We measure software companies by all sorts of metrics — product downloads, customer acquisitions, revenue growth.
But for startups there’s an especially important one: How long it takes to reach $100 million in annual revenue.
Last August we shared Barclays prediction that Hadoop distro provider Hortonworks was expected to hit this milestone by the end of this year.
It didn’t take that long.
When Hortonworks reported its third quarter earnings this week, we learned that the company exceeded $100 million over the past four quarters (specifically, $33.1 million in the third quarter, $30.7 million in the second quarter, $22.8 million in the first and $16.7 million in the fourth quarter last year for a total of $103.3 million).
It took Salesforce, which held the record until now, five years to do the same.
Community is Key
Hortonworks vice president of strategy, Shaun Connolly, doesn’t think Hortonworks deserves all of the credit for this milestone.
“It takes a village to raise an elephant,” he said during a conversation with CMSWire last night.
The “elephant” he was referring to is the icon that is commonly associated with the Apache Hadoop project that Hortonworks clings to in HDP, its 100 percent open source Hadoop data platform.
The Apache Hadoop project itself has around 100 code committers who are employed by companies as diverse as eBay, Facebook, Intel, LinkedIn and UC Berkeley among others, as well as Hortonworks itself and its main competitor Cloudera.
Connolly went out of his way to make it clear that part of the strength of HDP is based on the contributions of many individuals whose paychecks his company does not write.
That being said, Hortonworks Data Platform, differs significantly from those of the other two primary, commercial Hadoop distribution providers, Cloudera and MapR, not only in the other open source Apache projects it leverages in its specific configuration, but in the fact that it is the only 100 per cent open source among the three.
What Partnership Really Means
The team at Hortonworks also credits its community of partners, such as Microsoft, Teradata, EMC and the many, many companies it works with on the ODPi initiative—a tested reference core of open source Apache Hadoop, Apache Ambari and related Apache source artifacts— for making it easier for Enterprises to embrace Hadoop.
Gartner analyst Nick Heudecker told CMSWire that ODP (the name has since been changed to ODPi) could be “a catalyst for Hadoop adoption” when the initiative was announced last February. ODPi now has 27 member companies who sell or provide services around Hadoop including Teradata, CenturyLink, EMC, IBM, Pivotal, VMware and DataTorrent among others.
It’s interesting to note that Hortonworks has brought some of its customers into its greater community. It is working hand-in-hand with engineers from Merck, Target, SAS and Aetna to create technology that satisfies regulatory requirements like HIPPA, PII, SOX and Basel III which, when it is done, will be available, free of charge, for the benefit of all, even those who had nothing to do with its creation.
Earning the Right to Serve
Hortonworks makes its money by selling services around its big data crushing technology via subscription, meaning that customers don’t have to make any long term commitments to them or to buy software outright.
“We have to earn the right to serve (over and over again),” said Connolly.
Hortonworks seems to be cashing in on that strategy too. Its renewal rate, year over year, is 156 per cent. How can that be? Hortonworks’ existing customers are expanding their use of Hortonworks’ services.
A Winning Formula?
Pair a 100 percent open source, top-shelf product, like the Hortonworks Data Platform, with a subscription based revenue model, and you have a barrier-breaking record maker. At least that’s what Hortonworks’ experience suggests.
How does it feel? “Very liberating,” said Connolly.
Hortonworks filed for its IPO around this time last year and there were skeptics everywhere you turned. They claimed that the company was too young, that its business model wouldn’t work, and that its growth was unsustainable.
One of the reasons the company opened it kimono, exposing its numbers to auditors, competitors, investors and anyone else who wanted to see, was to reveal to the world and to customers just how well it was doing. There was almost no criticism about the worthiness of its product.
What are they saying now?
With everything exposed to the light, not a whole lot. “Our business is as transparent as our code,” said Connolly.
What does this mean for Hortonworks competitors? Connolly thinks that they should be ecstatic. “There’s a lot of greenfield out there,” he said.