TDWI | Training & Research | Business Intelligence, Analytics, Big Data, Data Warehousing

Firstlogic and Pitney Bowes: The Data Quality Dynamic Duo That Almost Was

What really happened—and where does Firstlogic go from here?

• By Stephen Swoyer
• November 30, 2005

Batman and Robin. The Wonder Twins. Jobs and Wozniak. Dynamic duos, all of them. And when Pitney Bowes Inc. announced its intent to buy Firstlogic Corp. a few months ago, the rapidly coalescing data quality space almost gave birth to a dynamic duo of its own. But it was not to be.

This month, the two companies called off the deal, citing unforeseen complications—such as a potentially costly investigation by the Federal Trade Commission (FTC). Call it the dynamic duo that almost was.

Earlier this month, the FTC surprised many observers by making a second request for information from both companies. The FTC’s request—while not unprecedented—was unexpected, so much so that Pitney Bowes apparently had a change of heart. According to Firstlogic VP Frank Dravis, who helms the company’s information quality division, the FTC’s request was actually a case of impeccably good timing.

“It was coincidental that the original timetable [for the deal] was expiring two weeks after the FTC announced their second request for information. The FTC had voiced some concerns that they’d heard through the industry, and they needed to get more data, more information, but they wouldn’t quantify the concerns they’ve been hearing,” Dravis explains. “So both parties looked at the effort involved in collecting that information, the costs involved, and they did their own risk analysis. You know, ‘Even if we did collect this information, what’s the likelihood of the FTC letting this go [through]?’”

But couldn’t a precedent like this have a chilling effect on other potential suitors? After all, what’s to stop the FTC from getting involved once again if another large player—such as ETL giant Informatica Corp. or BI powerhouse Business Objects SA, for example—were to make a similar offer?

Firstlogic’s Dravis won’t bite, however. Besides, he argues, it’s a moot question: Firstlogic’s would rather remain an independent entity. “I don’t see that there’s going to be any change in our course of direction. We’ve been in business now for more than 20 years, and people think that now that we’ve had this offer by Pitney Bowes, who’s going to be next?” he says. “But that question could have been asked about any publicly held corporation. Their fiduciary responsibilities when they get an offer: they have to take it to their shareholders and ask them, ‘Do you like this?’”

This isn’t entirely true, however. Firstlogic, after all, is not a publicly traded company. It’s been a privately held firm since its launch in 1984. So when Pitney Bowes came to Firstlogic with a buyout offer, the data quality stalwart didn’t necessarily have the same responsibilities as a publicly traded company. What this means, some industry watchers argue, is that company management—or Firstlogic’s majority owners, at least—are obviously open to the possibility of being acquired.

“The company has been the subject of acquisition rumors for some time, and the agreement with Pitney Bowes essentially confirmed that the company was at least open to being acquired,” writes Robert Lerner, a senior analyst for data management with Current Analysis. “Both customers and prospects may now be concerned over Firstlogic’s long-term plans—whether it will continue as an independent entity or whether it will look for another suitor.”

Dravis, for his part, says that when Pitney Bowes came to Firstlogic with a buyout offer, the company’s board of directors had to review the proposal.

One long-time industry-watcher who spoke on background had a less-than-charitable take on what happened, however, saying that one (or more) of Firstlogic’s private investors was likely trying to cash out.

Acquisition Spin-the-Bottle?

Two confirmed admirers are Informatica and Business Objects, which have existing partnerships with Firstlogic. Informatica, for example, has long resold Firstlogic as its data quality solution of choice (although that company also notched a similar agreement with Trillium this summer.) Informatica positions Firstlogic’s IQ8 suite as a complement to its PowerCenter ETL tool, and Firstlogic’s technology can in fact be called directly from the PowerCenter design environment. Business Objects, too, taps Firstlogic to provide name and address data cleansing for its Data Integrator ETL tool.

Mike Schiff, a principal with data warehousing and business intelligence consultancy MAS Strategies, says both vendors have at least some conceivable incentive to make a play for Firstlogic. Informatica, for example, must contend with a formidable opponent in IBM Corp., along with scrappy relational database competitors like Microsoft Corp. and Oracle Corp. (Both vendors are complementing their existing ETL capabilities with limited data quality components). Business Objects has never been afraid to pull the trigger on a big acquisition, says Schiff, and Firstlogic’s data quality assets would bolster its Data Integrator tool—as well as frustrate competitor Cognos Inc., which also resells Firstlogic’s data quality technology.

Not so Fast

On the other hand, it’s been a pretty good year for Firstlogic, all things considered. Case in point: new license revenues grew by nearly 30 percent over the first ten months of 2005, says Dravis. Firstlogic also expanded its overseas operations; shored up and expanded its reseller agreement with Informatica in August; announced a new version of its IQ8 data quality suite last month; and—a moot point, perhaps—notched a reselling agreement with Siebel Systems Inc. last month, too. “Through it all, we’ve managed as if there was no acquisition in progress, because we knew that Pitney Bowes was interested in us because we were a leading data quality vendor. And just because we were potentially being acquired was no time to rest on our laurels,” Dravis says.

Most of Firstlogic’s customers are still onboard, too, says Dravis, who points to the company’s reputed 90 percent retention rate. And while the Pitney Bowes episode almost certainly rattled many Firstlogic customers—and long-time partners, to boot—Dravis claims that few Firstlogic users were actually alarmed by the takeover announcement. “The announcement was made on September 1st, and we had one or two customers—maybe it was a little more—who called up and voiced some displeasure, but by and large, there were few who seemed put out by it,” he comments. “Through it all, we told them that the products they had would be supported, that we would continue to reinvest in those products, and enhance and maintain those products.”

Going forward, says Dravis, Firstlogic has a new version of IQ8 on tap for early 2006. As for ongoing data quality market consolidation and the long-term viability of data quality pure plays, he insists there’s still a need for independent vendors like Firstlogic. “I would even position [being a pure play] as a place of strength. Microsoft in their new integration services for Yukon is indeed coming out with some basic data quality functionality. Okay, that’s fine. But that only works on SQL Server 2005,” he comments. “You bet there are people out there who are a pure Microsoft shop who are going to want to take advantage of the intrinsic functionality that comes with SQL Server 2005. There is some pressure for data quality functions to be absorbed by some applications, too. But, by and large, a lot of the data cleansing is happening in the gaps between those applications in that heterogeneous environment space, and [customers] just want the specialization that they can get from a pure player.”