Markets, T. Friedman Research Note 27 October 2003 ETL Magic Quadrant Update, 2H03: The Market Broadens Competition in the extraction, transformation and loading tool market remains tough, attracting vendors from several related markets. ETL-focused tool vendors continue to lead and are extending their reach in this market. Core Topic Business Intelligence and Data Warehousing: Business Intelligence and Data Warehousing Markets and Technologies Key Issue How will business intelligence and data warehousing vendors react to market challenges, and which will lead the markets? Competition and general vendor activity have increased in the extraction, transformation and loading (ETL) tool market during the past six months (since April 2003). These changes are due to several acquisitions, the repositioning of vendors and products, and a general increase of interest in data integration issues on the part of enterprises of all sizes. As a result, ETL license revenue is expected to grow for 2003, improving on the nearly flat market of 2001 and 2002 (see Figure 1). Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Challengers Figure 1 Magic Quadrant for ETL, 2H03 Leaders Ability to Execute Microsoft Embarcadero Technologies SAS Institute Computer Associates Data Junction Sunopsis Group 1/Sagent Informatica Oracle Ascential Software IBM iway Software Cognos Business Objects DataMirror Ab Initio Hummingbird ETI October 2003 January 2003 As of October 2003 Niche Players Completeness of Vision Visionaries Source: Gartner Research (October 2003) Shift in Momentum Among the Leaders Informatica and Ascential Software continue to be leaders in the ETL tools market, but their positioning relative to each other has changed significantly during the past nine months (since January 2003). Ascential has continued to improve its execution in the field, generating several quarters of overall revenue growth and significantly improved sales force productivity (the license revenue generated based on the vendor's cost of sales). It has largely closed the gap in market visibility and license revenue, areas in which it has lagged Informatica in the past. 27 October 2003 2
Ascential has also expanded its vision around data integration, pushing its strategy and positioning into new areas beyond its core data warehousing competence. The recent purchase of Mercator, the largest of Ascential's acquisitions to date (see "Buying Mercator Will Extend Ascential Software's Reach"), supports this vision, but also adds more product integration challenges. Mercator will be accompanied by the significant distractions of organizational and product rationalization issues that are common to any acquisition of this size. Informatica's financial performance and overall market execution has remained relatively flat for several quarters. Although it continues to deliver solid product advances and field execution, it has lost the significant lead in license revenue it had during 2001 and 2002. Its recent move to acquire Striva (see "Striva Acquisition Will Enhance Informatica's Extraction Capabilities") will help by adding mainframe data extraction and changed-datacapture functionality to its portfolio, while concurrently causing some minor disruption for several competitive ETL tools vendors (for example, Business Objects, Embarcadero Technologies and Hummingbird) that also have been reselling Striva products. Informatica continues to refocus on its "roots" in data integration by discontinuing the direct sale of its packaged business intelligence (BI) applications and data models, placing more emphasis on ETL, and expanding its capabilities for metadata management via its new SuperGlue product. It is also attempting to round out its offerings, positioning and channels with an original equipment manufacturer (OEM) partnership with dataquality technology vendor Firstlogic, broader messaging that targets integration problems outside data warehousing (such as "operational integration" and business activity monitoring), and an agreement enabling IBM to resell Informatica products worldwide. Although some of these moves seem reactive to Ascential's recent progress, they are positive and contribute to an improvement on the Completeness of Vision axis on the Magic Quadrant. Impact of Database Management System Vendors Grows Slowly The large database management system (DBMS) vendors continue to make steady progress in ETL, increasing their functionality slowly over time. Among this class of vendors, Oracle remains the most advanced, with Oracle Warehouse Builder (OWB) gaining uptake in the market and deployments in data warehouse implementations of increasing breadth and complexity. Although its focus remains solely on ETL for data warehousing, Oracle continues to expand the breadth of 27 October 2003 3
functionality planned for OWB (for example, data profiling driving automatic generation of components of the ETL flow). IBM has also been improving its ETL functionality and vision, but it's not capitalizing on this in the field, where it continues to resell Ascential's products, occasionally at the expense of its own Data Warehouse Manager ETL offering. As a result, DB2 Data Warehouse Center/Data Warehouse Manager rarely shows up on Gartner clients' shortlists. Microsoft's positioning remains unchanged, pending the release of the Yukon version of the SQL Server database in which improved ETL capabilities are expected (see "Microsoft's BI Strategy Is a Work in Progress" and "MarketScope: OLTP Database Management System Market"). In addition to the major DBMS vendors, less-visible DBMS vendors are also entering the ETL and data integration markets. Examples include the pending acquisition of Data Junction by embedded DBMS vendor Pervasive Software, and the repositioning of various object-oriented DBMS and XML DBMS vendors as "data integration servers." Although the ETL capabilities of the DBMS vendors continue to grow, their products generally remain optimized for their own DBMS products, limiting their ability to meet the needs of enterprises with very heterogeneous source and target requirements. BI Tools Vendors Struggle to