BANGALORE, INDIA: On Monday, French open source (OS) data integration vendor Talend announced the closure of $12 million of Series C funding from investors AGF Private Equity and new stakeholder Balderton Capital. The amount raised is significant enough but is all the more remarkable given the current economic climate and tightening restrictions within the credit market. For Talend it signals a vote of confidence for the company and its OS products. The new investment together with the company’s impressive 2008 growth record provide strong indicators that data integration is an area ripe for OS development and investment.

All evidence points to increasing market acceptance for Talend’s products
Talend has had a short but successful history so far. The company released its first product, a code-generating data integration product called Talend Open Studio (TOS), in late 2006. Its approach to market is a very traditional one for a company that specialises in open source. TOS comes in two editions: a free-to-download community edition and Talend Integration Studio (TIS). TIS is a fee-based subscription service that extends the community edition with technical support, IP protection and additional enterprise-scale capabilities such as automatic deployment, a monitoring console, grid and parallel-processing capabilities.

The company has been successfully building market momentum around its offering and claims to have had over 3.3 million downloads. Although downloads are good, converting a download to a fee-paying customer is even better. While Talend had a slow start, only signing up 50 customers from the launch of TOS in October 2006 to the end of 2007, 2008 saw a significant improvement, with over 300 new customers including Virgin Mobile and SCNF. Of the revenues generated, around 55 percent come from subscription-based fees, with the rest believed to come from services.

This all points to increasing market confidence in Talend and its products, and explains the fresh round of funding it has received. The fact that Talend has not only managed to raise money but also to raise three times as much as in its first two VC funding rounds ($4 million each) seems even more remarkable given the harsh economic backdrop and the slowdown in IT spending witnessed over the last three to six months.

Talend must spend wisely
The challenge for Talend is to demonstrate that it can spend its newly acquired funds wisely. In the year ahead it will be increasingly important for it to continue to validate its creditability as a data integration provider in its target mid and large enterprise markets. Providing more features around reliability, performance and scalability across its core product line will undoubtedly help it to build a reputation for robust, quality products, an increasingly important concern for customers in today’s risk-averse environment. The company must continue to maintain the availability and breadth of its support capabilities as it expands into new country markets.

The company’s strategy of deepening product functionality, extending enterprise capabilities and increasing support seems very sensible. Although it has diversified into other areas such as data profiling, data quality and on-demand data integration and will continue to do so, we expect to see a sharper focus on its core market, which still provides the majority of customers and revenues, in the near future.

Talend has an aggressive expansion strategy and plans to extend operations in existing markets, France, the US, Germany and the UK, where revenues are split roughly 50/50 between Europe and the US, as well expanding into new parts of Europe, Asia-Pacific and South America. It aims to increase revenues by two to three times 2008 levels and extend market reach by increasing the number of systems integrators (and to a lesser extent ISVs) it works with.

A tough competitive landscape lies ahead
This all comes at a time when the company faces growing competition from other OS software providers such as Pentaho, Kinetic Networks, Apatar, SnapLogic and Enhydra Octopus, all of whom are gaining mindshare among developers. It also faces the stalwarts of the data integration market, IBM, Informatica and SAP Business Objects, which continue to deepen and expand data integration coverage.

Given this competitive landscape, the investment from Balderton Capital becomes all the more crucial, especially since it means that Bernard Liautaud, former founder, chairman and ex-CEO of Business Objects, now has a seat on the Talend board. The presence of the CEO of France’s most successful software success story is likely to bring kudos and connections, as well as valuable experience and expertise, something that Talend is no doubt keen to exploit.

(The author is senior analyst at Ovum)