RobertkarelBy Rob Karel

Informatica today announced its planned acquisition of Identity Systems, a software company offering advanced entity resolution and matching capabilities, with a specialization in cross-language matching.

Informatica acquires Identity Systems from Nokia for approximately $85 million. Nokia purchased Identity Systems as part of its acquisition of Intellisync in early 2006 and Identity Systems has operated as a wholly-owned — and more important — autonomous — subsidiary of Nokia ever since. Not surprisingly, Nokia didn’t see identity resolution and matching as part of its core mobile phone strategy and I expect the folks at Identity Systems will be happy with this change of ownership.

Informatica now enters the high end identity resolution marketplace and aside from powerful technology, Identity Systems brings to the table a strong presence in Europe and Asia, as well as a large government/public sector install base (e.g., think threat management). Informatica’s primary competitor in the identity resolution space is a familiar adversary – IBM. IBM’s Entity Analytics Solutions is based on technology IBM acquired from SRD in 2005 and Language Analysis Systems in 2006. Similar to their competition in the data integration arena, I would expect IBM to continue to grow their entity analytics business within enterprises with a large IBM hardware and software footprint, while Informatica will continue to do well in best of breed technology environments.

While the identity resolution/entity analytics capabilities offered by Identity Systems are certainly interesting, I’m even more intrigued by the potential impact this acquisition can have on the master data management (MDM) market.  Among other OEM’s, Identity Systems technology is the core matching engine for a number of MDM vendors competing in this space including D&B’s Purisma, Oracle, and Siperian. In my view, high volume, high confidence, highly configurable matching is critical to delivering a credible MDM solution. Informatica will wisely incorporate the easily embeddable Identity Systems’ technology into its Informatica Data Quality offering. This will significantly enhance that product’s matching capabilities by adding a hybrid of high power probabilistic matching and deterministic matching to Informatica’s deterministic matching engine.

So does this mean that Informatica is entering the MDM market? According to Informatica, the answer is no. I certainly agree with that decision since Informatica is still lacking a number of other key capabilities expected of an MDM solution such as industry data and process models.  But does that mean Informatica won’t enter the MDM market at some point soon? Don’t bet on it.

If I were Siperian, I would be very interested in being acquired by Informatica. This acquisition would of course reduce the risk of Informatica voiding Siperian’s OEM agreement with Identity Systems. But more importantly, it would provide Siperian with access to Informatica’s exponentially larger global install base and would finally provide them with a sales force big enough to compete effectively with MDM’s big 3 of IBM, Oracle, and SAP.  For Informatica, this acquisition would effectively fill in all the missing pieces it would require to enter the operational MDM market with significant credibility.

Now if I were Oracle, I would ask why I didn’t snatch up this relatively inexpensive company first and embed these capabilities permanently into my planned MDM fusion strategy. The coopetition between Oracle and Informatica has been fairly amicable, but that could change very quickly if Informatica voids Identity System’s OEM agreement with Oracle and enters the MDM market with a competing solution.

Stay tuned — this could get interesting.