Ticket to growth

Teradata sees bright future but challenges lie ahead

"We'll be able to be a little more flexible and nimble in our investment in research and development, as well as our investments in growing support operations." ?Bill Cooper, the company's vice president of sales

When NCR Corp. announced plans to spin off its data warehousing division, Teradata, the company said each entity on its own would be able to focus more on its "distinct customer base, business strategy and operational needs."

One thing that means for Teradata is a greater focus on the government data warehousing market, said Bill Cooper, the company's vice president of sales. Data warehousing is "a great market for us," he said. The technology is of growing importance in government, although Teradata hasn't yet penetrated that market, he said.

Teradata has begun building on its strength in the commercial market, and "there's a huge interest in us now," Cooper said.

The split likely will be completed in six to nine months.

Over time, as it invests in research and development and adds to its offerings, Teradata will become "a much stronger company," Cooper said. "We'll be able to be a little more flexible and nimble in our investment in research and development, as well as our investments in growing support operations," he said.

"While Teradata is only about a quarter of NCR's worldwide business, we're about 60 percent of the company's profit," he said. "A lot of people understand that [the spinoff] will allow us to be more competitive and deliver more capability to customers, more quality."

As for specifics, Cooper said, "it hasn't been decided exactly what we will do and what the timeline is, but the bottom line is, it makes us a much more nimble business."

Analysts agree. The split is "good news all around, for both sides of the business," said Donald Feinberg, database analyst with Gartner Inc.'s information management group. As it is, he said, "there's no synergy between the two companies."

On its own, Feinberg said, Teradata will be in a better position to raise money, make acquisitions and compete against companies such as IBM Corp., Microsoft Corp. and Oracle Corp. in the data warehousing market. Teradata is strong on the high end of the market, but would do well to offer a lower-priced product as well, and "I believe [the split] is going to allow them to do it," he said.

The database market hit about $16.8 billion in 2006 and is on track to grow at a rate of about 8 percent a year over the next five years, Feinberg said, and "a lot of that growth is coming from data warehousing." The government market, already large, will grow even bigger, he predicts, as agencies begin to coordinate and share information.

Government agencies have huge data warehouses, and "they don't throw information away," Feinberg said. "I firmly believe [the government market is] going to be growing tremendously."

Separating from NCR also lets Teradata "focus on the broader market of data management and system analytics," said Alyssa Farrell, industry marketing manager for government at SAS Institute Inc., Cary, N.C., a business-analytics software company.

Having begun its life as National Cash Register, "NCR's strong focus was on the retail space," Farrell said The company has "a lot of the retail data, customer data, purchasing data. That's a completely different business model than the data warehousing space.

"Teradata is very strong in the integrator space," Farrell said. "Their predominance and their strong selling within the integrator market is really what has brought them into the government space."

Although Teradata will now be able to build on its strengths and add to its offerings, it faces some challenges, Farrell said. Competitors are already doing what Teradata aims to provide, and the company has some catching up to do.

While Teradata has strong data warehousing capabilities, it doesn't provide strong technologies around analytics and often relies on companies such as SAS to work with systems integrators, Farrell said. "They're going to have a little bit of an uphill curve to get up to speed" with companies such as SAP and Oracle, she said.
The company also will have some "data integration issues" as it transitions away from its parent and moves data onto its own system, she said.

Customers meanwhile will need to continue to supplement Teradata's offerings with those of other companies, she said. "The integrators right now have to use Teradata as a warehousing component. They have to then round out the platform with business intelligence and analytics. That's why they're coming to companies like SAS.

The spinoff "does show that the market for data management itself has gotten significantly larger within government," Farrell said.

Nora Macaluso is a freelance writer in Williamson, Mich.

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