Earl E. Fry
Good morning. Welcome to Informatica's annual analyst day, 2013. We're doing it slightly different this year. We're actually having this session as you can tell, before the keynotes this afternoon. So please, those of you who are staying today and tomorrow, obviously, should get a good overview here and encourage you to go to the breakout sessions to the keynotes because I think that's where the real richness of what we're doing and why we're excited about the opportunity ahead of us.
So let me just introduce our executive team here: Sohaib Abbasi, our CEO; Marge Breya, our CMO; John McGee, our head of sales; and James Markarian, our CTO. So they'll each come up and present during different parts of the session today. As most of you know, I'm Earl Fry, Chief Financial Officer at Informatica. So again, welcome to the Analyst Day.
What we're going to try to cover here and tee up over the course of the next 1.5 hours or so is really to talk about why we're excited that we've got the right opportunity here, that we really have the right market strategies, the right go-to-market strategies, the right product strategies and that we have made and continue to make the right investments to execute against the opportunity. Before I jump into too much detail, our legal team, which is sitting in the back, wants to make sure that all of you read from top to bottom, our Safe Harbor Statement. So I'll pause there so people that are on the webcast and in the room can go through the Safe Harbor.
Now, let's tee up the agenda. So Sohaib will kick us off, talk about why we think we're in the right place, the right time, we've got the right opportunity in front of us over the next decade. James will then come on and talk about the right product strategy. Marge will come on and talk about the right market strategy and we'll have John come up and talk about the right go-to-market strategy and how we're going to execute against that opportunity. And finally, I'll come back and wrap up with some perspective on what -- where we've made the right investments in the past and going forward, and then we'll obviously leave some time for Q&A at the end. So with that, let me ask Sohaib to come up and kick us off.
Thank you, Earl. As we start the next phase of the Informatica journey, we believe we are at the right place at the right time and we have the right opportunity. And our aspirations that had been to grow Informatica into a category leader are now much grander than just that. And our next phase, we want to actually establish Informatica as an admired industry leader. Now, in order to do that, we have to be at the right place at the right time, and that is what I'd like to talk about. And we also find that we are well prepared for the next phase and that is because of the lessons that we learned in the last phase of the Informatica journey. Now, the last phase of the Informatica journey were guided by a very simple mission. We wanted to establish Informatica as the category leader in a new category called data integration and our aspirations were to build a billion dollar company. Now, that goal was very simply represented by a simple change that we had to our logo. Informatica, the logo change from Informatica without a very strong identity to the logo Informatica, the data integration company. Now, the date that we -- the time when we actually made that decision, there was no category called data integration. Industry analysts had not yet come up with a category called data integration, so we were at the forefront, and our product strategy mirrored that, that we had an opportunity for us to advance the frontiers of a new category that we were arguably creating. And that very singular mission, that goal worked very well for Informatica and the results speak for themselves. Even during the great recession when a lot of the other companies were shrinking, Informatica grew. Now, not every year was a fantastic year but we learned through that journey, we learned from the successes that we had, we learned from the challenges and that's why I believe that Informatica is better prepared today than we've ever been for what comes next.
Now, what I'd like to talk about is why do I believe it is the right place and the right time? Because in order to actually aspire to become more than a category leader, you have to be at the beginning of something new. So let me just walk you through the opportunity that is ahead of us. But the way I want to do that is I want to actually show you how the technology landscape evolved over the generations, to set the stage in terms of what is it going forward, what is the right time, what's the right opportunity.
Now, let me just walk you through the evolution of the computing generation. Every computing generation and actually, before I do that, let me also point out that the aspirations are once again, captured in a very simple change in our logo. All you have to do is look for our logo. The day it changes, you know we are on the next phase of our journey. Now in this phase, we go from just being a category leader to going beyond that and what we will emphasize is the value that we deliver, which is put potential to work. So let me with that let me tell you what it is that gives us a unique opportunity.
Now as I mentioned, every generation of computing delivered more value to more users and every generation of computing was shaped by a handful of companies. The first generation, of course, automated transactions, the back office, accounting and finance and this generation of computing was utterly dominated by IBM. The second generation of computing automated transactions in the front office, sales and marketing and this generation of computing was led by new leaders, Microsoft and Intel for clients, Oracle for servers and SAP for client/server applications. Now, the complexity of the computing platform continue to become greater and greater. In the first generation there were only 100 combinations of the different components. In client/server, there were tens of thousands of combinations of various components.
The next generation of computing automated ecommerce transactions with consumers, and this generation was shaped by pioneers such as Netscape for browsers, Sun for servers and of course, Amazon for ecommerce applications. And the computing infrastructure became more and more complicated because there were a lot of moving parts, millions of combinations of different pieces. The next generation of computing once again, automated more transactions. Cloud computing is automating those transactions that previously would have been too expensive to automate, and this generation of computing is being shaped by either the public cloud of pioneers like salesforce.com and Amazon AWS or the private cloud pioneers Amazon -- Private Cloud VMware. But the complexity of the data infrastructure and IT infrastructure is becoming daunting, a lot of different moving parts, a lot of different combinations. And today, for the first time, computing generations have gone beyond automating transactions to facilitating interactions. And by facilitating interactions, there are over 1 billion users that have formed social computing, and there is a new type of data that has never existed before, interaction versus transaction. And this generation of computing is being shaped by completely new pioneers, Facebook, LinkedIn, Twitter. But the complexity of the data infrastructure is becoming overwhelming.
So our opportunity very simply, is to help developers instead of fear change of technology, harness change for their own advantage. And our opportunity which James is going to talk about is to empower them so that they could leverage the information potential, put potential to work or, in other words, we have a technology called Vibe, the industry's first and only Virtual Data Machine that dramatically simplifies the data infrastructure. And we also built on top of Vibe; we deliver a complete platform, a comprehensive platform to enable the most important business imperatives that James will talk about. So that is why the time is right, the place is right and we are well prepared for the right opportunity. And to convince you of that, let me turn it over to James.
Thanks, Sohaib. I'm about to do the hardest thing I've ever done in my career, which is try to use some of Sohaib's slides right before he presents them at his keynote, while he is making note of every mistake that I make in delivering the exact words that I'm supposed to use. So you're going to -- this is, for those of you that have seen me present before, this one is a little bit less abstract and a little more concrete than some of my other presentations. If you'd like something a little more abstract from me, please come Thursday. I'm sure you're all eager to stick around in Las Vegas for a few days. So as Sohaib mentioned, what I'm going to do is try to give you a little bit more in-depth view of what Vibe is and how we're using that in our products and what that really means to our customers.
So the simple vision, before we get into the definition, but the vision for Vibe is that basically everything, every person on the planet, every application, every business, every device could be made better with the use of Vibe technology. Now, I'm going to spend the next few minutes trying to convince you of how we're going to make that possible and then Marge will come up and tell you about what that opportunity actually represents. So Vibe in a nutshell, so Informatica has developed technology and is starting really, almost 20 years ago when we started, and it was all about abstracting away the details from the underlying kind of processing environment from what developers are trying to do with our technology. So first it started out very simple, abstracting operating system and hardware platform, database environments, SMP, MPP, abstracting all the details out of this so that regardless of what came in the future, we would make sure that anything developers ever built with Informatica would be futureproof. So what we were able to do is really survive kind of every era of technology that Sohaib referred to and without any sort of recoding on the part of our customers. So they were able to be at all of their on premise needs. We're able to take that technology and move smoothly to the cloud as evidenced by the fact that Informatica was really the first enterprise integration vendor that moved their products to offer a full cloud product. We're the first of all the vendors, if you look at who all the enterprise vendors are, if you look at where IBM is or Oracle or any of the other integration vendors Ab Initio, et cetera, not one single one of them has made the transition to Hadoop in the time that we have, running natively inside of Hadoop. And we're also making a lot of headway and this is something that's relatively new about Vibe, enabling our partners who embed Vibe technology inside of their technology. So you've seen some announcements from Xactly and Ultimate Software and we're really investing quite a bit in the third-party SDKs that we're building around our products so that not only Informatica can use this inside all of products, which I'll get to in a minute, but all of our partners can look at embedding this technology inside theirs, and that process has already begun.
So the other important point about Vibe is that it's not limited to just developers. This really has applicability to every type of user in an environment. So business users and analysts using things like our cloud products or MDM and Data Quality products, they get benefits from Vibe, both because things like our cloud and Data Quality products are built directly on vibe. Also, because our MDM product leverages Vibe to import all of the data across all of those different eons of computing into MDM applications. And then, of course, our bread-and-butter, focusing on the developer community. And also, as I mentioned earlier, the third-party developers that are using -- like the programmers using our SDKs. So we've taken this general philosophy which we call, "map once and deploy anywhere," and we've opened up that philosophy to lots of different constituents to make sure that their investments are futureproof, make sure that we get lots of different benefits for different constituents. So for developers, they might care about Map Once and Deploy Anywhere; for IT administrators, they want to Map Once and then run optimally everywhere; for business users, they want to get the benefits of all the holistic information that Vibe can deliver to them.
