So who’s your favorite Spice Girl? As the marketing machine for the five ‘grrls’ steps into overdrive planetwide, you’ll soon have to have an answer to this question – lest you fade into complete social irrelevance and completely miss the Zeitgeist. In the IT world, the equivalent last year of the Brit cuties’ ubiquity was the Data Warehouse, the database application that would tell you What Your Sales Really Meant. Nary a week went by without a data warehouse conference, announcement, alliance, product or project being reported. So what went wrong at data warehouse maven Red Brick Systems Inc, of Los Gatos, California? Its first quarter figures, out Tuesday (CI No 3,142), stank. It made an unexpected operating loss of $6.7m, down from an operating profit of $0.2m in first-quarter 1996, with a total net loss for the quarter of $6.4m versus a net income of $0.4m for the same period last year.
By Gary Flood
Revenue was only $6.52m, when some analysts had been expecting more like twice that figure, hardly different from 1996’s Q1 of $6.51m. Software license revenues were $3.6m, or only 55.9% of total revenues, a decline of 31%, and maintenance and service revenues were $2.9m, or 44.1% of total revenues. The company publishes a customized version of a standard relational database on Unix and NT that is specialized for the kind of intensive decision support needs of users in a data warehouse or data mart. But some Cassandras, predicting disaster, worry that users’ natural inertia will mean that at some point they will stop buying Red Brick software to do this job and opt for the standard merchant relational database suppliers like Sybase, Oracle and Informix’s products, which are being variously augmented, extended or supplemented for decision support. Thus, has red Brick’s brief spell in the sun already ended? Not, unsurprisingly enough, according to Red Brick management, which told Morgan Stanley that deal slippage and salesforce productivity issues were the key reasons for the shortfall. The core 10 or so sales heavy hitters (out of total of 40 sales representatives) didn’t deliver any big wins and so the average deal size fell from the $200,000 mark it had been hitting recently to $127,000. Around 30 conversations and prospects failed to close by the quarter’s end, with Red Brick claiming 80% simply not closing due to customers wishing to delay purchase decisions, not opt for the Enemy (Oracle). Plus, there are some experience and training needs that have to be addressed to get the sales force more effective: expect some quite rapid movement on teleprospecting and post-sales support, says the firm. Red Brick was also shipping a new product, release 5.0 of the Red Brick Warehouse since December. A lack of third party tool support and sales force familiarity with new features in the new product probably lowered sales force effectiveness in the quarter, Morgan Stanley was told. The message is that once the board saw that the checks were not coming in, they decided to take their lumps on a number of issues that needed to be addressed. Management identified $1.75m in one time costs in the quarter which add to the overall red number; these include the cost of converting from Sybase connectivity software to a third party product (unnamed so far), several one time marketing expenses, localization costs of Red Brick 5.0 for international markets, and the closure of its UK office. Sadly, the 10 direct sales people there just weren’t bringing home the bacon, and the company is switching at once to a distributor arrangement, as in Japan, which it claims is going gangbusters. If Red Brick has simply had an execution problem – and anyone can be let off for an ordure-covered quarter now and then – what does this say, if anything, about the underlying shape of the data warehouse movement? Red Brick claims that all that is going swimmingly… but that users are becoming somewhat more realistic about what it means to build and exploit a data warehouse. Morgan Stanley comments: Clearly, the data warehousing market hasn’t evolved as quickly or smoothly as Red Brick had hoped. The company’s pipeline as well as survey results suggest that interest among customers remains fairly healthy, but that the projects are long term in nature and the payback harder to quantify if not tied to a specific application or business need. A warehouse for the sake of a warehouse simply doesn’t fly in an era of tightening budgets. Moreover, the complexity of piecing together a solution that includes several point tools for loading, scrubbing, mapping, and enhancing data on its way to the data warehouse or corporate repository has proved daunting for some prospects. In other words, the data warehouse has already passed the stage of being the IT Spice Girls, and has now become more like Alanis Morrisette’s CD (everyone’s got a copy of one, now they’re working out if they still want to listen to it any more), or Hootie & The Blowfish product (everyone’s got a copy but now wishes they didn’t), or more happily the Beatles (more! more! for ever! for ever!). Let’s hope this Red Brick stumble really is just that for its own sake, and that its core market is still eager to get to the record stores.
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