Wednesday, November 02, 2005

Awash with appliances

It is interesting how success attracts competition. Teradata have built up a billion dollar business from selling high end hardware and proprietary database technology to handle extremely large transaction-based data warehouses, such as those occurring in retail, Telcos and retail banking. Netezza has done an excellent job of raising its profile as a start-up in clear competition to Teradata, while now there are even newer startups like DATAllegro, offering a data warehouse appliance in competition to both (with a new offering out today) and Calpont. This is a healthy sign in an industry that is undeniably very large (business intelligence is variously estimated to be USD 25-35 billion in size, though the vast bulk of this is consulting services) yet has remained extremely fragmented in terms of vendors. Software vendors, other than the DBMS vendors, are few and far between in the data warehouse space, since the industry is mostly locked into a custom build mentality, with Kimball v Inmon design religion wars being the order of the day. SAP have, after some false starts, brought their BW product to a wide (SAP) audience but, other than Kalido, there are few data warehouse software companies. Of course there are ETL vendors such as Informatica and Ascential (now bought by IBM) and the reporting tools of Business Objects, Cognos and Hyperion, but the data warehouse itself has lacked much in the way of software automation

Teradata have succeeded despite an apparently major obstacle: the highly proprietary nature of their offering. Large companies CIO departments generally loathe proprietary infrastructure, especially when they have just spent years trying to (just about) standardize on a particular database or hardware platform, so it is an uphill struggle for the appliance vendors. Red Brick briefly did well selling a database tuned for data warehouse applications, but eventually it could not shake off the idea that Oracle or IBM could just add a "star join" feature to their products and make it redundant. Hence it is to Teradata's credit that they have maintained clear blue water between themselves and Oracle/IBM/Microsoft at the high end of large data warehouses. This in turn has created a market large enough to attract new entrants such as Netezza and DATAllegro, who can offer an easy to understand "like Teradata, but cheaper" message to customers who have giant transaction datasets to analyze but balk at Teradata's high price tag and opaque pricing when it comes to maintenance payments. It will be very interesting to see whether IT departments will pass a blind eye over the proprietary nature of these offerings (after all, this objection was essentially what killed off object databases) in the way they have with Teradata, though rumor has it that Netezza at least is making good early progress.

Of course only a small subset of data warehouses have the kind of volumes and processing requirements that require such technology. A TDWI survey showed Teradata at just 3% market penetration of deployed data warehouse databases, but of course this is a very attractive 3%, with typical deals in the million dollar range. Teradata has managed to overcome the proprietary stigma that bedeviled object databases in the 1990s and carved out an attractive high end niche that Oracle etc seem unable to really compete with. Its challenge now is growth, with competitors like Netezza nibbling into its margins and general purpose databases that get more powerful with each release. However the boom in raw data e.g. RFID seems likely to mean there is plenty of demand yet for raw power.


Anonymous Anonymous said...

While smaller than the other two vendors you mentioned, there is another data warehouse appliance vendor out there that is probably worth commenting on: Calpont ( They are based in Texas and take a bit of a different approach. However, like DATAllegro, they list no customers on their web site, so it is clearly still early days for them.

6:10 AM  

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