Vendor Ratings, VDR Kevin Strange, Andrew Butler, Gareth Herschel

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1 Vendor Ratings, Kevin Strange, Andrew Butler, Gareth Herschel Research Note 27 January 2003 Vendor Rating: Focus on NCR s Teradata Division NCR s Teradata division is performing well, despite the tough economy, and is gaining market share in the data warehouse segment of the database management system market. Yet, NCR s other two divisions are not doing as well. NCR Overall Rating: What You Need to Know: Declining revenue from NCR s financial self-service (automated teller) machines and retail store automation products, such as point-of-sale systems, are why we rate NCR overall as promising. However, we rate its Teradata division as positive because of its continuing success from a product technology and financial perspective. The Teradata division s focus on data warehouses and strategic business intelligence (BI) gives it an advantage over its more-diverse competitors, helping to position the Teradata division as a specialist rather than general-purpose vendor. Since its inception in 1999, the Teradata division has commanded the highest overall placing in Gartner s data warehouse Server Evaluation Model (SEM). However, the Teradata division does have its challenges (for example, pricing and marketing), and enterprises need to be aware of them and how they could affect their strategic plans. The Teradata division has performed well recently, especially given the difficult economy and the strategic nature of data warehouse implementations in support of BI; however, its presence is patchy outside of North America, Western Europe and Asia/Pacific. Enterprises planning to deploy Teradata products globally should ensure that they have adequate sales and support in the countries where they will be needed. Analyst Comments: We rate NCR as a promising overall; however, because of the strength of its Teradata database management system (DBMS), we rate NCR s Teradata division a positive. Detailed Rating: Initiative Corporate Viability Strategy Financial Teradata Division s Growth Marketing Organization Product/Services/ Technologies Product/Service NCR High-End Servers Rating Caution Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 NCR Midrange Servers Teradata Database Management System Analytical Customer Relationship Management Applications Technology Pricing Customer Service/ Product Support Sales/Distribution Support Services Strong Caution Corporate Viability: In this Vendor Rating research, we focus predominantly on NCR s Teradata division. The Vendor Rating chart reflects ratings for the Teradata division, except for the corporate viability section, which reflects NCR overall. NCR is a diverse company with three major business units: Financial self-service (automated teller) machines Retail store automation products (for example, point-of-sale systems) The Teradata division (which includes software, hardware and services) Financial: In the fiscal year ending 31 December 2002, NCR revenue totaled $5.585 billion, which was a decline of 6 percent over fiscal During this period, revenue in the financial self-service area decreased by 2 percent, and revenue in the retail divisions decreased by 14 percent. Through significant cost cutting, NCR has been able to increase its operating profit and cash positions. Cutting costs will become an issue in the midterm to long term. By being limited in how much it can financially invest in technology, NCR will struggle to maintain a competitive advantage and deliver the products that customers demand. Despite challenges from the economy and competitors such as Oracle and IBM, the Teradata division continues to take business and customers away from its less-specialized competitors. In 4Q02, the Teradata division s revenue grew by 8 percent compared with the same period in 2001, and its revenue was up 7 percent for fiscal year 2002 as compared to The Teradata division makes up approximately 20 percent of NCR s total revenue. Even with the relational DBMS market relatively flat, sales of the Teradata DBMS grew by 6 percent in 2001 (see DBMS Software Market: Flat but Not Calm ). Gartner believes that there will be similar growth with the Teradata DBMS for The Teradata division has delivered positive earnings results for five straight quarters. The challenge for NCR is for its financial and retail divisions to become profitable. Both divisions have experienced sharp revenue declines. The Teradata division, with its comprehensive knowledge of competitors and customers, is singlemindedly focusing on providing the infrastructure (for example, servers, DBMSs and applications) to support data warehouse implementations. After creating the Teradata division in June 2000, NCR increased the emphasis on the Teradata relational DBMS and the data warehouse market (see NCR s Teradata Division: Standing Tall, but for How Long? ). However, the strategy is hindered by support that is almost exclusively for NCR s Unix server platform. Teradata has not provided a strong message for Windows or non-ncr server support. 27 January