So you're going to see a demo, if you stick around for Sohaib's keynotes, we're going to be delivering several product demonstrations with kind of Vibe inside so you can see firsthand this afternoon, some of the capabilities. And the one thing that I want to do is take a quick step back and say kind of why is this really significant to our users. And there's a few different ways to slice this but basically, the way I think about this is look, there's a lot of change that's happening in the compute infrastructure nowadays. Developers, first of all, are pretty much overwhelmed by all the different skills necessary for all these platforms. Meanwhile, they're really being forced to innovate because the developers and IT staffs aren't just tasked with keeping on top of all of these changes for keeping on top's sake. They're really assigned to make sure that the business is moving forward. So they have to be productive and add value back to the business. And so for us, that's what unlocking the information potential is all about. Now, there are some quotes, "data is the new oil" and Informatica, I guess, in that process is the refinery that makes it a little bit better and makes everything operate a little bit more smoothly. So one quick down on Vibe, so at the core is again, the Vibe Virtual Data Machine, the machine that runs everywhere in every kind of environment optimally, accesses information from every eon of computing, from mainframe to client server to cloud, social and mobile, et cetera. And then all the solutions that we've built on top of it. Sorry, Vibe, of course, includes our data transformation capability as well. Now, when you look at every single thing that Informatica does, there's an element of picking data up, doing something to it and putting it back some place or delivering it out to a screen. So what we've done is kind of built this sack on top of it in a way that leverages the core capabilities and then every investment that we make in the Vibe platform is leveraged by all of these layers above it. So if you want to run Data Quality and Hadoop, you can do that because it's built on Vibe. If you want to move your application out to the cloud, you can do that because it's built on Vibe. There's really no other technology out there in the industry that allows you to do this and that's how we get this leverage across all of our platforms -- and sorry, products, and how we're going to deliver this to third parties. So data integration, our bread-and-butter, all the tooling around, making this possible, creating your mappings. Data Quality is the place where customers refine that information to make it more trustworthy; ILM is where our security products and archival products so that you can make it more trusted; information exchange that so we can broker this data out to all of our partners; MDM, to make the data more authoritative and governed; and then again, third-party solutions. So we really have this unique suite that mix and matches lots of capabilities together with all of our technologies either benefiting from Vibe are actually contributing back to it for all of our users.
Now I'm going to instead of kind of going through all the different business initiatives that customers benefit from, I'm going to give you just a very quick story around an epiphany I had. Do I have time for an epiphany? So the epiphany that I had came during our meeting yesterday with our user group leaders, and we had some discussions around kind of what's going on in different industries. And the epiphany was specifically around financial services. So if you spend any time talking to financial services, IT folks nowadays, what you hear is that they're really, overwhelmed by one thing, which is the amount of time that they spend conforming with regulations. So basically, if you look at -- if you turn the clock back 10 years or so, maybe 15 years, and I would say that there was very little difference between what a developer did on Wall Street and what a developer did in Silicon Valley, they're very smart guys working on cutting edge technologies. Now, a lot of the investment, something like -- some guys have quoted 50%, 60%, 70% of their investment in IT is conforming to regulations, reporting and other things. So you go back and say well, why is it that difficult for these guys to conform to new reporting requirements and other things? And the problem all came down to something that could have been solved with Vibe, which is basically during that time, those very bright guys, hand coding and crafting, telling people that their solutions weren't good enough, but building these highly closed proprietary systems that offer no transparency when it came time to report on what was actually being done to the data and when and by whom. Then they also had another problem, which is something like Hadoop comes along. They couldn't predict it 15 years ago. The technology doesn't run in Hadoop. Then they have to recode everything that they've built over those years to run in these new environments. So I really sort of think about from a customer standpoint, the sort of flexibility that Vibe gives them, the kind of transparency it gives at the same time and the fact that it really keeps your developers productive regardless of what change happens, and that's like the one cool thing about this, which is nobody saw Hadoop coming 10 years ago. 20 years ago, nobody saw the cloud coming but because of the way we built the solution, we're kind of futureproof from the beginning for us and for our customers.
Now, I'm going to switch gears just a little bit. I'm going to talk a little bit more about the specifics of our products and talk about something new, which I don't know, did we announce this today or is it tomorrow?
Margaret Anne Breya
The press release is tomorrow.
Okay, press release tomorrow. So we're going to give you a preview today during Sohaib's session. So again, switching gears a little bit. From our conversations with analysts and with customers, we kind of detected that there was a little bit of a gap in kind of the types of customers that were acquiring data integration technology and Data Quality technology. So on the bottom, you see the kind of buying model, high touch. Basically, this is download and go. This is kind of conversation in depth about requirements with like, a direct sales rep. Then on the other axis, you see kind of what's the scale of this type of operation? So is it an enterprise decision? Is it an individual within a large company? Is it a small, medium business? And kind of depending, there's a high correlation between the needs of those customers. And what we found is that there's a little bit of a gap. So we handled one end of the spectrum with our cloud express product, the free cloud product. At the high end, we handle all the requirements with PowerCenter Enterprise Editions and then Informatica Cloud the Paid Edition kind of occupying part of the middle.
Now what we're introducing today is PowerCenter Express, which is intended, not surprisingly, to fill precisely that gap. Just through the magic of power point, it sits exactly on that spot. And basically, what PowerCenter Express is, is a very simple to download. I think we actually have it down to a 5-minute install that comes in 2 basic versions. And again, this is all built on top of the Vibe technology, which is why it's so easy for us to produce. So basically, you download this in the Personal Edition for free from the web, 5-minute install, has its own embedded repository. In a couple of minutes, you're up and running and writing mappings. So customers might have looked at things like SSIS or other open source technology to fill that gap. Not every customer is ready to move to the cloud. You got sort of the guys that have security needs or just this need to hang on to their technology, they don't want to go to the cloud, this is a great product for them. It has some limits. So it connects to really popular things, files, databases, XML data sources, but it has some limits in terms of the amount of data that it can process, 250,000 rows. So if you're an individual in a small company, you're probably not going to deal with anything much bigger than that. If you're an individual in a department and you want to scale it up, we do have the Professional Edition, which allows you to add additional users, up to 5. We removed the bandwidth limit on it so you can process an infinite number -- amount of data but it only runs on a few different platforms. So as soon as your requirements get to be massive, you need mainframe connectivity, change data capture, you need the full kind of parallel processing capability of the Enterprise Edition, then what you do is you just upgrade to the Enterprise Edition, we take all the meta data from PowerCenter Express, you deposit it in a PowerCenter repository and without any changes, you're up and running with a couple of caveats here and there. So this kind of offers a smooth spectrum from the very lowest end, all the way to the highest end of our products, provides an easy onramp for customers who are technology. So before, if they wanted a simple buying experience, they wanted to run something on premise, they really didn't have a choice of going with Informatica. If they had an Integration Competency Center and they didn't want to deal with those guys because it's too hard to secure licenses from them for whatever reason, they might go and get something else. Our customers, even our big customers like the fact that they're users regardless of where they are in the enterprise can go and download this and it kind of keeps them all in the family. So they know as soon as they're ready to scale that project up, they can bring it into the Integration Competency Center and it can be governed just like everything else.
Now, again, I'm going to change gears just a little bit and start going through a little bit more of the detail in the specific products, not quite as much as I've been giving you on the first few things, cognizant of time, sorry, Earl. So I want to talk about some of the challenges that our customers are facing and what Informatica is doing it with our broader platform. Again, these are all products built on top of Vibe. So one observation that we've made is that the current world of new analytics is way too complicated. And what we mean by that is there's just this overwhelming range of choices, Hadoop in memory technologies, data warehouse appliances, some of the new BI technologies. And there's like this great -- this kind of great quote which I'm just going to paraphrase from one of our customers, which is basically, the analytics world is insane and the only sanity out there is Informatica. Because again, the thing that we offer is sort of this hedge, which is regardless of which of these technologies you choose, it doesn't matter because if you chose wrong or your decision has to evolve for some new business need, we'll just retarget to one of these new environments, you don't have to change anything, we do all of the work. So the way we accomplish this, again, not surprisingly, is with the Informatica platform. Now this represents things just a little bit because in a lot of these cases, we don't just treat these data -- these processing environments at arm's length. At a lot of cases like inside of Hadoop or in the data warehousing appliance case, we can actually run natively inside of those devices. So we can get data from again, every possible source. We can feed it in real-time using our Ultra Messaging technology with something new that we're developing called Binge, which I think we're talking about here this week. We can process all the log files using HParser. Of course, we have PowerCenter for the core, ETL heavy lifting, and then we have our Master Data Management and Data Quality technology that implies in all of these environments as well, plus we have technologies like CEP for more operational intelligence on the top right called RulePoint here but it's our CEP technology. And then of course, PowerCenter for downstream processing. So this open platform, this Vibe platform which encompasses all of these technologies, solves the problem of too much complexity. Another observation that we've made is that there are too many bottlenecks in kind of real-time environments. So what we've done is we've looked at those various bottlenecks. We've removed all the demons from high-performance messaging. This is the core of our 29West technology, our Ultra Messaging technology. That thinking about running brokerlessly is going to kind of come back again as we look ahead to where Vibe goes and running inside of devices and taking Vibe down to very low footprint environments and pushing more of the processing to the edges, so this is very significant. We've done a great job in our Data Replication technology, eliminating any of the bottlenecks so we can scrape events as they are happening directly out of database logs and propagating them to downstream systems. So our high-performance platform addresses really, kind of every facet of the bottleneck problem inside of our largest customers.
