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Informatica (NASD:INFA) has acquired identity resolution technology provider Identity Systems from Nokia for $85 million.

Identity Systems is among the leaders in the identity resolution space, competing against IBM, which acquired Language Analysis Systems (LAS) and System Research & Development (SRD), and Austin-based Infoglide Software.

Identity resolution is a critical function for applications such as fraud detection, anti-money laundering and various intelligence apps used by the three-letter-acronym agencies. They have two primary functions: improving match rate through the use of name variations and reducing false positives through a series of algorithms which score the likelihood of a match. Name variations include simple nicknames (Charles, Chuck & Chas), spelling variations and cultural variations, such as the use of al Haj).  Though I've not worked with Identity Systems in the past, I've had experience with both LAS (pre-IBM acquisition) and Infoglide Software. Each has impressive capabilities, though all of these applications seem to be stronger at the name variations than at reducing the false positives.

The acquisition makes a lot of sense. There was never a clear fit with Nokia, but there are some obvious synergies with Informatica. Informatica already offers data cleansing capabilities and identity resolution is a natural extension of those. For Identity Systems, this opens up a market, not only through Informatica's direct sales force, but also through their extensive channel distribution network of VARs and systems integrators. While the IBM acquisition of LAS if anything has limited its market exposure, as it's only available as part of an IBM services offering, this should help make identity resolution mainstream.

The acquisition should also be good news for Infoglide Software. While it may be counterintuitive that strengthening a competitor will be a boon for them, in an emerging technology as this, the power of a strong marketing push should help all in this space. At the same time, it might make them an attractive acquisition candidate for other companies in the data integration space. Bloor Research analyst Philip Howard agrees, suggesting Trillium, (SAS) Dataflux and SAP as potential buyers.

Informatica has shown in the past that it is able to integrate acquisitions quickly, from both a technological and marketing standpoint. Identity Systems is already an embedded technology with a mature SDK, so integration should be fairly straightforward. I think this will be a mainstream part of their offering fairly quickly, whereas LAS and SRD are not something that the typical IBM sales rep can talk to.