A couple of neighboring Silicon Valley data platform makers who have been competing in the Hadoop data storage and analytics market are finally joining forces--to the surprise of not many people in the enterprise IT world. In fact, some industry observers were wondering why it took so long to happen.
Cloudera and Hortonworks, who both entered the business world about 10 years ago and immediately began going after the same customers, jointly announced Oct. 3 that they have agreed to become one and the same in an all-stock merger of equals worth a combined $5.2 billion.
The companies, the combination of which was unanimously approved by the boards of both companies, will use their synergies to create what they describe as “the world’s leading next-generation data platform provider, spanning multi-cloud, on-premises and the edge.”
Plenty of Competitors in This Market
The new company, to be called Cloudera Hortonworks for the time being, will focus on trying to become an industry standard for hybrid cloud data management, officials said. It will compete with older, more established vendors as AWS, SAS, Microsoft, MapR, Pivotal, Splunk, IBM, HPE and several others.
Cloudera has more than 1,600 employees and has offices in 24 countries. Hortonworks, a leading commercial vendor of the open source Apache Hadoop platform for storing, managing and analyzing big data, has about 750 employees.
Hortonworks, which spun out of Yahoo, went public in 2014, and Cloudera, larger than Hortonworks in terms of market capitalization and revenue, went public in 2017. Intel was a major Cloudera investor. AWS has a distribution of Hadoop software.
'Highly Complementary' Businesses
“Our businesses are highly complementary and strategic,” Cloudera CEO Tom Reilly, who will continue as chief executive of the combined company, said in a media advisory. “By bringing together Hortonworks’ investments in end-to-end data management with Cloudera’s investments in data warehousing and machine learning, we will deliver the industry’s first enterprise data cloud from the Edge to AI.”
Rob Bearden, CEO of Hortonworks, will join the new board of directors.
“Together, we are well-positioned to continue growing and competing in the streaming and IoT, data management, data warehousing, machine learning/AI and hybrid cloud markets,” Bearden said. “Importantly, we will be able to offer a broader set of offerings that will enable our customers to capitalize on the value of their data.”
The transaction, according to the company:
- promises to establish a next-generation data platform with increased scale and resources to deliver the industry’s first enterprise data cloud;
- accelerates market development and fuels innovation in IoT, streaming, data warehouse, hybrid cloud, machine learning/AI;
- expands market opportunity with complementary offerings, including Hortonworks DataFlow and Cloudera Data Science Workbench;
- is expected to generate significant financial benefits and improved margin profile:
- about $720 million in revenue
- about 2,500 customers
- more than 120 customers over $1 million ARR
- more than $125 million in annual cost synergies
- more than $150 million cash flow in CY20
- $500 million-plus in cash, with no debt
Following completion of the transaction, Reilly will serve as Chief Executive Officer; Hortonworks’ Chief Operating Officer, Scott Davidson, will serve as Chief Operating Officer; Hortonworks’ Chief Product Officer, Arun C. Murthy, will serve as Chief Product Officer; and Cloudera’s Chief Financial Officer, Jim Frankola, will serve as Chief Financial Officer, of the combined company. Current Cloudera board member Marty Cole will become chairman of the board of directors.
What Industry Experts Say
Rob Enderle of Enderle Group told eWEEK that in a “merger of equals, sometimes it’s hard to get the leadership lined up correctly. But they made a good choice in Tom Reilly, who’s a first-class exec and will do a great job.”
Confluent CEO and co-founder Jay Kreps, creator of open source project Apache Kafka, which provides a streaming platform for enterprises to maximize the value of data, offered his take on the deal to eWEEK.
"This is a smart, strategic move for both parties--and possibly even a necessary one, because Hadoop, the core of their offering, is no longer the hot new technology it once was,” Kreps said. “Cloudera and Hortonworks both provide slightly different flavors of essentially the same product, so they've been highly competitive, and this fierce competition has created a lot of price pressure. This has been good for customers but bad for Cloudera and Hortonworks as businesses trying to get to profitability.
“These days these two former mortal enemies face a much bigger threat from AWS and other cloud vendors that provide analytics and data management offerings as a service. I think this merger will help both companies command higher prices and refocus their development to modernize and compete in the new cloud-centric world."
Will Cloud Continue to Eat into Hadoop Market?
Doug Henschen, an VP and principal analyst at Constellation Research, told TechCrunch that he sees the cloud eating into Hadoop’s market in a big way.
“The move to the cloud is, in my view, sapping growth and revenue potential for these companies such that it won’t sustain three profitable players with strong, double-digit growth,” Henschen said. “Cloudera and Hortonworks have both moved to provide consistent hybrid- and multi-cloud capable services, but I see @AWS EMR and Spark services and similar Azure and Google services as capturing faster growth, and together, the lion’s share of the big data platforms market.”
Hyoun Park, CEO and Principal Analyst of Amalgam Insights, told eWEEK that "this merger of Hadoop Market leaders creates a company that is able to serve a variety of big data needs. Cloudera has established itself as an enterprise solution company, complete with the ability to support a variety of data and analytics use cases, provide extremely detailed security and governance capabilities, and to provide related services as needed to support large enterprise needs. In contrast, Hortonworks has traditionally been a technology solution that is well positioned to support experimental for technical big data use cases.
'Building Blocks for Big Data Deployments'
"Because it is an open technology with a focus on data management, it is a good solution for enterprises wanting building blocks for big data deployments. Despite the fact that both of these companies have leading Hadoop distributions, the paths that these companies have taken lead to an expectation that this combined company will allow Cloudera and Hortonworks business units to maintain their respective go to market approaches," Park said.
"This would allow Hortonworks to focus on core Hadoop and data management research, development, and maintenance while allowing Cloudera to continue building applications, services, and vertical use cases to support enterprise needs. This merger also allows the combined Cloudera/Hortonworks organization to take on the threats up from MongoDB, Amazon, and other Big Data Solutions that have also gained market traction. Although this was a necessary merger for these companies, this merger also allows each business to focus on what they do best and should end up being accretive as a whole."
Not everybody thinks the merger is a particularly good idea. Unsurprisingly, this includes competitor MapR.
“I can’t find any innovation benefits to customers in this merger. It is entirely about cost cutting and rationalization," MapR CEO John Schroeder told eWEEK. "This means their customers will suffer. MapR has been innovating and delivering a better data platform for years, and we continue to see Cloudera and Hortonworks customers move to MapR. We support a broader set of workloads from analytics to ML and AI, already provide hybrid and multi-cloud, and deliver containerization with Kubernetes.”
The companies expect to complete the transaction during the first quarter of calendar year 2019.