Now, another observation has been that there is too much inefficiency and integration overall. So if you look at the average Informatica customer, sorry this is going to get dizzying in a second, really there are just thousands, like tens of thousands of data sources and thousands of thousands of mappings to tie all these things together. And despite the fact that we've sort of preached for a while, best practices about how to deal with this, the fact is that generally speaking, there's a lot of point-to-point mapping going on. So what we're introducing -- there might be one more build in here -- is a product that we're going to again, be talking about in the keynotes called the data integration hub, which brings some Pub/Sub-like capabilities to the Informatica platform. This isn't like an ESB. This isn't sort of go after MuleSoft and other guys you might think of. But first and foremost, we're looking at the needs of batch customers and setting up what looks for all intents and purposes, like a Pub/Sub mechanism. So there's a publication of all the publishers, the subscribers can subscribe to it and regardless of the number of data sources it's coming from, we can propagate those changes down. And we use -- sorry a number of our technologies to secure the data, to ensure its quality. We use a number of our technologies on the propagation side and we really feel like this helps manage the chaos here with -- and really improve the productivity.
Now, there's also an observation that the customer, well now, there's too much fragmentation in these customer environments. So when we look at the challenges our customers are facing, if you want to answer a simple question like how many products of a certain type are consumed by a particular customer and at what location? A simple question like that, because of the fragmentation of data around an enterprise, first and foremost, makes it difficult. Secondly, you look at a number of the solutions out there from some of the key competitors in the MDM space. The fact that their solutions themselves are highly fragmented actually presents challenges in pulling all that information together. So something that you've heard us talk about in the past has been this single MDM hub, which is a single place to pull all that information together, regardless of the data domain. This is actually something unique in the market, at least in terms of the way that it actually works, not talks about, which anybody can do, but actually works. Now, we've taken that and we've extended it in a couple of ways. First, we extended it with recently, the acquisition of Heiler so that we've introduced PIM capabilities. And just so we're clear on how that fits in, so from a data perspective, that's all going to be pulled into the hub. The acquisition is just finalizing now. I think we just finally own all of the stock, we're a couple of legal issues away from it being finalized and then we're going to be able to move -- to really complete the product plans. So that's going to bring more product data into the hub and then there's a number of things like all the business processes, et cetera, that are multichannel commerce specific, that remain sort of the domain of the PIM products, which is kind of outside the core MDM. And then we've also augmented it with cloud capabilities as well. So we did a recent acquisition of a cloud MDM provider, it runs in the scope of salesforce.com so customers don't have to overcome the security issues or the kind of latency issues of moving that data off and on salesforce.com. We can take all of that information and integrate it back into the hub to the extent that they need to correlate it with their other enterprise information.
Everything is too risky in the enterprise right now, and one of the biggest challenges that our customers have is they don't even understand the risks that they're facing. So it's very hard to discover and catalog all of the vulnerabilities that are out there and detect the sensitive information. We're building these development environments with this awesome test data that are actually creating fairly unsecure honey pots of some of the most sensitive information in a customer. So we're seeing that basically, the operational systems are highly secure. People don't tend to think about the development in test systems, and what happens is they don't have the same protection. They have a lot of -- they have all of the information you want and none of the protection that you want around it. We have lots of inconsistencies in the production data itself. And lastly, we don't necessarily have any means for moving that data once it's become less relevant into secure, accessible sources.
So what we've done through our kind of comprehensive and secure platform is really address all of these challenges in turn, applied our data profiling capabilities so that we can detect that sensitive information, applying data subset and masking to the test information so that developers can work on coherent sets of information that will allow them to test their applications without giving away sensitive information. We've obviously plugged in our master data management technology so that we can provide authoritative, reliable sources of information. And then lastly, if it does come time for daylight to kind of move into its twilight years, we have a secure archival product that it still allows security, as well as a search on top of the information.
Then lastly, an observation from what we've seen from our customers, is that they're really dealing with the over siloed or the re-siloing of information as they move to the cloud. So basically, the problem is that for years and years and years, everything was collapsing around the gravitational forces of SAP and Oracle. But now, as they're looking at moving to the cloud and moving to best-of-breed, if they want to continue to preserve their analytics environments or they want to integrate from point to point, they're really sort of re-deriving all of the problems that we solved long ago in the enterprise. So what we're doing, of course, is with the Vibe powered Informatica cloud platform, we're breaking down those silos so that integration on the cloud really doesn't need to look or feel any different than integration on premise.
So I've given you a bit of an overview of everything that we're doing with Vibe. We think it's really going to power our customers in Informatica. We have some exciting things that we're announcing this week that are relying on top of Vibe, and then Marge is going to come up and tell you a little bit more about the market opportunity it represents.
Margaret Anne Breya
Great. Thanks, James. So my job is, first of all, to say hi to everyone here. This is my first Informatica World and my first analyst conference so I look forward to interacting with you guys over the coming year. If we think about the market overall, in terms of where we sit within the software market, the overall software market this year is roughly a $300 billion market. And if you break that up into infrastructure software and applications software, infrastructure software is about $170 billion of it. These are Gartner numbers; we use that as our base data case. Within infrastructure software, we have roughly around a $9 billion or so addressable market today. By 2017, this will grow to roughly about $12 billion, and we think we can expand that, so just to give you a little bit of base there. Now, the thing that's actually interesting and you probably got this directly from Sohaib's comments, as well as James' comments, is that because of all of the disparate data sources and more and more whether it's machine data, SAT data all over in the cloud, et cetera, we are ending up with now, DI/DQ or data integration and Data Quality as the fastest growing infrastructure software market period. The compound annual growth through 2017 from like 2011 is 10.5% CAGR. If you look at just from today, through 2017, it's at about 11.5% CAGR. Now, this is something that a lot of folks have not thought about in a big way, and it just underscores the kind of opportunity and the rapid ability we have to take advantage of this with our Vibe and Informatica Platform technology. Now, James talked about a number of use cases. And the use cases are really the use cases that we can address today, this period. In 2017, these use cases will add up to about $12 billion. The way we look at the breakout of them is if you think about the first kind of 3 use cases, think, first of all, about hybrid as a mixed environment between cloud, as well as on premise technologies for wide-ranging Informatica Platform capabilities, and then we have our core analytics and customer centricity, which really represents our Master Data Management in use cases. By 2017 and this is another fun fact to know and tell Master Data Management will be roughly the same size as the data integration and Data Quality market. So about $5 billion a piece. And so, if you kind of think about all of these use cases, think about DI/DQ and Master Data Management as kind of living through most of them, and then we've got a change out in terms of whether is archiving or connectivity for real-time or other things like that, that kind of emphasize the use case in each one of them. That's the way I kind of think about the market opportunity. But what I wanted to do is also spend a few minutes talking to you about additional opportunities that we think is beyond where the current markets are forecasted today, and James and Sohaib intimated this. We think that we can now take our platform and specifically, data integration and Data Quality into embedded applications, as well as embedded devices. And many of you may know that I came from the business optics world, 20% of our addressable market had been around embedded analytics. Now, that's only for use cases where you actually need a visualization layer, we actually think that the entire market for embedded applications for our kind of technology could be even more aggressive than that because you don't need a visualization for all this connectivity. So we think there's a big opportunity there.
Now go into the embedded device area. By the end of this year, new players will be entering the market that will be offering data services direct to device. Now you've all probably seen the commercials that GE has been doing on the jet engine. A terabyte of data per jet engine per day kind of being sucked up to kind of look at predictive analytics. This is going to be a common use case in the Internet of Things. And so we see a real opportunity to go ahead and have a consistent architecture from the smallest footprint devices all the way to the large data center back ends as James had talked about, where we can take the Vibe architecture and create this end-to-end consistent data infrastructure. So that's the opportunity we see. If you were to net it out, it's probably going to be somewhere in the neighborhood by 2017 of a $1.5 billion opportunity for the embedded application side of the business and about $0.5 billion for the device centric embedded devices. And so just kind of that rough thing. Now why do I think that? Well, first of all, just to kind of give you the framing about Vibe, this is how we are describing Vibe, the industry's first and only embeddable virtual data machine to access, aggregate and manage data regardless of data type, source, volume, compute platform or user and without recoding. So we are absolutely targeting the embedded market with this technology. And why do we think we've got a great position here? Many of you probably know this, but I wanted to underscore it quickly. If you look at the Data Integration, Magic Quadrant from Gartner, for the second year in a row, and I've been in technology for a long time as many of you have probably, we are not only the highest from a vision standpoint, but also from an execution standpoint. That's pretty impressive in the marketplace. So that's our core data integration technology. And this year, we also moved into the leader position from a Data Quality standpoint. So DI and DQ, the absolute leader position in Gartner in the fastest growing infrastructure market within infrastructure software, so a nice position.
So where do we think we can go with Vibe? So there's been a couple of times in the industry where abstraction played a great role, and James did a great job of talking about that abstraction from the physical environment. This is what we're doing. The first time was with Java, I'd argue. And that was for the application infrastructure market. What Sun did, with the industry working together, was to abstract applications from the operating system environment. And they built as a result, with the industry, roughly a $16 billion market associated with that. The second time, I'd argue, again in infrastructure software was for systems infrastructure and VMware did it, did it with their virtualization effort, right? And again abstracting from the physical environment the operating environment. So this is another time. Now the question is, for data infrastructure or information infrastructure, who is going to do this? First of all, how did they do it? First of all, I would argue that they did it with a couple of 3 key things. They had either a cause or an enemy. They had absolutely a technology hero, and they had a simple message. So what is our cause or enemy? Our cause is harnessing change. We think, as James and Sohaib so deftly described, folks are going to be changing infrastructures, changing targeted environments back and forth in this world. We can help our customers seamlessly take advantage of that and harness the change. The next thing is about a technology hero. As you might imagine, it's Vibe, our virtual data machine. And finally, the very simple message, and the simple message is, "map once, deploy anywhere." So Vibe is all about "map once, deploy anywhere." And you'll see increasingly sophisticated software development kits come out. We've got some basic kits now and you'll see us advance those in the future.
