Informix maps out regrowth strategy
Struggling vendor looks to make good from bad financial results.
Troubled database supplier Informix is attempting to reinvent itself after being hit by financial crisis last year, but admits it still has a long, hard struggle ahead.
Although the company last week turned in its second consecutive profitable quarter since its ignominious crash last autumn, it wants to concentrate on a future marked by slow, steady growth and focused, efficient business practices.
Speaking to PC Dealer at the Informix User conference, Bob Finnochio, Informix president, chairman and chief executive, said: 'There is a time to be faint-hearted and this is not it. I knew I had a tough job, but I had no idea how tough. But I don't like to say Informix is a turnaround company - I don't want it to go back and be what it was. We've got a $500 million start-up and we're building a new company.'
He added: 'Remnants of the old culture persist and it will take many quarters and years to change, but it starts with how I behave and how management behaves. I'll do public executions when people go off course and reward those who perform. I hope the investors are smart enough to know that it takes time.'
Finnochio said he was trying to change Informix from a deal oriented culture, with a focus on closing short-term sales, into a customer oriented structure where staff concentrate on building relationships with their accounts to generate recurring business.
Diane Fraiman, Informix vice president of corporate marketing, said: 'Our business practices were not the way we want to be perceived today.
The management team is hungry and direct and has a customer and market focus. But we decided not to change the name or logo because Informix has good brand recognition associated with good technology, which we didn't want to lose.'
Informix has been working on clarifying its market position. No longer trying to emulate Oracle with a finger in every pie, it is proclaiming itself to be, purely and simply, a high-end database vendor. It will concentrate on three main areas - the online transaction processing market, where it generates 60 per cent of its revenues; the data warehouse and datamart sectors, which account for 20 per cent of turnover; and Web and content management.
This sector was served by the Universal Data Option (UDO), the object relational database formerly known as Universal Server, which was based on Informix's Illustra acquisition - which accounts for the remaining 20 per cent of sales.
Finnochio said: 'I believe these areas are where the growth is and we have the substance to be relevant. We don't want a world with just one software company, we want a world where there's choice. We'll fight hard to be that choice.'
He added: 'A $5 billion niche is fine and I've not once met a high-end player that wasn't interested in it. The whole notion of saturation is nonsense. Prices are dropping at the low end, so there's an appearance of no revenue growth that may increase with Microsoft's entry into the market. We'll focus on our big niche at the high-end.'
Informix also wants to be perceived as a serious player at the high-performance end of the Windows NT space, despite having made little impact to date.
It released NT-based products several years ago but they still account for less than 15 per cent of turnover.
Finnochio was confident that work on stabilising the vendor was complete 'in all aspects', although there was still work to be done on boosting sales - licence revenues were 22 per cent down for its second fiscal quarter compared with the same quarter last year.
'We have positive cashflow, financial stability and showed sequential growth in the second and third quarters. We need to focus on growing the top line and this is down to execution. I don't want to give customers just a choice of products, but also a choice of companies,' he said.
'There's a tremendous emphasis on courting relationships with ISVs and resellers and we're investing heavily in consulting and rejuvenating training,' he added.
While OEM deals account for 10 per cent of revenues and indirect sales less than half, Informix wants to grow its channel business faster than direct sales to try to achieve a more balanced model.
Jean-Yves Dexmier, the vendor's chief financial officer, acknowledged there was still a lot of work do in Europe, which was responsible for 'more than half' of its financial woes last year.
'But it was an encouraging second quarter - better than the first,' he said. 'The UK organisation continued to perform well, so there were some bright spots. Europe will need many more quarters of hard work, but it did well, even with weak leadership. In future, performance will be based on more substance.'
Dexmier added he expected a European vice president to join the company by the middle of August, whose name would be announced in the next couple of weeks.
He said Informix was no longer competing after large $20 million deals to boost its end of quarter figures, but preferred to chase a mixed bag of contracts and build a backlog that can be carried over to the next quarter. It had not increased commission rates, but was offering sales staff bonuses if they sold licences into target markets and customer bases.
From this quarter, executives will become more involved in looking after big accounts rather than just focusing on fixing internal problems. Dedicated salespeople have been redeployed from the direct salesforce and emphasis is being placed on more efficient execution.
Dexmier was not happy with Informix's margins, although he was unclear about how long it would take to improve them. 'We have a 6.5 per cent operating profit. The average margins for a software company are between 15 and 20 per cent, so we still have to make some progress, but as we increase revenues, we'll increase our expenses by proportionately less.
Our goal is to get acceptable margins but that depends on the response of the market and the growth of our top line.'