3 Marketing: The Teradata division has improved its marketing strategy. Its active data warehouse message is not new, but it has garnered extra attention because of the market s fascination with the goals of the real-time enterprise. However, the Teradata division has not been able to leverage this as well as it should, especially in differentiating Teradata s DBMS from its competitors. Furthermore, the Teradata division has not made any significant progress in gaining a share of the midsize enterprise market. The Teradata division must address this through more-targeted sales and marketing efforts, and developing attractive pricing models for midsize enterprises. Lacking such efforts limits the Teradata division s growth opportunities, a situation that will become an increasing issue as its competitors enhance scaling capabilities. Two programs warrant mention because of their success. The first, data mart consolidation, is a strategic marketing push identifying enterprises that have fragmented BI strategies. The Teradata division provides the services to consolidate the data marts into a Teradata DBMS-based data warehouse. The second, aimed at competitors customers that have had limited success with data warehouse implementations, seeks to replace established technologies with Teradata DBMSs. This replacement strategy has led to 100 more customers during the last 24 months. Organization: The Teradata division s success has led to its president and chief operating officer (COO), Mark Hurd, being moved in September 2002 to become NCR s president and COO a move aimed at leveraging his track record across the other NCR divisions in a drive to turn those businesses around. Under the leadership of Hurd, who will keep both positions for the time being, the Teradata division increased its operating performance, market share and profitability. A challenge, however, could be the possible loss of focus by management. Until a new Teradata COO is appointed, one with strong operations experience, there is a risk that the Teradata division could lose its sharp focus. Products/Services/Technologies: Teradata DBMS: Teradata s strength is its proven capability at the high end with complex data warehouse implementations. Support for complex data models with strong query optimization enables enterprises to perform diverse queries without modeling or tuning specifically for them. This helps provide analytical agility and a significant reduction in costs (see IBM s Regatta Still Lags NCR Teradata in Data Warehousing ). Gartner s data warehouse Server Evaluation Model (SEM) evaluates the combination of each flagship model enterprise server (from, for example, Sun Microsystems, IBM and Hewlett-Packard) and DBMS (for example, Oracle s or IBM s DB2). NCR Servers: In the past few years, the Teradata division has changed its focus more toward the business intelligence (BI) segment. Although this limits its market reach, it enables NCR to invest in platforms that are specifically engineered for BI users. The latest 49XX and 53XX servers are Intel-based two-way nodes that run its own NCR MP/RAS Unix operating system or Microsoft Windows. The 49XX supports up to four-node massively parallel processing (MPP) configurations that can address data warehouse needs of up to about 1.5 Terabytes. Beyond this, the 53XX supports up to hundreds of nodes (Teradata sets the limit at 4,096 nodes) for extreme levels of scaling. NCR server technology is well-proven and delivers almost unlimited scaling. Investment protection is further enhanced by being able to mix and match different generations within a single MPP complex. As Gartner s data warehouse SEM shows, the MPP topology also enables the servers to achieve low levels of downtime (planned and unplanned), which is highly competitive when compared with symmetric multiprocessing (SMP) servers. The Teradata division plans to introduce Itanium 2 platforms in 2H03 that run 64-bit HP-UX (and 64-bit Windows). These will be based on the forthcoming Madison generation. The Teradata division will 27 January

4 continue to invest in MP/RAS for as long as there is sufficient demand for Intel IA-32, but enterprises should assume that the focus will mostly be on its Itanium plans from 2004 (0.8 probability). MPP is readily justified by enterprises that need the highest extremes of data warehouse scaling. However, the Teradata division faces more of a battle to successfully target midsize enterprises, which are likely to be more hesitant to invest in a technology that they do not see as mainstream within their IT infrastructure. This presents the Teradata division with a challenge to position smaller NCR server configurations as an equally viable alternative to the use of more-standard hardware and operating systems. This, in turn, could jeopardize the long-term business justification for the NCR server business, now that conventional SMP platforms based on Windows or Unix operating systems are achieving increasingly strong scaling results. Analytical Customer Relationship Management Applications: Teradata s analytical applications are a loosely coupled portfolio rather than an integrated suite. Teradata has built (helped along by a few acquisitions) a wide range of applications with the primary focus on customer analysis (including data mining and customer profitability analysis), campaign management and personalization. Each application works as a stand-alone application and is considered best-of-breed by clients looking for a solution in that particular niche. The development of these applications by the Teradata division s vertical groups has had two significant effects. First, the availability of these solutions is variable depending on the industry. NCR s Teradata division has traditionally focused on industries such as financial services, telecom and retail, so these industries tend to be better and earlier served than others. Second, the independent development (because of acquisitions) of the different applications has resulted in inconsistent interfaces and partnerships with complementary vendors, and unnecessary duplication of the user management and technical underpinnings of any of the applications. This is what differentiates an application portfolio from a true suite. The Teradata division is aware of these issues and is putting in place the organizational and developmental elements needed to integrate these applications and their market positioning. A challenge for the Teradata division s application business, however, is its dependence on the underlying Teradata DBMS. The optimization of the Teradata applications to take advantage of the Teradata DBMS platform significantly limits the target market audience for the overall application business. Customer Service/Product Support: Through its subsidiaries and distributors, NCR is a global company. Its strongest regions with the most presence are North America, Western Europe and Asia/Pacific, where the Teradata division provides excellent support. Countries in other areas, such as South America, indicate that presence and support are not as strong. Enterprises in these regions should consult Gartner before determining any shortlists. The Teradata division s products enjoy high reliability, with few issues raised by customers. Pricing, however, is mysterious and differs significantly depending on the sales teams and regions involved. The Teradata division does not provide a price list and likes to bundle hardware, software and services into a solution-priced offering. Enterprises should proceed with caution, perform due diligence and consult with Gartner to better understand the pitfalls, challenges or risks associated with the negotiation process (see Reduce Data Warehouse Costs With Better Negotiating ). Related Research and Ratings: IBM s Regatta Still Lags NCR Teradata in Data Warehousing Company Profile: NCR Building Solutions, Driving Services 27 January

5 Rating Definition: Strong Caution Strong Negative Solid provider of strategic products, services or solutions. Customers: Continue investments. Potential customers: Consider this vendor a strong strategic choice. Demonstrates strength in specific areas, but is largely opportunistic. Customers: Continue incremental investments. Potential customers: Put this vendor on a short list of tactical alternatives. Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured. Customers: Watch for a change in status and consider scenarios for short- and long-term impact. Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor. Faces challenges in one or more areas. Customers: Understand challenges in relevant areas and begin to assemble contingency exit plans as needed. Potential customers: Note the vendor s challenges as part of due diligence. Difficulty responding to problems in multiple areas. Customers: Exit immediately. Potential customers: Consider this vendor only if there are no alternatives. Acronym Key BI COO DBMS MPP SEM SMP Business intelligence Chief operating officer Database management system Massively parallel processing Server Evaluation Model Symmetric multiprocessing Core Topic Data Warehousing and Data Movement Markets, Technologies and Techniques ~ Business Intelligence and Data Warehousing 27 January

6 NCR Headquarters: Dayton, Ohio Web Location: 27 January