So what I'd like to convince you, if you will, is that we've got a roughly about a $2 billion market that will be built on Vibe that is outside of this $12 billion footprint. And just a couple of things about the brand. I have to say, you'll see the new logo, the new tagline, it goes live today. And you'll see it throughout the entire conference. Love your feedback, if you've got any comments, and you see me wandering around. The potential to work is really around information potential. You'll see photography and other things that really look at how -- what our lens of the world looks like. Everything we look at, however human, has data associated with it. And so that's -- when you see kind of the videos and all of that, that's our look and feel. Our website has changed. We'll also have an exclusive preview and download capability for our attendees at Informatica World for PowerCenter Express, and so we'll be divulging the download site this afternoon. And then we'll also be launching 6 communities because we believe that we've got a number of different professions that we can form large communities with, from architects to developers, sales and operations -- sales and marketing operations professionals, IT leaders, information leaders. And then finally, we'll be doing some fun things with info graphics as we call it. This one is one that you'll see tomorrow on stage where we're talking about investment in the BRIC countries front sectional Intel (ph). Brazil actually as a percent of GDP is outspending any of the other BRIC countries in data integration and Data Quality and China's doing so in MDM. And so that's basically what I wanted to share with you, and I'd be happy to interact with you over the coming days. Thanks a lot. John?
Thanks, Marge. Good morning, everybody. James and Marge outlined the inherent advantages we have in our architecture, the correlated use cases that we're taking to market that are powered and supported by our unified platform Vibe and the overall market strategy. I'm here to tell you this is not a forecast. This is not a vision statement. This is something that our clients are enjoying today. Please note that with the small sampling we took from our last quarter, these are customers from around the world. They're in different verticals. They're in different sizes in terms of market segmentation. No matter where we go in the addressable market that we serve, the Informatica value proposition resonates. When we take a look in terms of where we've been focused for the last 10 months, there's been one word that my organization has been obsessed about, and that's productivity. How do we increase the revenue yields per rep around the world? Reps that are with us, as well as reps that are coming on board. And so that's where we've been going and our objective has been double-digit productivity growth. Shortly, I'm going to be showing a lot of data points that suggest that we're on board to meet or to exceed that objective, and there's a couple of things that, that gives us. One, it gives us the benefit, as we start to look into FY '14, in terms of how to be able to take that productivity growth and then be able to move in terms of overall market expansion. So we're at the midway points of the fiscal year or close to it. Think of my presentation in terms of 2 components: One is the continued execution of our FY '13 plan, and then how do we get up to a fast start in FY '14 to take advantage of this market opportunity. Now productivity is a funny thing in a sense that there's a lot of places you can go to that run into dead ends. And so my experience has been, there's been 3 overall keys you want to be able to go to, to start with productivity. The first is, you need a robust model to be able to understand fact based, analytically based where you're having productivity dilutions, right? Second one is, you need to have a competitive sales team. You have to have the most competitive sales team in the marketplace. If you win more deals, you become more productive. The last is, and this is a personal belief is, the differentiation or the competitive advantages that my organization can bring back to Informatica is not what we do at the end of the quarter. What I'd submit to everybody in this room is the last 30 days every technology sales team looks exactly the same. You're looking to close deals. It's what you do the first 30 days is what separates the Informatica sales team from the rest of the industry. So when you take a look at -- with that said, we went to work. And we looked at 3 things, right? Most organizations start their planning with what's considered a tops down. The executive committee along with the board sets a number and then it's driven down to the organization. We did exactly the opposite in FY '13. We did what's called a bottoms up. We looked at every single installed account that we have. We looked at every line item within our CRM system. We built a scoring model on all our white space accounts and then we hit the road. We went to every single office that Informatica has. We had meetings with first line managers and sometimes account managers, and we're asking them and working with them in terms of what they felt they could produce with the opportunities that they had. Interestingly enough, the numbers came back slightly above to what the board and the executive team looked like. A couple of things came out of this process. One is, it's not the corporation's plan, it's their plan. The early indications of positive success is that we had a record number of reps hit their Q1 objective. That's important for a couple of different reasons. One is, we're seeing -- we're having wide contribution and wide participation in the success of the company. We're not going to be as reliant on the large deals. The second fact is that we have relatively low attrition. In sales, you're always worried about Q1 because that's the attrition season. That's when reps will leave and join the other company. We had relatively low attrition, and I think that's due to the planning that we were able to take forth in the beginning. Second one is operational efficiency. What does that mean? That means there's one way of doing things. That's the Informatica way, right? We're not going to have different ways around the world. We instituted a deal methodology system. We have a cadence in every single week of the quarter. For the first week, we do quarterly business reviews. Why? Because our business -- our competition either can't do it or won't do it. What that means is, in the first week of the quarter, every account manager in Informatica around the world sits down with their first manager, reviews what they did the previous quarter, gives the commit for the quarter that they're in, takes a look at any sort of product contingencies, open cases, executive sponsors and what they have to do. The second week, we do the big deal review. That's where you get full organizational alignment. That's where the business units participate. We have the engineering team. We have IPS. We have some partners participate. These are the large and must win deals we have to go through. Then we go through a whole series of emphasis throughout the quarter Q5 and Q9 as we look at the full -- the next quarter. We have a deal team that goes into next quarter. Everything going in terms of being a one way to be able to do it. And this last one is the competitive sales culture. I mentioned this earlier. If you win more deals, you become more competitive, right? So why did we do? We were able then to be able to look that enablement completely differently, right? We took a look and said, you know what, we'll do the product online, but when they come into headquarters, when we go out in the field, we're going to focus on how we could be more competitive and how we could have what we call situational selling, right? We doubled our competitive intelligence team. We now have mobile apps with battle cards, so when our reps go on a sales calls they're getting the latest information in terms of how to position it, and we're going much more on the offensive. For Q1, we had greater than a 75% win rate, which is outstanding. But we still have a lot more room to go, and we're very positive that we're going to be able to kind of go in that particular direction.
One of the ways that you could lose productivity, though, is if you have too many targets or worse, you have changing targets. So we looked at 2013, we wanted to be defined as much as what we do versus what we're not going to do, and we want it to be very, very focused in terms of what we we're going to go after. You looked at James, you looked at Marge in terms of how they're outlining the products we have. We have the best products in the market. So we wanted to have a very closely aligned strategy in terms of what we're going after, product expansion. If you look at our customers in terms of the larger lines of business we have, they're different buyers. They're different sale cycles. They're different competitors. We went with a specialized model. So now we have teams that wake up every day saying, how can I sell the cloud? How can I sell MDM? How can we sell ILM? And the Q1 results speak for themselves. We had really good results with MDM and ILM. We had a fantastic quarter with the cloud, an indication that this model is working. We also wanted to go the indirect business. We have a very strong sales team. They've done well. They will continue to do well. But we have a great opportunity in white space in terms of going after and getting our products embedded to be able to have other companies serve to their customers. The best example of that is in Q1, we did business with a insurance aggregation platform to be able to pool insurance risk, bundle it up and then resell it to the larger carriers. That's not a market our direct sales team is set up to go after, but by embedding it into a third-party product, we're able to get a mid-7-figure deal over the course of 3 years. There's an incredible amount of opportunity, both from a platform and applications space that our indirect team is now going after, and it's 100% accretive to the direct sales team. The last is the new logo. That is the oxygen of a sales organization. That's how we grow. It is not a revenue play. It's a productivity play. Getting new business is costly. It's probably the hardest to be able to run, but once you have it in-house and you have successful deployment, that's where the up sell and the cross sell happens, and that's where the productivity gains. We have a small team. We have a different level of modeling to be able to go at the new logos. We had an 11% increase in our new logo acquisition quarter-over-quarter. So very, very positive and also kind of shows a little bit in terms of what we could expect going out into the future.
I talked about productivity; we looked at the specialist, but let me also talk a little bit about the alliance managers. When we're going through that modeling and the planning session, we came back with some interesting analysis. The richest source of funnel and sales conversion came from a partner organization. So we doubled it this year. We doubled it both from a regional account manager, which is basically reps that are working with our SIs. But we also built what we call a solution factory in Bangalore, India to work side-by-side with our partners and their solution factories. So we're looking at our partners from 2 perspectives. How do we work closer with them in the field, but then how do we get inserted directly into their solutions set, and so that way we could have higher conversion. For Q1, we had exceeded objectives both in terms of source creation, as well as contribution to revenue. You also see a different way they're compensated. They're compensated on 100% source bookings, meaning the term influence and everything else doesn't really apply in terms of how are they working with our partners to be able to develop contribution back into our funnel that converts back over to revenue. And then with the theme of productivity we also wanted to look at how we can leverage inside sales. We were able to move our quota carrying reps by 50%. We increased them by 50% from 2012 to 2013. One of the ways we did that is we assigned a quota to nearly everybody that we can. We eliminated 6 management positions. We converted them over to sales, and then we were able to give inside sales quota. We gave them quotas specifically on the lower end of the market, so we could tie our routes to the market to the best allocated cost. We had a 32% increase in the account that inside sales was able to do in Q1, and that is also then to free up our direct outside team both the SAMs, the strategic account managers and the major account managers, so they could go after the larger deals and build a more complex high valued sales. Again, another indication that the work we're doing, from the operational piece and the planning piece, is starting to work.
