September 20, 2010
Some thoughts on the announcement that IBM is buying Netezza
As you’ve probably read, IBM and Netezza announced a deal today for IBM to buy Netezza. I didn’t sit in on the conference call, but I’ve seen the reporting. Naturally, I have some quick thoughts, which I’ve broken up into several sections below:
- Clearing some underbrush.
- Speculation about what IBM/Netezza will do.
- Speculation about alternative acquirers for Netezza.
- Speculation about what IBM/Netezza competitors will do.
First, the underbrush:
- Apparently there’s a deal breakup fee of around 3% of the purchase price. So yes, it’s perfectly conceivable that IBM get outbid.
- I’ve been getting some DB2 briefings, which is why I’ve blogged about some specialized technical points from same. But I can’t yet say why the theoretically great-sounding data warehousing option DB2 isn’t more successful in the market.
- I haven’t been briefed in any detail on IBM’s more general analytic appliance stack, but I get the impressions:
- To date it’s more packaging than technology.
- However, some performance optimizations have already happened (e.g. Cognos/DB2).
- Lots of analytic DBMS vendors told me about partnership discussions or actual partnership activity with IBM, perhaps via IBM’s service arm and/or in specific geographies. So IBM acquiring one of them was never inconceivable.
- And of course IBM has multiple DBMS products (most notably including the former Informix) in any case.
- The fact that Netezza currently happens to use IBM hardware for most copies of its TwinFin appliance is pretty irrelevant.
- In fact, the alternative, hardware from NEC, was probably a little better for the job. That’s irrelevant too.
- I hate it when my biggest clients get acquired, but it was pretty inevitable. Consolidation is happening.
- In particular, Netezza seemed to be somewhat more natural as a seller than a buyer, and didn’t happen to be super-aggressive on buying.
- By the way, the rumors of an almost-happened Oracle/Vertica deal seem pretty credible. I don’t know exactly when this was, but I’m guessing it was before Chris Lynch started as CEO.
- Netezza had multiple positionings, which would have been unsustainable or at least under-optimal over time without some kind of M&A activity, including:
- Simple, easy, low-TCO appliance. (This has been Netezza’s core positioning from the getgo.)
- Super-capable analytic engine.
- Enterprise data warehouse (EDW) for medium-sized enterprises. (E.g. — I think — Ross Stores.)
- Netezza was really focusing on $1/2 million and up sales, except for some OEM appliance deals.
- Netezza’s OEM appliance efforts never struck me as making a whole lot of sense, and the list of OEM partners didn’t amount to much, possibly excepting ones whose real motivation was to sell into the Netezza market.
- Netezza’s detailed attacks on Exadata highlight differences between Netezza and one-size-fits-all approaches, and hence serve to remind us that Netezza/DB2 integration wouldn’t be particularly natural.
Now, the speculation about the technical and/or business evolution of Netezza and IBM data warehousing, assuming IBM indeed winds up being the Netezza buyer:
- Netezza’s products are too successful and far along for IBM to shut down. This is not at all a Kickfire/Teradata situation.
- I hope and trust IBM will get Netezza onto a more frequent and consistent hardware revision cycle, starting in, say, the second half of 2011.
- Oopsie on the sometimes close, sometimes not-so-close Netezza/SAS relationship. It looks like Netezza/SPSS is the main focus going forward.
- More generally, Netezza’s high-end analytic positioning should be strengthened by IBM ownership. Netezza’s approach to advanced analytics is more “kitchen sink” than tightly-designed integration, so mixing together Netezza and IBM technology should improve both.
- However, the opposite kind of design considerations apply to Netezza’s core DBMS functions. When it comes to database processing, Netezza’s design is carefully integrated. Surely IBM can send over some engineers to teach Netezza some things it has figured out, but for most purposes DB2 and Netezza will remain as separate technologies, not integrated with each other.
- However, I expect IBM to totally revamp Netezza’s data movement and integration. IBM is a huge player in data movement and integration. Netezza has been struggling even with its modest goals in the area.
- And by the way, if DB2 and Netezza are to remain as separate product lines, it would surely be to IBM’s advantage to make it easy to allocate data among them as makes sense.
- As just one piece of that, IBM needs its own version of EMC/Greenplum Chorus.
- I don’t yet have an opinion as to whether IBM’s primary full-stack analytic appliance strategy will be based on DB2, Netezza, or both.
- However, pushing Netezza technology harder for OEM deals would make good sense.
- Both IBM and Netezza believe in solid-state memory for data warehousing. Expect the merged company to be aggressive in that area.
So who else could bid for Netezza?
- HP would be an obvious Netezza bidder, in that HP clearly needs to change its DBMS appliance strategy. However, HP is a little busy changing CEOs.
- Any big acquirer would add value to Netezza via the message “OK, the shoe has dropped, they’re not going away, they have staying power, etc.” But that’s all Dell would add, and I question whether that’s worth a bidding war. Besides, Dell wants to partner with as many vendors as possible.
