Research Note Markets 06 May 2002

The extraction, transformation and loading (ETL) tools market remains a growing and changing — yet fragmented — market with a large number of visible vendors (see Figure 1). During the course of the last several years, the market has evolved from a small set of vendors focused almost exclusively on ETL to a large number of vendors coming from several different backgrounds and perspectives:

• "Pure Play" Vendors — ETL represents a core competency and accounts for most (in some cases, all) of these vendors' license revenue. Vendors in this category include Ab Initio Software, Acta Technology, Ascential Software, Data Junction, DataMirror, Evolutionary Technologies International and Informatica. This class of vendors is driving the bulk of innovation and "mind share" in the ETL market, as reflected by the positioning of Ascential and Informatica in the Leaders quadrant.
• Business Intelligence Vendors — Business intelligence tools and platforms are their core competency. For most of these vendors, ETL technology plays a supporting role to their flagship business intelligence offerings, or is one component of a broad offering including business intelligence and ETL. Vendors in this category include Cognos, Hummingbird, iWay Software (a division of Information Builders), Sagent and SAS Institute.
• Database Management System (DBMS) Vendors — The "Big Three" database vendors, IBM, Microsoft and Oracle, have an increasing impact on this market as they continue to bundle ETL functionality closer to the relational DBMS.
• Other Infrastructure Providers — They provide various types of technical infrastructure components beyond the DBMS. For these vendors, ETL is typically positioned as yet another technical toolset in their portfolios. Vendors in this category include Computer Associates and Embarcadero Technologies.

Figure 1

Gartner's ETL Magic Quadrant

Source: Gartner Research

Although the overall opportunity for ETL vendors is huge (more than 75 percent of data warehouse efforts deploy custom-coded ETL solutions) and several pure-play ETL vendors continue to lead, major infrastructure providers such as the DBMS vendors will own the majority of the ETL market share during the long term.

Business Requirements Evolve

Even though most vendors and consumers of ETL technology place the bulk of their focus on product functionality, Gartner believes that a broader range of evaluation criteria is more appropriate (see "Gartner's Evaluation Criteria for the ETL Magic Quadrant," M-16-2939), particularly given the large number, different types and varying degrees of focus on ETL. In positioning vendors in this updated version of the ETL Magic Quadrant, we emphasize vendor viability, alliances, pricing models and key product/functional criteria. Furthermore, the vendors' plans and ability (both demonstrated and perceived) to address key trends in data integration (such as real-time requirements, increasing complexity of integration scenarios and massive data volumes) factor heavily in the placement.

Clear, strong return on investment is the highest priority requirement for Gartner clients evaluating ETL technology in the current market. For example, many enterprises that have a data warehouse infrastructure based on custom-coded ETL are looking to replace their costly and inflexible solutions with a tool-based approach to ETL. Given the generally high pricing for the predominant ETL tools, it is sometimes challenging to build a clear business case to make this switch. Some vendors have improved on this point by beginning to address more completely the complexities found in the environments of most large enterprises (for example, many vendors have added support for mainframe data sources during the past 12 months), but augmentation in the form of custom code remains a requirement for the majority of ETL tool deployments.

New Players Emerge

Despite the challenging economy and the large number of vendors already playing in this market, new vendors have entered the Magic Quadrant. Embarcadero, which is well-known for its success in the database tools market, delivered the first version of its new DT/Studio ETL product in February 2002. Ab Initio, although not really a new entrant to the ETL market, has become significantly more visible, appearing in competitive situations within large enterprises. Although there remains a general lack of detailed information about this vendor (see "Ab Initio: The Nearly Invisible Vendor," C-14-7786), Ab Initio's positioning on the Magic Quadrant is based on recent interactions with Ab Initio customers and prospects in the Gartner client base. Embarcadero and Ab Initio are targeting aspects of the market that are not well-addressed by the majority of ETL vendors — ease of use and low price (Embarcadero), and large data volume and high-complexity integration requirements (Ab Initio).

Data Integration Markets Move Toward Convergence

Consolidation with other related markets remains a trend for ETL. The most-visible examples of this relate to the data quality tools market, where acquisition activity (such as Ascential Software's acquisition of Vality Technology and the technology assets of Metagenix) and tighter partnerships (such as data quality vendor Group 1 Software beginning to resell products from Informatica) have occurred in recent months. Partnerships are still the rule in regard to the application integration tools market, although the production deployments of ETL tools coupled with integration brokers remain few. A push to commoditize ETL by the DBMS vendors (bundling ETL functionality closer to the DBMS at a low price point) will further fuel the need for ETL vendors to broaden their offerings. Although the demand for more-comprehensive integration suites (including data integration, application integration and data quality functionality) will begin to grow, ETL remains a separate and distinct market today.

The ETL tools market remains in a state of slowed growth (see "ETL Market Set for Continued but Limited Growth in 2002," M-14-7782) primarily because of economic conditions. Restricted IT spending has negatively affected many vendors in the ETL market and will remain a significant factor through 2002. For example, leading vendors Informatica and Ascential Software are not currently profitable. Informatica, which posted losses during the last three quarters of 2001, achieved break-even financial results in the most-recent quarter based on strong revenue from its core ETL product line. Although Ascential Software recently delivered weak revenue results, it remains financially viable because of the large amount of cash it has on hand; however, it needs to focus on operational efficiency and revenue growth to remain so in the long term. Improving economic conditions in 2003 will provide some relief to pure-play vendors in the ETL market, but this relief may be offset by the continued downward price pressure and commoditization of ETL by the DBMS vendors (primarily Oracle and Microsoft) and other infrastructure providers.

Bottom Line: The landscape for ETL tools remains complex and varied, with extreme differences in product capabilities, price points and the potential for long-term vendor success. Enterprises evaluating ETL offerings must view vendors and products through the lens of their specific business requirements and carefully analyze vendor viability and understand key integration trends.

This research is part of a set of related research pieces. See AV-16-2580 for an overview.

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