Rivals Cloudera, Hortonworks Merge as Battle With IoT Giant…


Cloudera Inc. and Hortonworks Inc. are joining forces to better compete with giant enterprise information-technology providers in the fast-growing market for Internet-of-Things, artificial intelligence and other digital business tools, executives from both firms say.

Just don’t mention Hadoop – the open-source software framework that once underpinned the two Silicon Valley companies’ big-data rivalry.

Cloudera, which last week announced plans to merge with Hortonworks, was founded a decade ago by a group of engineers from Alphabet Inc.’s Google, Facebook Inc., Oracle Corp. and Yahoo Inc., where the technology behind Hadoop was developed. Hortonworks launched about two years later. Both are publicly traded.

News of the all-stock deal sent Cloudera shares up more than 16% to $19.90 in after-hours trading on Wednesday, Oct. 3, when the deal was announced. Hortonworks rose by a similar margin, to $25.40. Share prices have since declined, with Cloudera trading Thursday morning at $15.22 and Hortonworks at $19.73

Hadoop was designed to work with data distributed across clusters of hardware, rather than a traditional database, allowing for a more elastic capacity to match user needs, while enabling them to handle a large volume and wider variety of data, among other benefits.

Based on a programming language used in search, Hadoop become a critical tool for businesses trying to make sense of massive amounts of data pouring into their networks. Yet some critics said it lacked key enterprise-grade features, not least security. 

Businesses today have far more options for analyzing large amounts of data, in addition to discrete machine- and deep-learning services for AI projects, or streaming and data flow systems that analyze data as it’s funneled into cloud storage.

“Hadoop has evolved so drastically that we don’t even mention it anymore,” said Cloudera Chief Executive Tom Reilly: “Today we ship 26 other open-source projects,” he added.

Under the terms of last week’s deal, Mr. Reilly will serve as CEO of the combined companies, while Scott Davidson, Hortonworks chief operating officer, will serve as COO.

Mr. Reilly said in recent years both firms have shifted away from a focus on data management services to offering business insights, eyeing the broader enterprise IT market.

That has seen them alternately competing against, and partnering with, the likes of Microsoft Corp., Amazon.com Inc., Alphabet Inc.’s Google and International Business Machines Corp., he said.    

The merger, which is expected to close during the first quarter of 2019, is estimated to give the combined firms an equity value of more than $5 billion. By 2020, they expect to be approaching 3,000 customers and over $1 billion in annual revenue.  

CIO Journal this week spoke with Mr. Reilly about the decision to merge with a former arch rival, as well as the new venture’s place in the enterprise IT market. Edited excerpts below:

For the past eight years, Cloudera has been battling with Hortonworks in the big-data software market. Why join forces now?

We’ve been beating each other up by competing against one another, while a new class of competitors was emerging. And we were not taking them head on, from Amazon to Google and others. This merger gives us scale to compete against the big guys.

What everyone is racing for is IoT, machine learning and AI. We want to win that market.

Is that goal a shift in strategy from a few years ago?

It is. We’ve publicly talked about how this industry is now in ‘Phase Three’ of its maturity. ‘Phase One’ was when our two companies started and were proving out a new technology and a new architecture. We had to prove to the world that it would work. ‘Phase Two’ was making it enterprise ready, meaning secure, well-governed and well-managed. ‘Phase Three’ revolves around AI and machine learning. Can you get insights in a competitive way out of data.

We’ve been competing against one another as the industry’s been maturing. Now, IoT in industrial use cases, whether its autonomous vehicles, pay-as-you-drive insurance or heavy machinery, is just taking off. We’ve been talking about it for eight years, but it’s just taking off.   

What can you offer that your larger tech competitors cannot?

An intense solution from the edge all the way to AI, and, by the way, we’ll operate it on the main public clouds — Amazon, Google, Microsoft and IBM. We’re partners with all these players, as well as competitors, but none of them partner with one another.

Not only do we partner with each of them, but our software works identically across all of these platforms. That gives users the ultimate flexibility.

Where you’re doing AI work, say, in Amazon or Microsoft or your own data center, we don’t care.  

Any surprises after the deal came together?  

It turned out roughly 70% of our code base was already shared. It was a common code base. It was open source and our engineers all worked on it. Really, once we got past the competitive dynamic, which took us a while, this merger became a no brainer.

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