The last part then is funnel, and that is something that I think that it could be complicated if you make it -- if you want to make it complicated or you can kind of focus on the aspects that really have performance at the end. We wanted to be able to get visibility into our funnel, right? We do 9-month funnel reviews right now. So we're actually taking our first stab at Q1. We know what we have in Q3. In Q4, we're getting a good sense of it. We absolutely know where we could have some sort of investments to be able to beef up very specific areas of our go-to-market. What it also allows us to do with the visibility, is to have very discrete investments where it's required or where it's not. We have a deal team that goes out one quarter. So right now in the first week of Q3, we have a deal team that starts working on Q4 deals. Why? Because when you move from Stage 2 to Stage 3 or Stage 3 to Stage 4, you increase your conversion rate by 17%. So we're able to use -- get the visibility and then be able to correlate it back to the event we're looking for which is more revenue.
Measurement. We are -- take a look at the 3 components that drive the funnel: its sales, its partners, its field marketing. They now have direct responsibility and accountability for the percentage of the funnel that they're going to own. So we're able to be able to drive that. We have a 48 turnaround with leads. We have a lead scoring methodology. We have dashboards. So we're able to be able to drive that. Working with Marge and her field marketing team and the 6 business use cases that were outlined earlier, we're doing an integrated campaign, where marketing is going out and being hit to market with a value proposition, and we're going old-fashioned calling, where we have call out days, again, to be able to build up the funnel to ensure we have success going out to the future. And the outcome is, we feel we have a pretty good funnel. We have good quality. We have good visibility. We have good dashboards going forward, and we have the right level of assessment to be able to -- for us to be able to gauge where we're going out into the future
So going into FY '14, there's a couple of themes that I wanted to be able to emphasize. We will always be a team that is focused on productivity. Every single year you can expect productivity growth coming from the Informatica sales team. Because of this double-digit growth that we're expected to achieve, we now have the ability to do market coverage. Marge gave some of the facts. Let me give some more. If the addressable market is $12.2 billion by Gartner, with Vibe, we see as $14.2 billion. The top 10 countries of that addressable market represent 80% of the opportunity. In those 10 countries is where we have the largest infrastructure in terms of sales, SCs and customer base. Within that 80%, one country represents 61%, and that's North America, right? And that's where we have -- believe it or not -- a level of penetration that we're able to increase. We also have, I'll say, the best leadership team. And we're able to be able to kind of move forward in a rapid manner. so we're going to able to expand out in terms of these top 10 countries. We also look at mid market. This is an area that Informatica never played in. We didn't have the right products. We didn't have the focus. That has now changed. We have PC Express, we have Cloud Express. We have the products to go after that. Gartner estimates this at $1 billion-plus market that we never even went after. Going to 2014, we're going to be launching a channel strategy. For less than 1,000 employees, you do not get an Informatica sales rep. You will have a vibrant channel to be able to go after 100% accretive market going into 2014. And then finally, we have the dirty part of the embedding. It's a $2 billion market when you look at applications and devices. We're starting to have the success now. In terms of our indirect revenue, we're going to be able to really ramp that up going into next year.
No matter what happens though in terms of the market, no matter what changes we have to make, what I have found that's been core to Informatica, though, is how we treat the customer. And let me just kind of share a little bit of a personal story that happened to me. I've been here for 8 months. In the first 30 days, I've gone out -- I went to a call and a customer was having an issue with one of the appliances that they said explicitly, it was not an Informatica issue but because we're associated with, we'll get hit with the same sort of negativity from the customer perspective. I made a call into customer support, we got the third party on the line. Within 2 days, we were able to let it get back up. I can go on and on and on in terms of embedded in the Informatica culture is customer success. It's focus on the customer. And someone who's in head of sales, I've never seen anything like it. And it's a luxury that not every sales leader has, but we have it here. And so it's going to be something we'll be able to go. So if you take a look, that's why we have 7 years in a row customer loyalty. We have the highest renewal rate in the marketplace, right? And so you're going to able to see that type of, we have the best products, we've got to focus on the success. So when I take a look in terms of where we are for FY '13, I have a high level of confidence. There's a lot of data that suggests that we're on the right road. I'm incredibly excited about FY '14 and just thrilled to be here.
I'll now turn it over to Earl who will kind of wrap it up.
Earl E. Fry
Thanks, John. So as John mentioned, really one of the things that struck him coming to Informatica was really the focus or kind of the DNA on customer success. I want to take a step back to something that we covered last year. So many of you were at our Analyst Day last year, and we were talking about some of the challenges that we had at that point in time with getting some of our customers implemented and successful on some of our newer products, and we started talking about it in terms of, one of the things that a real focus in 2012 was focusing on customer success, getting customers live, more go lives and in a more rapid timeframe, especially on some of the new products. We talked about the investments that we were making in the services and support organization around our technical architecture managers, technical delivery managers, customer success managers, all focused on improving that rate of customer success. So partly why I want to take that -- this kind of a little bit of a sidebar is to say, investments that we've made starting at the back end of 2011 and through 2012. Now 2012 was a challenging year for us, but some things went very, very right.
So for the seventh year in a row, in 2012, we were #1 in enterprise software for customer loyalty. This is an independent poll from our customers. And more importantly, if you look at the investments that we made around customer success and look at the results that we've had through 2012 over the last 12 months, we had a record number of customer go lives, up 27% from a year ago. We had in our newer areas, around MDM, ILM, up 50% in terms of number of go lives or cloud go lives up 160%.
Increase in reference able customers. Again, this is kind of the foundation that John's team now can start to leverage. And you're seeing that start to leverage in 2013 and going forward in 2014, double the amount of reference able customers in MDM, ILM, up 80% in cloud. And we talked about the customer loyalty metrics, the industry leading -- continue to have industry leading maintenance renewal rates and then even in our cloud business. And when you talked to most SaaS vendors, they're looking at where they're having churn of -- if you want to believe them -- teens, really under the cover is a lot of them are closer to 20% or more. We are at less than 10% churn on our subscription businesses. So the same kind of DNA in terms of focusing on the products work and we get customers successful. So again, the investments that we've made, I think you can start to see the results that we had.
We've made -- we continued to make investments. And as we talked about last year was a tough year for us, but we continue to invest in all areas of the business, and this looks at it just in terms of headcount. If you look at it in terms of critical areas that led to some of the customer success around the technical architecture managers, the technical delivery managers, customer success managers, you could see that was a major investment that we started making even going back to Q4 '11 and it kind of took us 1 year to kind of get the results that we did. Similarly, around when looking at the sales organization, the sales specialists, putting the subject matter experts in place, that started last year and now you're starting to see, again, we had a decent Q1, and you hear how John is thinking not only about this year, but how his team is positioned from a go-to-market standpoint for next year. So again, I think the theme here is, we continue to make investments in the right areas of the business, and we'll continue to do that.
Again, that shows up in sales and marketing and you can see that we have invested in the sales and marketing team. You're seeing some of the results of that. you're starting to see some of the results of that now, and I think that's the reason for our confidence going forward because we have made changes and have made investments.
On the R&D side, we talked about -- James talked about how we're positioned. We talked about Vibe. We talked about the fact that in a tumultuous year, we release the Big Data Edition, the only company that's running data integration natively onto Hadoop. We talk about the continued releases around cloud integration. You hear -- today, you hear or tomorrow, I guess, you'll see the press release on PowerCenter Express. So again, it's continual investment in innovation in areas that are key to future proofing our customer, our customers' investments; again shows up as R&D spend. And then when you kind of look at that sales and marketing spend as a percent of revenue, obviously, last year a little tough year, so operating income as a percent of revenue fell off of peak levels. But again, hopefully, you're getting a sense of, we made investments in customer success last year, talked about it last year, you can see the results. We've made continued investments in sales and marketing and R&D. I think you're hearing that this team is excited about where we're positioned and how we think we can execute against the market opportunity going forward.
So just in wrapping up. You heard Sohaib talk about the right opportunity, the right place, the right time and how well we're positioned. You heard James talk about the right product strategy and some of the new releases that are coming out this week. Marge talked about the right market strategy, the -- around Vibe, around the virtual data machine. And you heard John talk about how he's built a team, an engine to address this growing market opportunity, the fastest growing market opportunity in infrastructure software. And hopefully, you've heard from me in terms of, we continue to make investments ahead of time, not catch-up investments, but investments ahead of time to address future opportunities. And this is a management team that does have a track record of executing against these opportunities.
So with that, I'd like to have the management team, executive team come up, and we're happy to take questions both from -- take questions from the audience. And we have a mic coming around so we want to make sure that we could hear the questions for the webcast as well.
Michael B. Nemeroff - Crédit Suisse AG, Research Division
Michael Nemeroff, Crédit Suisse. First question for you, Earl, just on the last slide, on the investments that you've made over the last year. Peak operating margins, what could we expect over the next year in terms of getting back up or surpassing that -- those peak operating margins? Is that something that you expect to happen in 2014? Or is that going to take a little bit longer?
Earl E. Fry
The short answer is it'll take a little bit longer. The #1 focus continues to be revenue growth and getting accelerating revenue growth against the opportunity. So as we've mentioned, I guess I'll go back to kind of implied guidance for -- that I gave in April, implies that operating margins will be down as a percent of revenue down this year versus last year. I do expect that as we get into Q4 we're going to start to see some of the productivity improvement that John talked about. Again, that will be tempered because we're going to be focusing on growth. And if you look at the market opportunities that we have, there are a lot of places that we think we could invest very wisely to drive not only revenue growth in 2014, but over the next 5 or 10 years.