Gain Traction With ETL Buyers' propensities to acquire more of the overall BI "stack" from a single vendor is increasing, but still in its early stages. Although BI tool vendors have invested in ETL functionality (through organic growth or acquisition), they have not yet had a significant impact on the market. Business Objects acquired capable ETL technology through its purchase of Acta Technology in 2002, but is just beginning to demonstrate positive execution with Data Integrator. A recent move to reorganize and energize its sales force around ETL and compete directly against pure-play ETL vendors should have a positive impact, but will be hampered in the short term by the distraction of the Crystal Decisions acquisition. Cognos continues to slowly make progress introducing DecisionStream as a differentiator in competitive situations vs. other BI tool vendors. However, the product remains tightly tied to the Cognos BI tools and is rarely selected independently. A similar situation exists with SAS Institute and its ETL Studio offering. SAS has demonstrated solid advancements in its vision 27 October 2003 4
for ETL, including tight integration of data quality functionality and improvements in metadata capabilities and openness, but has been unable to achieve success in competitive situations outside of its customer base. iway Software faces the same challenges in competing outside of the installed base of its parent company's (Information Builders) BI offerings. It continues to lag in proof points of complex data integration implementations and rarely appears on the ETL vendor shortlists of Gartner clients. Although Hummingbird continues to increase its ETL functionality, its overall repositioning regarding document and knowledge management has caused it to lose "mind share" in the ETL market. Pressure on Niche Vendors Grows With the best-of-breed ETL tool vendors continuing to command market visibility and mind share, and the DBMS and BI tool vendors building momentum, ETL niche vendors are increasingly being challenged to differentiate themselves. ETI remains strong in its support of high-complexity, mainframecentric data integration scenarios. Its customer base, however, has not grown, and customers and prospects continue to cite challenges in ease of use and the dwindling availability of ETI skills in the market. Although substantially larger in scale overall, Computer Associates (CA) remains a niche player in ETL. CA's positioning is a result of several areas of functional weakness and a lack of strong focus on ETL within its extremely broad product portfolio. Facing the challenge of building from a modest customer base located mostly in Europe, Sunopsis is attempting to increase the awareness of its capabilities through a marketing presence and several recent wins in the United States. Its hybrid of ETL and application integration functionality is in line with the changing market demands and trends of market consolidation. Although more focused on heterogeneous database replication than true ETL, DataMirror should benefit from the recent interest in changed-data-capture capabilities resulting from Informatica's acquisition of Striva, as well as its positioning and experience in real-time synchronization of data between operational systems. Group 1 Software's purchase of Sagent's assets is complete, eliminating vendor viability concerns for Sagent customers and prospects. Although there is significant synergy between ETL 27 October 2003 5
and data-quality technology, Group 1's primary focus on data quality and output management will limit its success in the ETL market in the short term while it finalizes product plans and comes up the learning curve on ETL. Market Demand and Vendor Positioning Broadens A notable trend relates to changes in the positioning of ETL vendors and the types of buyers and data integration problems the vendors are pursuing. Although most of the vendors in the market have been focused on data acquisition and integration for BI and data warehousing purposes, several (including Ascential, Data Junction, Informatica and Sunopsis) have been gradually adapting their functionality, messaging and pricing to target other areas. These include ensuring data consistency between applications (one style of application integration), system migrations and conversions, and the import/export of data for business-to-business integration. Users and potential buyers of ETL tools are beginning to explore these other areas of applicability, expecting to leverage the tools more broadly and obtain additional productivity and cost-reduction benefits. Although data warehousing initiatives will remain the "sweet spot" for most ETL investment, applications beyond data warehousing will account for a rapidly increasing percentage of ETL tool revenue. The greatest area of growth will be the delivery of batch-oriented processes for ensuring consistency of data between related applications. Acronym Key BI business intelligence CA Computer Associates DBMS database management system ETL extraction, transformation and loading OEM original equipment manufacturer OWB Oracle Warehouse Builder Bottom Line: Tool vendors focused on extraction, transformation and loading continue to lead the market, using innovation and acquisitions to expand their market opportunities, and to stay ahead of the growing impact of database management system vendors and business intelligence tool vendors. In the Leaders quadrant of the Magic Quadrant for ETL, 2H03, competition remains strong and a shift in momentum has occurred with Ascential nearly closing the gap in ETL license revenue and "mind share" with Informatica. Facilitated by recent merger and acquisition activity, ETL tool vendors are quickly broadening their reach beyond the traditional problem of data warehouse implementation. Enterprises should explore the applicability of the tools in other data integration scenarios to derive greater benefits as a result of their investments (for example, replacement of custom-coded interfaces and reduction in the number of integration technologies to manage across the enterprise). 27 October 2003 6