- NEC wouldn’t add much more. Netezza is already doing great in East Asia anyway, from what they tell me, and Japanese enterprise computer companies have poor track records outside their home region.
So where does the analytic DBMS market go from here?
- Further consolidation is inevitable. The analytic DBMS market will not indefinitely support all of Oracle, IBM, Microsoft, SAP/Sybase, Teradata, Vertica, Aster Data, Infobright, and ParAccel. Yet each of those (I think even ParAccel) has a legitimate reason to continue business and product operations. And that’s even before mentioning Kognitio, SAND, Kx, and so on, plus of course HP.
- Over the next years, different styles of analytic DBMS engine could usefully merge.
- Row-based/columnar integration for disk-based systems is a pretty well-established trend now.
- SAP’s fuss about in-memory column store is getting me-too response from Oracle. Use your imagination about how that idea could be extended, and you see that all that stuff is still in its early days.
- And that’s before we even mention XML documents, graph, etc.
- Of all that, the part that would most naturally drive analytic DBMS vendor consolidation (as opposed to, say, tuck-in acquisitions from adjacent sectors) would be row-based/columnar integration. For example:
- Oracle is already known to have looked at buying Vertica. ParAccel could be cheaper. Infobright was once a highly strategic partner for MySQL.
- If HP can’t bring itself to admit it’s killing Neoview, a columnar acquisition could be a face-saver.
Categories: Analytic technologies, Cognos, Data integration and middleware, Data warehousing, EAI, EII, ETL, ELT, ETLT, IBM and DB2, Netezza, Oracle, SAS Institute, Solid-state memory, Vertica Systems
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20 Responses to “Some thoughts on the announcement that IBM is buying Netezza”
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[…] check out DBMS2 for some […]
Curt – Cogent, concise analysis! A good service to your clients and extended followers. Thank you.
Thanks for the kind words, Robert! And you’re welcome!
[…] on IBM Buying Netezza, Sending Clear Shot Across Oracle’s Bow, and there’s Curt Monash with Some thoughts on the announcement that IBM is buying Netezza. Curt also spells out that there’s a breakup fee of around 3%, meaning somebody else could […]
I agree that Netezza will likely have to remain separate from DB2 for the medium term, however I would expect IBM’s technical focus would be towards making NZ ‘code compatible’ with DB2 in the short term.
If IBM/DB2 has any traction in the DW market, then it’s in Finance and Manufacturing. A lift and shift NZ option would be a boon for customers struggling to scale DB2 warehouses. Not to mention a real headache for Teradata’s sales reps.
How do you rate the chances of IBM using Netezza as the platform for an “Exadata-killer” DW-OLTP hybrid rack system?
Joe,
The idea of using Netezza in a hybrid OLTP system is ludicrous UNLESS you assume two different databases (one each managed by DB2 and Netezza) with great data movement between them. I.e., it’s not just a matter of two-way integration between DB2 and Netezza — it’s more like three-way between DB2, Netezza, and DataStage.
Netezza /SAS would definitely give way to Netezza/SPSS – I wonder what this would do to Netezza efforts to use R on the appliance. It was the foremost BI vendor pushing R Analytics/Stats on the BI world
[…] territory for IBM, though Curt Monash, as always, offers some perceptive speculations in his post, including the likelihood that SPSS will displace Netezza’s SAS partnership. While I agree, […]
Hi Curt – Nice writeup you covered all the questions I had about this deal as well as possible “next moves”. It will be interesting to see what further consolidation takes place particularly in the columnar space as there seems to be a few players and no real winners yet to handle the lower tier DW space.
Cheers!
Hi Curt – Nice writeup and you covered all the questions I had about this deal as well as possible “next moves”. It will be interesting to see what further consolidation takes place particularly in the columnar space as there seems to be a few players and no real winners yet to handle the lower tier DW space.
Cheers!
[…] deals include EMC/Greenplum Teradata/Kickfire and now IBM/Netezza. A good breakdown of this deal is on Curt’s blog. There is still more to go of course with one of the crown jewels, Vertica, still ripe for the […]
[…] Some thoughts on the announcement that IBM is buying Netezza (dbms2.com) […]
Curt,
sometime ago we did a POC for our company that also included netezza. We were very interested in the technology but it didn’t get chosen because the benefits weren’t big enough to introduce a new DB-standard (we’re now oracle only). I think this is somewhere where IBM can leverage a lot. It is indeed ludicrous to use Netezza as hybrid OLTP/DW. But if you have a system that looks like DB2 to the end-user both for oltp and DWH you gain some standardization accross the company (like Oracle used times-ten as an in-memoryfront-end which is semi-transparant, this way you would have an OLTP semi-transparant in your DWH). I think the 2 parts should not be sync’ed with datastage but on a lower level(streaming technology).