Nathan Schneiderman - Roth Capital Partners, LLC, Research Division
Nate Schneiderman with Roth Capital. I have a couple of Vibe related questions. I was a little unclear as to how much of this is marketing and positioning versus how much is actually new product because I gather that PowerCenter Express is new, but I wasn't clear how much else was new versus more of a marketing positioning spin. And then also on the opportunity for the embedded market, can you discuss the go-to-market strategy for this? Are these going to be the same sales reps selling that kind of solution to the same customers? Or do you -- are you going to have a different sales force go after that opportunity? And if so, how does that work?
So I think Marge or James.
I'll take the first part of Nate's question or at least take a stab at it, kind of what's net new about Vibe. So yes, first of all, one thing to point out is, we've never really kind of branded or discussed kind of the engine itself independent of anything else that we do. For what it's worth, I view it as we're transitioning from being the data integration company, which is sort of like a packaged stand-alone solution to this company that's putting potential to work. But what I found in customer conversations is that it's actually difficult when you have siloed products to kind of discuss that capability that they could benefit from in lots of applications. If it's really -- if you're really kind of thought of as the PowerCenter company. So what we found immediately is in some of the customer conversations we've had since we started introducing Vibe is that they kind of latched on to this term, and they actually start using Vibe in sentences about how they can use Vibe to transform things inside their enterprise. Now for me, what's net new? So it's a convenient way, first of all, to kind of talk about the technology that's separate from individual products. What's net new from a technology standpoint is that we have made an investment in building this kind of stand-alone virtual data machine that will be used inside of Informatica products and also inside of third-party products, so it's a journey. Again, this is technology, not surprisingly, that we've been building for a while. The packaging has allowed us to do things like rapidly build the world's best data quality product, take our technologies that are built on Vibe to Hadoop, et cetera. So Nate, this isn't really intended to be like -- Vibe's not a product, right? So this is a technology infrastructure that all of our products are now built on, so they're going to get this leverage. The new things from -- sort of from John's perspective that we're really out there selling, so you'll see things like PowerCenter Express. Well, hopefully he won't be selling it. PowerCenter Express, the data integration hub. The Big Data Edition was built on this technology. So it's already kind of manifesting itself in terms of some of the new things that you are seeing. So I don't know if that kind of clarifies a little bit. And then Marge on the --
Margaret Anne Breya
Yes, maybe I'll just drill down on the second and then hand it over to John. So if you think about it, at this conference, we're taking our core technology built on Vibe into also the departmental level with express and then going forward, you'll see us then expand that footprint into devices and applications. In terms of the packaging, it is -- there is absolutely packaging associated with this. I think that's the core thing if you were to look at whether it's what VMware did or what Sun did with Java. Packaging is an important part in order to make the technology consumable outside of the packaged enterprise software area. So I'm not going to back away from that at all. There is a key part of packaging there. And then from a -- I think our partners will change in terms of how we go to market for embedded devices and applications. But John, maybe you want to talk about the sales force?
Sure. We have a separate team going after that market. And that's only way it's going to be successful. The existing team we have is sell to. The indirect team is sell through. And the reasons for that are pretty straightforward. You have a different length of sale. Many times the right economic model for both the customer of Informatica is to have either a click or a some sort of metric that's being measured and counted to be able to go after that. The sales cycle tends to be long in terms of years. There's engineering that has to be recognized and integrated in so that you need to have a separate sales team because it's operating on a completely different cadence. So what we're trying to do is get full market coverage, where we have our direct team going after the installed to sell to and then where our sales team is not set up either from a skill, from a timing or for a comp perspective to have the indirect team to be able to fill in that accretive space that Vibe gives us.
And maybe just one more note about the sort of embedded device market. This is a pretty different market than the one that we've gone after. So if you look at the agent technology that we acquired from -- that effectively we acquired from 29West, they have a very low footprint product that kind of pushes processing all the way to the edges. They have this broker less architecture. If you combine that with the core kind of data transformation capability that we feel like we can strip down to its very essence, so to push a certain amount of processing, a certain amount of filtering down to the device level and effectively have that play a part in what are essentially these sensor networks, so that it's easy to do things on devices for any kind of programmer, just like it is like in all these other environments that we've gone to. But then it's also easy to integrate all of the information that's coming off these devices with all of, kind of rest of your enterprise applications or your analytics environments. So that we feel like this model kind of scales pretty well from the device all the way up to enterprise. This is very early. So this is not like we're about to announce Vibe(NYSE:TM) for embedded devices. This is something that we're in early discussions with a few potentially key partners, something that the R&D teams are looking at, guys from within my organization, the architect team. So this is something that we think is possible with the technology. We're looking at the market, making sure that we have something that's compelling to these guys, and we think that there's a fit right there -- right now, but there's a lot more work to be done.
Jobin Mathew - Deutsche Bank AG, Research Division
Jobin Mathew, with Deutsche Bank. So I'd like to focus on some of the fastest growing parts of your business. So last quarter you broke out the subscription business which is growing north of 60%, and you've got a new announcement today of PowerCenter Express. So it seems like there's a lot of new SKUs which are now coming out which are successful and which are adjacent to each other. The question is, is there a concern that some of these SKUs could be cannibalistic to some of your flagship products? And as you go further down market, who are the competition that you're seeing? Are these the traditional guys that you've been seeing all along? Are you seeing some open source vendors in general on the margin?
The biggest growth opportunity for us is around some of our newer products, and we've talked about that in the earnings calls that we've had good success with MDM. We've got an addition to MDM, a PIM, product information management, that would enable Omni channel commerce. So we have a lot of opportunities ahead in terms of our core MDM data security. The question that you raise about cloud and could it be cannibalistic. The reason why I believe that it will not be the case is if you consider cloud adoption. Cloud adoption is creating the next wave of data fragmentation. The challenges that we're helping our customers address is there is a lot of fragmentation on premise, and they're using our technology to integrate that data perhaps for analytics, and James talked about the fact that there are many ways of doing analytics. So there continues to be very healthy demand for our core products on premise and now cloud creates this new dimension of fragmentation which is across beyond the firewall. So for us, I believe that we have an incremental opportunity with cloud, and I don't believe that it would have a cannibalistic impact to us in the way that you have seen in other categories, where perhaps if you were in an application category, it would have a much more cannibalistic impact. But given the nature of integration and fragmentation, that's a new opportunity for us. From a competitive landscape, it hasn't really changed over the years. Most of our deals continue to be uncontested by commercial competitors. Now within specific areas, I'm sure the numbers very different, but there hasn't really been any change from a competitive landscape.
Matthew Hedberg - RBC Capital Markets, LLC, Research Division
Matt Hedberg from RBC Capital Markets. Obviously, infrastructure software overall has had a tough patch here for a lot of sort of your peers. One of the bigger areas of, I'd say, spending pause has been in the data warehouse space. How do you think about that market as it relates to your business? And if that market were to continue to show pauses, how does it impact sort of your end markets?
Let me comment on it and I'll give the others an opportunity to express their views as well. The reason why, if you look at analytics, it's a very confusing landscape is because of the claims being made by the vendors, and that has created a lot of confusion. There are 6 distinct ways of doing analytics, and each one of the vendors claims they do it all. And the 6 ways of doing analytics. One is data warehousing, tiered data which is I suspect what you're referring to. The second way is analytic databases like EMC, Pivotal, Greenplum, or Netezza or Vertica from HP. The third is in memory databases like SAP HANA and Oracle has announced their offering. The fourth is Agile BI, Tableau, QlikTech. The fifth is Hadoop. And the sixth way is analytic cloud services like what Amazon announced with Redshift and Google also has announced it. So if you look at the broader opportunity for Informatica, it doesn't matter which of the 6 ways the customers end up analyzing their data. Now my own view is over time the vendors will recognize that they don't do it all.HANA is not the answer to all analytics and the same could be said about other things. And there will be specialization. There will be categories that would be along the lines of agile analytics. There'll be another category for operational analytics. There'd be another category for predictive analytics. There'd be a lot of different analytic categories. And then I think it'll become a lot easier to see what are the demand drivers. At this point as James mentioned, we are in a unique position regardless of which of the many ways you want to do analytics, we benefit from it.
Michael Turits - Raymond James & Associates, Inc., Research Division
Michael Turits from Raymond James. One question for John then another shot at Vibe. So John, could you give us an update on the restructuring of the European sales force and any metrics you can give us to what's going on there in terms of how that's picked up. And then I guess for James, another shot at Vibe. I guess two things: One is that it's an underlying infrastructure for all your products. And then second that it's a way of embedding them into applications and devices. So, can you tell us what you've done technically in order in the product set. What exactly is that underlying infrastructure, what's different about it technically, so John and James?
I'll take the first question. [indiscernible] I don't have metrics because some of the changes are in process. And we have a new leader, Charles Race who's been a long time Informatica executive who we all have a lot of confidence in. He's making all the right moves. We have a new central Europe country manager. He actually starts today. We have a new Netherlands country manager that is going to be starting in 2 weeks. There's the whole cadence that we're talking about that I just outlined, it's now being fully adopted through -- with Charles. I don't believe that Europe is going to be a 90 day kind of measurement. But I do believe that we are making all the right moves and that Europe is going to be on pace with all the other regions in a very short amount of time.
