strategy, our next step was to define key corporate objectives. These objectives provided a framework to align the team on common goals. To pursue the growth strategy, we rebalanced the investments across the various departments. As an example, in order to grow license revenues, we recruited more salespeople. To allow this growth in the sales department, we reduced the expenses in other departments, including R&D.

Organizational alignment enabled the team to execute effectively on our focused growth strategy. As a result, two years later, Informatica has grown with 35 percent more employees.



4. Deliver Continual Product Innovation
Over the past two years, the R&D team at Informatica has done a remarkable job by delivering new product innovations every quarter for seven consecutive quarters. For each such innovation, the team selected the appropriate approach by considering three options: build, buy or partner. Through continual innovation at a rapid pace, we offer our customers an increasingly differentiated product. In fact, the latest release goes beyond the enterprise. Now, customers can utilize cross-enterprise data integration to integrate both on-premise and off-premise data managed by software-as-a-service (SaaS) vendors. All the product innovations are designed with our singular mission in mind: help automate the entire the enterprise data integration project lifecycle and improve the quality of data.



5. Strengthen Partnerships
Our corporate goal is to become the most trusted source for data integration. Our singular mission and neutrality - across hardware platforms, operating systems, middleware, business intelligence, database and business applications - positions us to be a trusted ally to our technology partners. Through neutrality, Informatica enables customers to have the choice to pick the most appropriate vendor in each of these categories.

IBM's entry into the data integration market, through an acquisition, changed the partner ecosystem. This acquisition allowed Informatica to distinguish itself even more fully as the neutral and trusted partner. As a consequence, the leaders in computer services, such as system integrators, strengthened their partnerships with Informatica. These partnerships offer the customers the choice to select from an increasing pool of Informatica-skilled organizations.

Most importantly, these partnerships have contributed to our business. The results have been encouraging: in the second quarter of 2006, more than half of our deals were influenced by our partners.

After the Turnaround
To sum up, by refocusing the company on its core market, we attained better results.

For the past six quarters, Informatica reported over 20 percent year-over-year growth in revenue. And, our profits grew even faster. Informatica's non-GAAP operating margin percentage is now higher than ever before.



Informatica now has the largest-ever team and the strongest-ever partner ecosystem to help customers achieve success in their data integration efforts.

Sohaib Abbasi is the chairman and CEO of Informatica.

Note: All information provided and all views expressed in this article are as of October 23, 2006, and the author undertakes no duty to update the article. This article should not be relied upon in making a purchasing decision. All company names may be trade names or trademarks of their respective owners.