Hortonworks business strategy certainly has its naysayers. They claim the venture capital backed company won’t be able to generate the kind of revenues Wall Street investors expect without selling proprietary software that compliments or extends open source Apache Hadoop or any other open source software, for that matter.
This sort of talk falls on deaf ears at Hortonworks.
“Our strategy is to build out (Hadoop and Hortonworks Data Platform aka HDP) in open source so that it resonates and deeply increases value for our partners, our customers and for us,“ said Shaun Connolly, vice president of Corporate Strategy at Hortonworks.
Free for the Taking
What this means is that the company is spending big bucks paying some of the world’s leading and most dedicated engineers to commit code to the Apache Hadoop project which is, by the way, anyone’s for the taking. It’s fairly widely acknowledged, for example, that Hortonworks employees developed a majority of YARN, which is key to Hadoop 2.x and is now an integral part of most commercial Hadoop distributions.
But what sets Hortonworks apart is that the company doesn’t sell software that makes Hadoop enterprise-grade. Tools for governance, security and operations are all included in HDP, which is 100 percent open source. The tools that other vendors provide are proprietary and sold as part of enterprise-grade, Hadoop-based subscriptions.
The Best Experts
Yet Hortonworks value proposition to Enterprises isn’t one of its software being free — it’s about being 100 percent open source, expanding the Hadoop platform, and being able to support its customers and partners like no one else can.
Where does Hortonworks get off claiming the latter? “We spend our time in the Operating System (OS) on behalf of our customers and partners,” said Connolly. In other words: We’re the best experts because we contributed more code than our competitors.
Getting help (or support as it’s called), however, is not free. Hortonworks makes its money by selling HDP-related services by subscription- these include things like first, second and third support, software patches and updates. And because Hadoop is such a bear to contend with, most enterprises want or need to have an expert to call on and to get access to the latest fixes. Connolly said that seventy per cent of Hortonworks’ revenue comes from these kinds of software subscriptions. (Twenty percent come from consulting, 10 percent come from training.)
But while this is an attractive strategy, in and of itself, Hortonworks biggest market advantage might come from its partnerships with Microsoft, Teradata, SAP and the like. Hortonworks’ Data Platform is strategically and deeply integrated into their offerings, these vendors’ employees are trained and certified to provide support for their customers, and perhaps, most significantly from a revenue generating perspective, HDP is introduced and sold into to the Enterprise through a familiar and already trusted vendor.
Mind you, these are not the kind of partnerships in which vendors exchange cash and a day of training to establish. Instead, engineers from both firms have worked side by side to bring integrated solutions to market. Perhaps, as importantly, Hortonworks, for example, isn’t looking to replace Teradata; instead the two vendors are working together to help their customers store and reap value from more and more data, which is, after all, what the big data proposition is all about. (Though saving money ranks as well.)
Hortonworks’ relationship with Microsoft might serve as another example. Both HDInsight and HDP for Windows are key to Microsoft’s goal to bring big data to 1 billion users.
And, while it’s certainly true that, with HDP being open source, a vendor could easily opt out of a Hortonworks relationship, they’re not likely to do so, not only because Hadoop is so key to their strategy, but also because they’re so happy with their relationships.
Taking Closer Looks
As more and more Enterprises realize that Hadoop is a “must have” for the future, they will no doubt give Hortonworks a good look; after all, the value proposition is clear — Hortonworks has the most Open Source, Enterprise-grade Hadoop platform; it’s deeply integrated with technologies that Enterprises already know, like, and use; customers get easy access to the latest bug fixes and tools, as well as a deep, expert level bench for support.
Connolly said the company has added 60 new customers each quarter for the last six quarters. We’d expect that number to go up sharply as Enterprise adoption of Hadoop skyrockets.
Finally, it’s worth noting that earlier this month Hortonworks hired its first CFO, which may suggest that it is beginning to prepare to go public. While Connolly admits that the market is accelerating and that the company is doing the “necessary calisthenics” to make sure they can maintain their delivery levels, he adds that an IPO would be something along the trajectory they are on, but not an end goal.