On the vibe side, so I think that you should probably think of it in a couple of ways. So obviously I think you touched on a few of the key things that are different, so we are packaging and developing the SDKs in a way that we really haven't done around our products in the past. We're using them first internally. We have kind of so-called, like an internal SDKs that teams like the Data Quality or B2B team use to consume or the cloud team to consume the Vibe technology. At the end of this year, we're a little bit kind of like off cycle for some of this technology with respect to the conference. But by the end of this year with the 96 release of the platform, we're going to have a kind of fully published external SDK that we're already kind of engaging with partners around. Now we have an early version of this that the cloud team is using successfully. And I mentioned exactly and ultimate software, so they're kind of successfully embedding already. We have embedded our products, so we do have OEM agreements and resell agreements that you've seen largely speaking in the past what -- the way that those have worked is they've used the technologies at kind of like arm's-length, like you install your package, I install my package. If you want to do some integration, you launch PowerCenter or the sort of the big thing and you don't really think about it as being integrated. This works totally differently than that. So right down to replacing the user interface with anything that you want and just calling it as a service -- running in-process or out of process. You have this kind of capability of embedding all of these integration capabilities inside of your solution, so it's much more seamless. It's now possible to make it much more seamless than it ever has been before. Now in parallel with that, so that's kind of on the external side, if you look back to the end of last year, having the engine run natively inside of Hadoop, doing these investigations around running on embedded devices, et cetera. But those are kind of the innovations on sort of like what Vibe is actually doing for its clients. And then you'll see some things, the keynotes like we're investing in connectivity to know SQL data sources and other things and everything that's built on Vibe kind of inherits that automatically despite being on the platform.
Karl Keirstead - BMO Capital Markets U.S.
Karl Keirstead at BMO Capital Markets. I've got 2 questions, one for Sohaib and then one for Earl. Sohaib we've been hearing about the introduction of power center express and changes to the sales model to go more mid market. As you admitted, this is a new place for Informatica to go into the mid market and I'm wondering if you could step back and put this decision in context for us. Informatica has historically been a very large enterprise play. What's changed in the marketplace that's incented you to move to the mid market now? And then for Earl, Marge mentioned in her comments that she sees the data integration, Data Quality space as being a 10%, 11% grower through 2017. Is that a good benchmark for Informatica's core medium term growth outlook? And then perhaps on top of that, you get a little bit of a kiss with MDM, is that how we should think about it?
Let me comment about the opportunity associated with parts and express. I would say that it is not limited just to the SMB market. We have within our existing customers many that say that the demand for data integration is such that they need to empower developers with all kinds of skills and all kinds of budgets. So one of the things that James highlighted was we recognized that there was a gap in terms of sophistication of the data integration jobs. Perhaps the associated skill sets that were required to become proficient in it. And we have within our customer base many that are using our technology and using something else that they thought was the right tool to augment that. And what we want to do is provide those customers with a better alternative, which is that we will provide them with tools at different price points, requiring different skill levels with varying degrees of sophistication of the jobs that you could do, so we could provide a comprehensive portfolio of products to cover the entire gamut of developer skills for data integration. Now it does open up, as you've correctly observed, new opportunities where our products were perhaps not priced appropriately or were not easy to install for that particular market. And it opens up new opportunities and that was what John commented on that we will be focusing on the channel. Now we talked earlier about the channel role for Vibe and how we will go out to the embedded market. But the channel -- PowerCenter express would also be a product for us to distribute through those channels along with Informatica Cloud.
Earl E. Fry
And as far as growth rates, yes that's a good overall growth rate that Gartner is giving. Obviously we're playing in areas whether it's cloud, whether it's MDM that are -- we believe are much faster growing segments of that market plus I believe the stats that Marge quoted does not include any potential revenue that would derive from the embedded apps coming out of Vibe.
Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division
Tom Roderick with Stifel. So I've got a joint question for John and Earl and you guys can answer it as a team and compare notes how well you do. [indiscernible] So I guess the good news about what Informatica has become over the years is that, there's a very broad product portfolio. A lot of products can be sold in the customers. The deals can get quite large. The bad news about that is those deals tend to occur very close to the end of the quarter and they tend to be very binary. So I guess the question is, from the standpoint of both of you working together, how has the forecasting and visibility inherent in those big deal sort of improved? What have you done to manage that process? How much control do you feel like you have over those big deals that can be very binary as you look into the next few quarters this year, however long the time frame is?
Let me maybe start and then tee it up for John. So I think we've dramatically improved our processes. And a lot of -- and, yes, while there may be more million-dollar transactions like we had in Q1, a vast majority, and I think 15 of the 19 transactions, million-dollar plus transactions started with a 1. So I think we're getting better as an organization in finding opportunities linking to key business use cases. We had a decent quarter on Q1, in terms of linearity and I chopped that up to a lot of the changes of disciplines that John has put into the process. I don't know if you want to --
No. Just to add, it's always a challenge because you're right, it is going to be binary. We're getting better at it. We have a lot of areas to improve upon. Some of the areas that we're stressing is we have I think a healthy paranoia around those large deals. We want -- we're constantly stressing who wins and who loses from the business if the deal does or does not happen. What is our relationship at the business level. We believe and we see technology investments. And it's now a question of us getting high on the ROI poll, in terms of when a company decides where they're going to spend their money each quarter. And as we start deriving and communicating our business value more and more, that's when you're going to see the consistent results that we started to really just become very stable over time. With that said, as the head of sales, I would love to have a much higher run rate and so we're going to be looking at both perspectives going into the future. And we think with the mid market piece, with the cloud, there's going to be an area that we're going to be able to see some of that as well.
John, could you speak specifically to the criticality of MDM within the role [indiscernible] it seems like they're playing a specifically important role.
Unidentified Corporate Executive
So the follow-up question was with regard to what role does MDM play in some of those larger transactions?
I'm going to say it's a high value proposition. So the high value is going to create a high revenue acquisition for us. That's the nature of what we're selling. We're solving big complex problems. At the same time, I don't want to underestimate the value that our core products play in that area as well in DI or DQ. And certainly in Q1, it was an MDM-led quarter. But I see a balanced portfolio with different areas of our product line, with different solutions taking the lead at different quarters.
Unidentified Corporate Executive
Let me make one comment, one observation. One of the new things that John has implemented that he hasn't talked about is, very early in the quarter identifying what are the critical use for the quarter and I believe he referred to it in first week. By the third week, John usually assigns an executive sponsor for that deal. So there is a lot more engagement, not just within the field management, but rather across the company where the executives are being assigned and they are getting a lot more involved and that is making a big difference, in terms of visibility and confidence on some of those larger transactions.
Jesse Hulsing - Pacific Crest Securities, Inc., Research Division
Jesse Hulsing, Pacific Crest. I have 2 questions. First, I'd like to take it back to one of your first comments, Sohaib where you said you wanted to take Informatica from a category leader to an industry leader. Does that imply a broadening of your platform via acquisitions? And the second question is Informatica cloud is about a $40 million run rate coming out of Q1, but the drivers behind its growth, as far as new applications being developed in the cloud or new SaaS applications being deployed, those seem to be picking up. Is there any reason why that business can't accelerate off of a fairly small base? And I think it grew 69% in Q1, something like that.
Going back to our aspirations to grow Informatica from a category leader to an industry leader. The observation that I have is, industry leaders are created by being in the right place at the right time. Having been at Oracle from 1982 when it was a $4 million company and Larry Ellison's aspiration was to someday be a $100 million company and see where it is today. Oracle happened to be at the right place at the right time when the database became an embedded technology that needed to be embedded in every single business application and whether it was ERP, CRM. And then Y2K happened, which adoption of the package applications accelerated. So my belief is that we happen to be in a similar situation, right place, right time for all the reasons that you heard. That we have a lot of technology that could be embedded and it could be a very critical element of the IP infrastructure and a new generation of applications that have yet not been developed and delivered for the Industrial Internet. So we have a similar belief. Now from an acquisition perspective, I don't think it changes demands that in terms of how we will be looking at it. It's the category that we're in happens to have a much bigger role to play and we are the leader within that category. Now in terms of our Cloud, our Cloud business in Q1 grew by 70%. The subscription part of the -- which was reported grew by 70% and a large part of it is of course coming from Informatica Cloud. And we are -- we have the most number of customers that are using Informatica Cloud. We were ranked #1 on AppExchange, salesform.com's AppExchange for the fifth year in a row as the most popular integration technology. And we will continue to make investments. There will be a preview of the next generation of cloud offering that we will have that will be actually that will be delivered later this year. So we will continue to make investments in the cloud to make sure that we could sustain whatever the market would bear.
Earl E. Fry
That said I think it's probably aggressive to think that you could see accelerating growth from 69% -- the 69% you saw in Q1.
Steven R. Koenig - Wedbush Securities Inc., Research Division
Steve Koenig with Wedbush. Just a few tactical questions here. First one is on the sales side of things. We've heard some talk, maybe it's just noise about a fourth turnover in Q1, particularly in North America, I've also heard though about some pretty good Oracle sales reps coming into Informatica. So John, maybe you could address the question. Does level of forced turnover -- does it disrupt pipelines going forward? How do you manage that? Secondly, I was curious about the PowerCenter Express. Did you mention -- and I apologize if I missed it, when is GA for that and is your direct sales force going to be empowered to sell that?