Even if there are no plans for a real merge of the technologies I think DB2 can be altered to use the fpga concept. The idea of offloading logic close to the storage layer is correct (allready stolen by exadata) and can be integrated in a DB2-appliance.
On the netezza side I think a lot can be gained by implementing the broadness of sql-possibilities in the DB2 environment.
On a broader aspect I mainly wonder what this means for teradata.If both IBM an Oracle get succesfull appliances (and is there maybe an SAP Sybase IQ appliance on it’s way?) I’m not sure if they can survive independently
Well, I’m sure that Netezza has some expertise in using FPGA technology that isn’t obvious to other DBMS vendors. On the other hand, before too many more product generations, the FPGA will probably be replaced by standard microprocessors anyway.
I do believe in predicate pushdown, for disk-based and solid-state implementations alike. But to date the DB2 architects have disagreed, and I’m not convinced that owning Netezza would lead them to suddenly change their opinion.
Good point on the lower-level streaming. I was being sloppy about that part.
Thanks,
CAM
[…] that won’t change. Of course, the clients may change. After all, my biggest client is being acquired by IBM, my 2nd-largest was acquired by EMC, a small one was acquired by SAP, and another small one […]
Curt
great article. I have some comments on this, and while I freely raise my hand and say I work for a software company and so am biased, that does not mean I am wrong. One can be biased and right, they are not mutually exclusive.
I know I talk about vendors no-one seems to remember and the grey hair on my head seems to be multiplying these days, but is the cloud that different from IBM’s time sharing? Are appliances really the new software or is that so last Thursday? Unlike other posts I have seen I am suspect you are as sold on the idea of appliances as others, so perhaps some of this will resonate.
It seems like just the other day I was shaking my head at the determination of relational database vendors to keep fine-tuning their legacy software in order to optimize it for dedicated proprietary hardware. In essence, to deliver the last drips of performance by acquiring huge alloy wheels, an enormous spoiler, new carbs, a noisy exhaust pipe, and painting flames down the side of their database. To the outside world it looks like it should go fast, but inside there’s still the same rickety old steam engine under the hood.
This is very similar to what I recall from my first days in the database market. IBM and the big box vendors, ICL, Unisys, etc. had a stranglehold on the market with file technology that was two decades old. Remembers IMS, IDMS, TOTAL? They all held COBOL as the centre of their Universe. COBOL did deliver secure, scalable, and reliable environments. It was also expensive, slow, and delivered sub-par applications compared to what could be delivered with Unix, Client/Server, and Relational Databases.
How did you fix things back in the day, especially if the problem involved more users, more data, more functionality? The answer was more disk, more memory, more CPU, and lots more money. (On a personal note, thank goodness for that!)
I started my software career in this market in 1990 and with a better, faster, cheaper solution we had a lot of budget to work within and deliver ROI.
But then those products started to mature, to become entrenched, and to stop innovating on future-thinking software in order to preserve past revenue streams.
Rinse, wash, repeat.
It’s twenty years later and how do you get Oracle, Teradata, Netezza, and IBM’s data to go faster? More disk, more memory, more CPU, and lots more money. Why else do you pay nearly 10 times revenues?
If the definition of insanity is doing the same things over and over again and expecting different results, then continuously throwing hardware at what’s clearly a software problem is insane.
Once again, it’s time for a new approach.
I believe only a massively parallel, column-oriented database can properly handle the requirements of the modern database market. So when the team asked me today what I thought about IBM’s acquisition of Netezza, I said it was what’s to be expected, and there’s likely more to come.
Now that Mark Hurd’s gone will we finally see HP ditch NeoView (or is that NoView?) and buy Teradata? With Kickfire going to Teradata, DATAllegro to Microsoft, Sun to Oracle to make their own appliance, and now IBM getting Netezza, that leaves the independent software vendors with the innovative software uniquely poised to deliver the real solutions.
At least if we’re not confused about who the real competition is, unlike some who will remain named (ParAccel). Our competition is SAP’s Sybase IQ (hmm two acquisitions and a funeral?), Vertica, Infobright, and yes, ParAccel too. Then again, I remember ParAccell clearly talking about Oracle and Netezza and somehow forgetting Vertica. Perhaps they don’t really have a columnar database? they did start out as an appliance…
Either way, it feels like 1990 all over again.
Now, time to pull my double-breasted suit, Nirvana CD’s and my favourite Keds.
[…] obvious reasons, IBM wasn’t in a position to talk a lot of IBM/Netezza detail when we happened to chat post-merger-announcement. But they did want to set me straight on […]
Is there a benchmarks which shows how Vertica, ParAccel & Exasol performs on same dataset / same set of queries on same hardware like this one – http://www.vertica.com/benchmarks
In the above link Vertica compares itself with only row-store DBMS.
Not really. But if you look around this blog, you’ll see that I strongly favor running your own benchmarks anyway.
[…] IBM bought Netezza. […]