Short-Term License Pain For Long-Term Subscription Gain?

ANAHEIM: As the market waits with more than a little anticipation for next week’s Q3 2017 quarterly report, Teradata Corporation (TDC) is wrapping up its annual customer and partner event — approximately 4,500 attendees — which was held under the rather appropriate tag line, ‘The Edge of NEXT’. As the company suggest, ‘Next’ is the rapidly approaching revolution, a market segment that has been around forever, but is undergoing rapid change and increasing adoption as the sheer volume and value of data escalates, and organizations start to achieve game-changing results folding, spindling and mutilating — i.e. analyzing — that cornucopia of data.

Originating out of research at the California Institute of Technology (Caltech) in 1976, TDC began life officially in the proverbial California (Brentwood) garage in 1979, and shipped its first beta database management system (DBMS) in 1983. Fast forward to July 2017, and TDC, which now positions itself as the ‘leading data and analytics company,’ reported ‘dismal results’ for its second quarter, where ‘its top and bottom lines not only fell short of the respective Zacks Consensus Estimate but also marked significant year over year decline.’ The company is in the process of changing its business model, and as usual for a publicly traded company, investor — or at least analyst — patience is nonexistent.

Last quarter’s revenue was $513 million, just a shade under the expected $513.35 million, but earnings ‘plunged’ 80% year-over-year, or 69% YoY on a non-GAAP basis. Expectations for the year are revenues of $2.095 billion to $2.140 billion, representing a decline of 10% to 8%, which makes next week’s Q3 results so interesting, to see just how the transition is faring as the revenue-model changes (hopefully) gather momentum.

During the Q2 earnings call President & CEO Vic Lund told analysts TDC’s strategy, “which is business outcome-led and technology enabled,” is “extremely relevant today.” The new strategy, focused on customer success, is being supported “by our increased funnel and our momentum, which positions us well for the last half of 2017 and a strong start to 2018.”

must not only overcome its business challenges, but also the changes sweeping its BDA market. Revenue projections are a moving target, but IDC puts the global big data and analytics (BDA) software market at $49.1 billion in 2016, and predicts it will expand at a compound annual growth rate of 10.6% through 2021. Rival research firm Gartner calls 2017 ‘the year that data and analytics go mainstream’, and that ‘[T]hose who fail to act today will suffer not just in 2017, but also hugely limit their potential for growth in 2018 and beyond, as the returns from increased insight, responsiveness and efficiency snowball.’

Gartner also stated that jumping aboard the BDA bandwagon will not be easy. The majority of current data architectures are ‘not ready for the future of data and analytics’, it said, and digital business ‘requires architectures that are purpose-built and flexible to adapt to an organization that expands its data and experiments with it.’

This is the market that Teradata wants to dominate, and specifically, the top 500 businesses that are expected to account for the biggest slice of the DBA products and services pie. However, to capture more than its fair share, the company will not only have to offer the right products and services, it will have to weather the transition from traditional perpetual software license model to a subscription model, a transition that stock analysts have been quick to criticize.

At last year’s event I noted that the company’s prospects appeared to be improving, while still facing an uphill battle, and apparently that storyline remains consistent. Lund talked about the company’s new business, not technology, focus and that resonated at this week’s event. Next week I’ll take a closer look at the company’s announcements — including the Teradata Analytics Platform; Teradata IntelliSphere, with all the tools to ingest, access, deploy and manage a flexible analytical ecosystem; AI services and accelerators; and the Agile Analytics Factory an as-a-service program to accelerate client innovation in advanced analytics, and deliver strategic business outcomes — as well as the company’s  new report on the state of the market, and its prospects.

DISCLAIMER: Teradata looked after airfare and hotel.


Author: Steve Wexler

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