After Buyout, IBM Eyes Informix Customers

IBM's $1 billion acquisition last week of Informix Software-and its 100,000-customer base-will give IBM added ammunition in its war with database giant Oracle Corp.

IBMs $1 billion acquisition last week of Informix Software—and its 100,000-customer base—will give IBM added ammunition in its war with database giant Oracle Corp.

But the challenge facing IBM, of Armonk, N.Y., is finding ways to keep Informix customers in the fold and convincing them to put their future projects on its flagship DB2 database.

Although industry observers said Informix was ripe for an acquisition, some customers were surprised.

"It was somewhat of a shock," said Lloyd Wilson, president of the Informix User Group of Canada. "There were little hints, but it was never really a clear indication that IBM ... would buy them out. To us, Informix looked like it was on the rebound."

Life was good for Informix in 1996, when it was the No. 2 database vendor behind Oracle. One of its innovations included introducing parallel capabilities in the database, which vastly improved performance and throughput for queries. It has become a staple feature in high-end databases.

A year later, Informixs ride began to derail. The company had to restate its finances in 1997 when a revenue error of almost $100 million was discovered, and it also diversified its technology focus by emphasizing object- relational databases.

"There were just too many missteps along the way," said Richard Winter, president of Winter Corp., a research company in Waltham, Mass. "I think a lot of big customers backed away from Informix because of the financial problems. Those relationships began to get undone in 1997 and they suffered from that.

"I think this is a sad ending to the story of Informix. I would have liked to see them succeed as an independent player."

In September of last year, Informix Corp. said it was splitting its core operations into two wholly owned subsidiaries: Informix Software, which concentrated on database products, and Ascential Software, for business intelligence and asset management tools.

But the move hasnt panned out for Informix, of Westboro, Mass. Last week, Informix announced a drop in first-quarter revenues to $217 million, compared with $250 million during the same period last year.

Wilson said the best thing IBM can do to maintain the current Informix customer base is to keep the latters products intact, either by renaming them or by integrating the best tools into DB2.

"Im more in favor of the tools being integrated into DB2, as opposed to the entire engine being lost into DB2," said Wilson, who is also founder and president of Cemnas Corp., based in Mississauga, Ontario. "I like the acquisition, as long as IBM can keep these particular products intact and utilize the IBM tools to work with Informix products. That would be an ideal situation. That is going to be an extremely happy Informix customer."

Otherwise, IBM could be paving the way for turning Informix customers into Oracle converts. "I think because of this buyout, it is going to turn the heads of many Informix customers," Wilson said. "They may go to Oracle because they can depend on Oracle."

IBM officials said last week they will integrate Informixs DataBlade database extenders into DB2 and "appropriate" technologies from Arrowhead, a project that incorporates object-relational and massively parallel database technologies with analytics. Arrowhead was obtained through Informixs earlier acquisition of Red Brick Software Inc.

IBM will also maintain a relationship with Informixs other half, Ascential Software, which comprises 1,000 employees and 1,700 customers. Ascential will partner with IBM over the next three years to create links between Ascentials business intelligence and asset management tools and IBMs DB2 Warehouse Manager.

Still, it will be tricky for IBM to keep Informix customers from moving over to Oracle, some analysts said. The company will have to convince customers that it has embraced the idea of distributed databases and that it wants DB2 to be successful on all major platforms.

"So far, IBM has not had the ability to move away from the perception that it is a hardware company," Winter said. "They will have to treat Sun Microsystems [Inc.] and Hewlett-Packard [Co.] and other hardware partners as well as they treat their IBM partners. They need to do that to retain the Informix customer base."