Hadoop is booming -- its vendors, not so much

Hortonworks had an improved quarter than typically acknowledged, however will the open supply company sustain itself over the long haul?

 Forrester analysis says enterprise adoption of Hadoop is turning into "mandatory." however Hortonworks’ initial earnings unharness as a public company suggests work lies ahead. once missing earnings by twenty cents and registering lower revenue growth than analysts expected, Hortonworks features a ways that to travel before it will proclaim itself a giant information darling.

Or will it?

While several analysts looked askant at Hortonworks’ numbers, others -- as well as Wells city analyst Jason Maynard -- see principally silver linings. the truth of the Hortonworks unharness is each positive and negative, associated it's miles additional indicative of the problem of building an open supply business than it's of any specific Hortonworks failings.

First, the numbers

For higher and for worse, Hadoop has long been the tyke for large information. therefore once Gartner finds that seventy three % of enterprises have near-term plans to take a position in huge information (or already have), the truth is that several of those corporations mean “Hadoop” after they say “big information.”

Hortonworks, one among the highest 2 Hadoop vendors, stands to learn from this market shift. Seemingly, it already is.

While several (including myself) referred to as out Hortonworks for missing earnings, the truth, per Maynard, is extremely completely different. job out billings growth of 148 % year over year, and revenue (non-GAAP) nearly doubling, Maynard writes in a very analysis note:

 we tend to still believe that demand for large information technologies can expand, and Hadoop can become thought. we predict that Hortonworks is well positioned to be a frontrunner during this burgeoning market. The outperformance within the quarter reinforces our read that Hortonworks features a robust competitive position supported by its open supply business model, sizable amount of Hadoop committers, and robust partner network.

The problem with measure Hortonworks’ performance is that it’s not a software system business, although analysts need to treat it per se.

One of the strongest indicators of Hortonworks’ business isn't solely new client growth, that was spectacular for the quarter (99 new subscription customers), however additionally the speed at that existing customers reinvest within the relationship. By this metric, Hortonworks is doing very well, as customers upped their monetary commitments to Hortonworks by one hundred forty four % on the average over the last year.

That’s the great news.

The dangerous news, however, is that the corporate is losing more cash while it makes more cash. the opposite dangerous news is that Cloudera, the highest Hadoop vender, is doing doubly the revenue that Hortonworks is. Also, Cloudera insists its revenue is GAAP-approved, rather rather the non-GAAP, that is however Hortonworks prefers to report its earnings.

While some Hortonworks initiatives -- the Open information Platform involves mind, justifiedly excoriated by Gartner associatealysts Merv Adrian and Nick Heudecker -- area unit an exercise in self-importance and unusefulness, others like the info Governance Initiative show rather more promise and leadership.

As gamete analyst Tony Baer writes of DGI, Hortonworks has taken on the “thankless task” of corralling trade participants to drive information governance activities that area unit “likely to spawn future Apache comes that, if productive, can draw essential mass participation for technologies that may be optimized for the distinct surroundings of Hadoop.”


It’s associate example of Hortonworks at its open supply best and hopefully a signal of fine things to return.

It doesn't, however, guarantee ultimate wealth.

Code is currency

In general, she United Nations agency contributes most controls and influences most in open supply. rather than belongings, contributions area unit the currency that typically earns the most important returns, as Red Hat has shown in UNIX operating system, OpenStack, and alternative communities to that it contributes. As Hortonworks corporate executive Herb Cunitz declares, “Unless you've got influence [with a project through contributions], it is not a monetizable business.”

It may not be a “monetizable business,” anyway.

There’s a reason that solely Red Hat has managed to earn $1 billion a year in accumulation revenue: It’s onerous to sell “free.” Or as former Kaplan CTO Jon Williams once outlined:

    The [happier] he's together with his industrial open supply software system, the less doubtless he are to acquire it. Why? as a result of his developers can acquire the experience over time to support themselves and since the merchandise can mature to the purpose that support are less necessary.

Hortonworks touts it as a plus that it doesn’t sully its services with proprietary software; to be clear, this resonates with some consumers. however once fifteen years of mercantilism open supply subscriptions at a spread of corporations in numerous areas of the software system stack (operating system, database, applications), it’s terribly clear to American state that the service-and-support model won’t sustain future Red Hats.

Former XenSource corporate executive Peter Levine persuasively argues why there'll ne'er be another Red Hat, light on the manner Red Hat’s relative underperformance vis-a-vis additional proprietarily inclined peers. As he concludes, “the business model merely doesn't modify adequate funding of in progress investments.”

Coming back to the code-as-currency argument, this implies that Hortonworks, prolific because it has been with venture capitalists’ cash in refueling spectacular investments in YARN and alternative Hadoop staples, won’t be ready to sustain these investments on its own billings growth, hefty as that has been.

Right now, Cloudera gets paid quite Hortonworks for the code Hortonworks contributes. That’s not a semipermanent winning strategy.

Give it time?

Of course, Hortonworks might defy open supply gravity and become future billion-dollar open supply company (in terms of accumulation revenue, not valuation). to urge there, it’ll ought to stop dissembling it doesn’t need to play by an equivalent economic rules as alternative public corporations.

While some analysts argue, with the corporate, “The Hortonworks model is complicated at the instant and that i don't think it ought to be evaluated supported the conventional expectations of public corporations,” the truth is that Wall Street has very little patience for such deviations from the norm. Red Hat spent years attempting to urge earlier than its revenue and eventually has some leeway to amass corporations that aren’t increasing.

Red Hat, in short, will finally afford to take a position strategically, not just tactically.

Hortonworks could be a long, ways from that time. it should get there, however it's chosen a model that provides it promoting bragging rights however even stronger monetary headwinds. Wikibon analyst Jeff Kelly, speaking of another corner of huge information, NoSQL databases, offers insight that applies equally to Hortonworks:

 corporations that with success leverage NoSQL technologies area unit planning to produce huge worth for themselves, their investors and their customers. however there’s no guarantee that this worth creation can touch freelance, open supply NoSQL vendors. It might, however create no mistake, building a productive open supply NoSQL company goes to be an extended, hard slog.

The same is true of Hadoop vendors or, additional accurately expressed, Hadoop vendors that decide to divulge all their software system reciprocally for a few tiny share of users turning into consumers. It will happen, however the chances aren't in Hortonworks' favor. the corporate had a decent quarter, however it'll want more to require its place next to Red Hat.

More Info :- InfoWorld