UPDATED 12:44 EDT / MAY 09 2011

NEWS

Why EMC is Making its Hadoop Move

In our view, EMC is making its move in the commercial Hadoop market at this time for four primary reasons:

#1. To reestablish its strategic position on Wall Street as a growth company by targeting hot markets and introducing new revenue streams in the form of commercial Hadoop distributions and services;
#2.To leverage its legacy storage prowess, channels and recently acquired Big Data acquisitions (e.g. Isilon and Greenplum) to ride the growing and potentially lucrative Hadoop wave;
#3.To maximize its investments in Greenplum and Isilon by packaging the software and storage into a convenient appliance bundle (not unlike Oracle has done with Exadata);
#4. To prevent up-start Cloudera from establishing itself as the de facto Hadoop distribution.

By way of background, enterprises are eager to make use of the petabytes of customer and other data being generated within different parts of the extended enterprise and on the Web each day. Thanks to high profile users like Facebook and Yahoo!, open source Hadoop has quickly become the leading method for processing and analyzing petabyte-level, distributed data. Its use has spread from purely web-based companies to financial firms, pharmaceuticals, government, medical research and many other segments. In short, Hadoop is hot and only getting hotter.

(Read full Wikibon analysis of EMC’s entry into the commercial Hadoop market here.)

Cloudera, the Hadoop framework leader, is to Hadoop what RedHat is to Linux. Redhat has a nearly $10B market cap and EMC is looking for new sources of valuation growth. Specifically, in recent years, EMC’s valuation growth has been almost exclusively driven by it’s roughly 80% ownership of VMware. In 2010, the value of EMC’s non-VMware holdings actually contracted (while the S&P 500 rose 12.78% during the same period.) It is important for EMC to illustrate to Wall Street that the storage vendor has a new strategy for growth outside of its core business.

EMC recognizes this and appears to have settled on a strategy —
evident by its recent acquisitions, marketing campaigns and today’s announcement — to position itself squarely at the intersection of two important and growing technology movements: cloud computing and Big Data.

As part of that strategy, EMC is following a path well worn by Oracle and others. That is, bundling its analytic software with server and storage technology in the form of preconfigured analytic appliances. Data warehouse appliances are significantly faster to deploy and easier to manage than roll-your-own data warehouses, and have the added benefit of a single SKU. The appliance model has gained significant adoption in the data warehouse market in recent years, to the point that Wikibon believes the appliance model will soon become the most popular data warehouse deployment approach. EMC’s Greenplum appliances will benefit from this trend; however it’s unclear at this point if Hadoop users will adopt this method of deployment.

Meanwhile, Cloudera, a Silicon Valley start-up that includes Hadoop creator Doug Cutting and former Yahoo engineering VP Amr Awadallah, has had the commercial Hadoop marketplace virtually to itself for the last two years. It has used that time wisely, contributing heavily to the open source Apache Hadoop project, developing its own well-regarded commercial Hadoop distribution, cultivating a stable of over 100 paying clients, and generally building a reputation as the go-to commercial Hadoop vendor. The buzz surrounding Cloudera is nearly deafening, and EMC hopes to prevent the upstart with significant “cool-factor” from running away with the market.

Indeed, while EMC formed a very loose partnership with Cloudera last summer, the storage vendor has made the strategic decision to go it alone rather than partner closely with Cloudera, Yahoo or another Hadoop framework developer. With the Greenplum HD release, EMC has, in essence, shown its Hadoop hand and gone all-in.

The competitive positioning with Cloudera is meaningful in our view and the main reason EMC is pre-announcing this initiative. By doing so, our belief is EMC hopes to freeze the market for Cloudera services and set the marketing groundwork to de-position Cloudera as less robust.

On balance, we believe EMC is in the midst of a transformation. The company is eager to exploit interest in Hadoop and Big Data to kick-start a new period of growth. Wikibon believes this strategy is a sound one, but it will take time to achieve and lots of trial and error.

Jeff Kelly is a Principal Research Contributor at Wikibon.org. He focuses on trends in business analytics and big data technologies. Reach Jeff by email at jeff.kelly@wikibon.org or Twitter at @jeffreyfkelly.


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