I have been working in the data integration space for about 15 years now and let me tell you this stuff is expensive. I have always found it odd that the current leading integration software vendors are not bigger financially. Think about it… There are many software vendors that are much younger and have a lower price point and yet yield more profit than the DI vendors. How is that possible?

Well the first reason is that the truth is that most data integration software is not much better than writing custom code. If you are familiar with the space, there is always a stored procedure or some shell script that need to be run due to holes in the product architecture. Let’s face it, these products were first designed, and never rearchitected, when data volumes were much smaller and everything was pretty much relational data. XML and standard message formats like SWIFT and EDI were an afterthought. That deceptive product demo shows a simple GUI, but when the rubber hits the road, the wheels fall off.

The real problem is the cost of the software. Every single add-on cost extra: connectivity, 64-bit, real-time, versioning. Why are these extra when they are fundamental to data integration? Even the speed of the hardware is factored into the cost. Do you have any idea how painful it is to decide to upgrade a server because you know it will also increase your software license costs? And this insult is compounded by the fact that the software already costs more than the hardware in the first place.

The real problem is that software is a commodity market. The old software sales practices from the ‘90’s no longer apply and should not. Back then, many vendors were selling software for outrageous prices because it could be done. Today, that does not work. Look at the technology debacle of 2000. But when you have a large installed base or even worse, are already public, you can’t very well go dropping your prices to accommodate market changes.

Need some validation? Take a look at the SEC filings for your technology vendor. See how much business they are really doing. What you will see if that even though they are adding N new customers per quarter, the installed base is not growing by the same percentage. The reason is that old customers are leaving just about as fast as new ones are joining.

I wonder why that is happening?

- john russell, chief-scientist and co-founder