My opening comments in terms of having a robust and detailed planning model that really gets to the heart of your question. We anticipated having that type of turnover. Actually right down to identifying the account managers that probably would not thrive in this new sales culture that we're building here. So it really did not have an impact. In fact, we probably still have a fair, I'll say -- I'll use the word hedge in my model. We still have plenty built in in anticipation of that. And I actually think that it's -- to be an effective sales organization, you always have to be able to look in terms of where the performance is and where it's not. And just like we'll always be focused on increasing productivity. We'll always be looking in terms of the account managers that are successful here and the ones you want to invest in and quite frankly, the ones that we might divest in. So that's going to just be part of who we are going into the future.
Margaret Anne Breya
And I can talk about the GA. So PowerCenter Express is actually from a GA standpoint available today. The downloading will be enabled for Informatica World attendees. So this afternoon we'll go ahead and show the attendees the download sites and the URL for that. And then the idea is to reserve that right, if you will, for roughly about 30 days until early July where we'll open it up to the rest of market. And then from a sales force standpoint, we will have a multi packs that are available from the sales force. But the idea is buy it from the Informatica store. We put in e-commerce capability into marketplace to be able to go ahead and not only download for free, but also to transact -- it's an $8,000 per user per year basis. And then of course we have partners that will be enabled as well.
And one last comment. I inherited a really good sales team. If you recall going back to my comments in Q1, going to the planning, we didn't want to change territories. We didn't want to be able to make changes. And we've absolutely lived up to that expectation. We had to just change the culture and I'll say the levers more than anything else. So the sales team is a good solid sales team. It's going to be with us and be able to deliver the results.
Aaron Schwartz - Jefferies & Company, Inc., Research Division
Aaron Schwartz from Jefferies. John I'll start with you. You talked about the productivity goal sort of at least in line to you expectations, maybe sort of exceeding that for the year. What specifically is driving that? I think we all know that optics are a little easy on a year-on-year basis. Is there something specific that's brought (ph) you to the sales special relation or something else? And then what has to happen to get you to sort of exceed your targets for the year. And then second question is the Express product, will that be available on a subscription form or is it just perpetual? And I guess the follow-up question would be, how should we think about margins or a longer-term as that subscription business scales. I think you talked about the margin impact this year really being from the hiring. Is that going to be sort of a, not a lid, but some pressure on the margins longer term?
It starts with leadership. So we have new leadership in probably about 60% of the positions in North America. We have a new leader in Europe. We have a new leader in Latin America. And then actually bringing in some staff sales leaders as they go down to the organization, so I think that's the first step. I made a comment in my presentation, we had a 50% increase in quota carrying reps, so we have 50% more people carrying a quota. That's certainly going to be able to help with our productivity. And we have a very tight 90-day cadence. And we have that sort of like way to be able to be able to review deals, to be able to get the executive sponsors in, to get the organizational alignment, so it's not one particular thing. I think it's a series of steps that have taken place. And so the measurements we see are positive and we have a lot of confidence going out to the future certainly for FY '13.
PowerCenter Express will be on a subscription basis. And to the degree that all those subscription revenues are growing faster than the overall business. Clearly it has a slightly different impact on the business model. But I don't think -- yes it'll be a bit of a headwind, but I would hope that overall as we start going into 2014 and '15, we'll have enough growth in the other parts of the business where we should be able to make some progress on productivity.
Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division
Ed Maguire from CLSA. Since the Hadoop law from last year seems to have faded a bit, I was wondering if you could, first of all, address what you see as the real impact. Has it been incremental? Is it neutral? Are we still in early stages? And then I also have a Vibe question, which is -- I know it's early, but are you anticipating a type of model where there's a -- where there would be say, a royalty on devices or a free component to say an agent -- a free agent that exists on a client and then licenses that would be associated with a solution and what ultimately that -- how that might bring you into competition with some of those enterprise application integration or even messaging types of technologies, 2 questions there.
Let me comment on Hadoop and then ask James to provide you some color as well. My view is Hadoop adoption is still in early stages and we've got customers in financial services and other industries that are looking at Hadoop in the case of financial services for a credit risk as an example. The opportunity ahead for Informatica as I said -- I mean there's 6 ways of doing analytics. And as long as you accept that and as long as you accept that all of those vendors will deliver some value, this will be one more way for us to position what we do. Now the interesting thing about what we've done with Hadoop is not only are we providing the connectivity, but we are leveraging the true value of Hadoop. Hadoop was never really a data integration platform. It was never designed to be one. It was a way to reduce the cost of computing where you could take a large computer science problem that would have required you to spend a lot of money on hardware to break it apart and then run it in parallel and commodity hardware. So the cost effective scalability aspect of it we're not leveraging because we are now running Vibe on top of -- natively on top of Hadoop, which is another way of saying all of our products are running -- most of our products are running natively on Hadoop. We've had marquee wins, Facebook uses, Informatica, OpenTable, Western Union, a lot of other ones. But I think that to the extent that we're benefiting from it it's still early days.
Yes, I think that echoes what we're seeing. I would say that if you look at one decent proxy for these things is always the activity of our product specialists. I think the busiest guys at Informatica are the product specialists focused, not just on Hadoop, but on big data in general, there on very high demand from customers and the field still continues to be the place where I spend most of my time with customers. And I think that one of the things that's interesting is that there's a lot of demand for "ports" of our technology to lots of different Hadoop distributions. And I think what we're seeing is kind of an interesting thing, which is if you look at -- back even to like the early UNIX days or something like that, there's a lot of kind of fragmentation even in the Hadoop markets where different vendors are focused on different parts of the problem. Customers, 1, need a little bit of advice for it. And, 2, we're actually seeing cases where different departments within different customers are adopting different Hadoop distributions. And again want a single platform where they can address all of it. So I guess sort of a side -- you could argue it's a little bit immature, but it's actually progressed from where it was a year ago, so I'd say that it's at least a sign that the market is changing a little bit.
Margaret Anne Breya
So there's a number of different ways that this can work as you can imagine. A question that we're exploring is, do you make something very free for development kind of environment use cases and then at deployment go ahead and charge or other things. The other question is, where is the value in the customer offering? Is it really in the backend analytical data services versus the collection of the data and I think you have a different business model depending on which side of the fence that is. And so we're in exploration I think is the best way to say it in a nutshell.
Unidentified Corporate Executive
You would probably say though that it's a real time environment, real time and event driven, so it's going to look a little bit different than the traditional Informatica business.
Unidentified Corporate Executive
I think we have time for maybe 2 more questions.
Chris Hogan - Barclays Capital, Research Division
Chris Hogan from Barclays. I actually want to stand the Hadoop theme. I just sat in on a session on Hadoop with Western Union and the amount of customers in there who were looking to add a Hadoop deployment over the next 12 months. It was pretty incredible versus who already had a deployment, which was obviously very small. I guess with the -- it seems like all the questions are around the complexity of the deployment. And do you feel like Informatica has the level of expertise both obviously quality and then just quantity to get those deployments over the finish line? And then I guess secondly, with the different Hadoop distributions, how do the partnerships with those vendors, with the Clouderas, with the Hortonworks, how does that affect how you're going to be -- how you're going to be keeping the Big Data Edition kind of in line with those distributions and as those are kind of rolling out?
The first part of the question. So I think that there are kind of 2 elements to it, right. One is kind of the general skills to stand up a Hadoop cluster, manage and administer it, just in and of itself which is a little bit -- is a problem faced by the customers. Obviously in the Hadoop community itself, there's been a lot of investment around the kind of admin and management tools. In terms of the data part of the problem, I feel like we're doing a good job of scaling with the customer demand. The good part is we've approached this like a software problem and not a services problem, meaning that we want the technology to the extent possible to leverage the deployment mechanisms that are in the Hadoop environments. Almost any one of our sales consultants with a little bit of training can kind of go out, install the product in a Hadoop environment and be productive that day showing customers results. So we think that because it's a largely software-based solution, we will be able to scale at least with the kind of mainstream. Now with the Hadoop distributions, yes, these are coming really fast and furious, right? So these guys produce anywhere from l3 to 14 drops of their distribution every year, maybe back to Ed's point that it's still an immature market; you'd kind of contend that if a platform is evolving that quickly, it's a somewhat immature market. So we are kind of scaling up the organization inside to be able to keep up with the pace of change from these guys. Fortunately right now there's really sort of the big 3 distribution vendors, so Hortonworks, Appr and Cloudera. There's very few customers that are sticking with native Apache. We do support it. IBM big in size right now is basically an Apache distribution, so we're kind of up to speed with that. So that part's a little bit trickier, that does sort of touch the software layer, but we're kind of accelerating that effort this year.
Nicole Hayashi - UBS Investment Bank, Research Division
Nicole Hayashi from UBS. John you mentioned the 75% win rate in Q1. Which products had the highest win rates and what were the reasons for losing some of those deals in Q1?
I think your question was which products had the highest win rate and then the reason why? So in Q1-- when we lost, why did we lose? Was that the question? Many times when we lose deals, it's because we didn't do the right prequalification and what we're trying to be able to do is go into deals where we have that unfair advantage, in terms of how we have persuaded the client to look at the problem, to be able to look in terms of where our strengths are in the market. I think it's natural for sales reps to be optimists and they never want to say give up, or they never want to say die. And so they tend to be able to go to deals that were really never our deals to begin with. We also take a look at hand coding as a loss as well, all right. So that's something we look at. We wanted to be -- we want to be very competitive. And so if we want to be competitive, we've got to define all the competitors. And so if a project goes to hand coding, that is something that we looked at as well.
Great. So I think we're out of time. We're at noon. So we do appreciate your attendance here at the analyst day. And for those of you who are staying, please enjoy the rest of the user conference. Thank you.
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