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SMB Open Source Authors: Jason Bloomberg, Jayaram Krishnaswamy, Lacey Thoms, Pat Romanski, Adrian Bridgwater

Related Topics: Cloud Computing, Virtualization Magazine, Cloud Expo on Ulitzer, Open Source for Small Business, Big Data on Ulitzer

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Hortonworks Big Data IPO By @TheEbizWizard | @CloudExpo [ #BigData]

Hortonworks and its primary competitors Cloudera and MapR are at the center of the skirmish

Hortonworks Big Data IPO: Where are the Margins?

Enterprises run on data, so it’s no surprise that big data – and in particular, big data platform Hadoop – are today’s enterprise software battleground. This week’s news that Hadoop vendor Hortonworks filed their S1 with the SEC, indicating their intent to go public, ratchets this battle into high gear.

Yet, while Hortonworks and its primary competitors Cloudera and MapR are at the center of the skirmish, this battle is over more than which platform is better. Hadoop is open source, which means it’s free to use, and furthermore, anybody is welcome to contribute to its code base. It’s up to each vendor to decide how to make money on top of Hadoop – and each of the three Hadoop leaders has chosen a different model.

The spoils of this battle, therefore, do not go only to the vendor with the best offering. This war is also over how to build a successful enterprise open source software company.

Battle of the Open Source Business Models

elephantsHortonworks’ S1 filing spells out their business model. “We generally make the Hortonworks Data Platform available free of charge and derive the predominant amount of our revenue from customer fees from support subscription offerings and professional services.”

Selling support and services is perhaps the most common open source business model, but it’s a difficult way to make money, as margins depend upon how much they can mark up what they pay for their employees’ time – and many users of their platform may not pay them anything. For a vendor who is going public having never turned a profit, therefore, people are predictably concerned that Hortonworks will never be able to achieve the growth necessary to warrant investment.

Competitor Cloudera is particularly blunt about Hortonworks’ chances. “They don’t have a defensible business model,” says Amr Awadallah, CTO and founder of Cloudera. “They’re not doing okay now. And while they might be gaining customers and revenues, to create a healthy business you have to always contrast the revenue to how much is the cost of getting that revenue.”

Cloudera also makes some of its revenue from services, but offers proprietary, value-added software on top of the open source Hadoop platform as well. “We have proprietary software that’s only unique to us, Cloudera Manager and Cloudera Navigator,” Awadallah explains. “Hortonworks doesn’t have anything like that software, which is a big disadvantage.”

In essence, Cloudera’s model is the upsell model: give away the basic platform for free, but charge for enterprise-class add-ons. The upsell model is almost as popular as the support and services model, but relies upon customers seeing the value in the add-on products. As the free platform matures, therefore, Cloudera will have to work hard to maintain a clear differentiator.

MapR has targeted this weakness in Cloudera’s strategy by building value-added capabilities on top of Hadoop that are essential for solving an important set of Hadoop-related challenges. In fact, “MapR delivers high value technology to customers that include must-have features and advantages,” according to John Schroeder, CEO and cofounder, MapR Technologies.

Read the entire article at http://www.forbes.com/sites/jasonbloomberg/2014/11/12/hortonworks-big-data-ipo-where-are-the-margins/.

Intellyx advises companies on their digital transformation initiatives and helps vendors communicate their agility stories. As of the time of writing, MapR is an Intellyx customer, but provided no input to this article other than John Schroeder’s quotes. All other organizations mentioned are not Intellyx customers. Image credit: Nils Rinaldi.

Read the original blog entry...

More Stories By Jason Bloomberg

Jason Bloomberg is a leading IT industry analyst, Forbes contributor, keynote speaker, and globally recognized expert on multiple disruptive trends in enterprise technology and digital transformation. He is ranked #5 on Onalytica’s list of top Digital Transformation influencers for 2018 and #15 on Jax’s list of top DevOps influencers for 2017, the only person to appear on both lists.

As founder and president of Agile Digital Transformation analyst firm Intellyx, he advises, writes, and speaks on a diverse set of topics, including digital transformation, artificial intelligence, cloud computing, devops, big data/analytics, cybersecurity, blockchain/bitcoin/cryptocurrency, no-code/low-code platforms and tools, organizational transformation, internet of things, enterprise architecture, SD-WAN/SDX, mainframes, hybrid IT, and legacy transformation, among other topics.

Mr. Bloomberg’s articles in Forbes are often viewed by more than 100,000 readers. During his career, he has published over 1,200 articles (over 200 for Forbes alone), spoken at over 400 conferences and webinars, and he has been quoted in the press and blogosphere over 2,000 times.

Mr. Bloomberg is the author or coauthor of four books: The Agile Architecture Revolution (Wiley, 2013), Service Orient or Be Doomed! How Service Orientation Will Change Your Business (Wiley, 2006), XML and Web Services Unleashed (SAMS Publishing, 2002), and Web Page Scripting Techniques (Hayden Books, 1996). His next book, Agile Digital Transformation, is due within the next year.

At SOA-focused industry analyst firm ZapThink from 2001 to 2013, Mr. Bloomberg created and delivered the Licensed ZapThink Architect (LZA) Service-Oriented Architecture (SOA) course and associated credential, certifying over 1,700 professionals worldwide. He is one of the original Managing Partners of ZapThink LLC, which was acquired by Dovel Technologies in 2011.

Prior to ZapThink, Mr. Bloomberg built a diverse background in eBusiness technology management and industry analysis, including serving as a senior analyst in IDC’s eBusiness Advisory group, as well as holding eBusiness management positions at USWeb/CKS (later marchFIRST) and WaveBend Solutions (now Hitachi Consulting), and several software and web development positions.