Monday, April 24, 2006

Hyperion goes shopping

In Hollywood there is something of a herd mentality. If one studio brings out a gladiator film (say) then the others feel obliged to do likewise. Software is something of a fashion business, and so some similar behavior occurs. It seems like the indispensable fashion accessory at the moment is a data quality vendors: one simply can't be seen out without one, darling. Hyperion showed off its latest purchase this week: Upstream software, a small data quality vendor from Michigan. As in fashion, the price is so much more tantalizing if it is only available to those in the know, and so the terms of the deal were not announced. I believe that Upstream's revenues were about USD 8M and had about 30 employees. At some point Hyperion will presumably have to come clean, since they are a public company. Recently data quality vendors have been snapped up at bargain-basement prices, and certainly Hyperion has the sort of bank balance that it could pay fro Upstream out of loose change even if it paid a full price. However its most recent results show a certain amount of stumbling. Even though profit margins were still strong at 16%, but license revenues (the key to long term health for a software vendor ) actually fell by 6% on a year over year basis. Nonetheless, Hyperion has an enviable franchise as the undisputed king of financial consolidation, and is highly profitable.

The deal actually makes good sense to me: financial consolidation is Hyperion's core business, and those of us who work in the industry know just how flaky the quality of data can be in those superficially shiny ERP finance systems. Hence a data quality spin makes good sense for Hyperion's message to nervous CFOs. Unfortunately data quality is a very intractable problem, involving as it does human nature, and even the cleverest software can only assist with fixing issues of this nature. The data quality software vendor market may be shrinking, but underlying the problem of data quality itself is not.

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