Informatica CEO unbowed by market tumult: 'This is not our first rodeo at a tough economic time'

Informatica CEO Amit Walia says multiyear turnaround is nearly complete

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In growth-obsessed high-technology markets, a 1% increase in year-over-year revenues is usually not thought of as something to cheer about, but Informatica Inc. CEO Amit Walia says he couldn’t be happier with the results the company announced last week.

That’s because the 1.1% revenue increase occurred in the context of a multiyear turnaround effort that will see the company ultimately discard its licensed software business in favor of a cloud subscription model.

Cloud subscription annual recurring revenue jumped 37%, to $513 million, in the most recent quarter and now makes up nearly half of the integration firm’s total revenues.

“I am totally satisfied with the quarter,” Walia said in an interview with SiliconANGLE. “The number that matters for us is cloud ARR because that’s the engine that’s fueling our growth.”

Return to growth

Despite the uncertain economy, Informatica is pretty positive about its short-term outlook. The company raised its full-year 2023 operating income guidance by between 5% and 10% as well as its estimated after-tax unlevered free cash flow, which is an indicator of business health. It’s also guiding to 5% revenue growth for the year based on expectations of a busy second half.

Growth in cloud subscription revenue will more than compensate for the decline in on-premises licensing and restore the company to a growth trajectory, Walia said. “This is the year that gets the most impact of the cloud transformation,” he said.

Rather than trying to navigate a tricky transition from licenses to subscriptions, Informatica took the unusual step early this year of announcing that it would abandon the traditional model completely and would henceforth only sell its cloud service.

The logic of that decision was grounded in more than just financial reasoning, Walia said. ”The simplification of the business has benefits in the focus it brings to our sellers,” he said. “They are only selling cloud.” Abandoning new on-premises sales will also reduce support costs over time and shorten the painful transition that some companies have endured for years.

If he had to do it all over again, he said, “I would have done it sooner.”

AI opportunity

Like nearly everyone, Informatica has also thrown its hat into the generative artificial intelligence ring with recently announced enhancements to its Claire intelligent metadata automation engine that add generative pre-trained transformer technology.

AI may be the hottest thing in tech right now, but it’s nothing new to Informatica, Walia said. “We’ve been doing this for years,” he said. “We’ve been putting Claire on top of all the machine learning algorithms the world has seen. What Facebook does with photo tagging, we do for data tagging. What Amazon does with product recommendations, we do for data recommendations.”

The CEO sees the anticipated large-scale adoption of AI by enterprises as having plenty of upside for his company. “There’s no value in AI without data,” he said. “It’s a dumb model until you put some data in it.”

Even before they begin to build models, enterprises are focusing on reliability and ethical issues such as the potential for bias. Those are governance problems, Walia said. “Large customers who are going to be the biggest users of gen AI and will want complex, highly governed workloads to be run through us,” he said.

That demand should come after the current transition has been completed. “I couldn’t be more pleased with our execution,” Walia said. “To go through a business model transformation while growing the top line and the bottom line is a rarity.”

Photo: Informatica

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