Why I Think Industry Consolidation is Years Away

Posted by Tom

on Wednesday, August 13. 2008

Those who know me personally know that I have an almost-annoying habit of frequently quoting movies. They won't be surprised, then, when I sum up my thoughts on the MS/DATAllegro acquisition by quoting Jules Winnfield (played by Samuel L. Jackson) from Pulp Fiction:

Personality goes a long way.

I won't claim to be intimately familiar with DATAllegro - I was just getting to know them, after all - but if ever there was a database company whose personality fit with Microsoft's personality, they were it. Proprietary hardware? Nope. Radical new approach to data management that requires jumping mental hurdles? Nope. Established concepts and existing products that can be mimicked? Yup. Willingness to build one version, throw it out and get things right on the third try? Yup.

Those were all Microsoft traits I was listing there. The fact that they fit DATAllegro too, well... you get the point.

Now, as for what this acquisition means for the rest of the industry... Contrary to what others (1, 2) have said, I see no reason to think that consolidation in the database industry is imminent. Why? Well, once again, I think Jules had it right. It's all a matter of personality. Let's start with the potential acquirers.

The Potential Buyers (or Not)

• Teradata has spent an awfully long time thinking, believing and preaching that they're the be-all end-all of data warehousing. Acquiring a new upstart vendor who did things differently would mean... well, maybe they weren't all that. Oops. I don't see Teradata realizing that until it's too late.

• Oracle people will tell you that benchmarks are all marketing lies and that their system will outperform all others if properly configured and tuned. So why would they need to add anything to it? That aside, rumor has it that attempts are being made inside Oracle to build their own MPP data warehousing solution, so acquiring another company would mean first admitting defeat. I don't exactly see that fitting with Oracle's personality, at least as far as I know it.

Also, Oracle has a reputation for being a bottom-feeder when it comes to acquisitions. I wouldn't be surprised if they bought somebody 3-5 years from now when the small companies falter just for the cheap IP, but I doubt they'll buy anybody sooner than that for truly competitive purposes.

• IBM already has something that competes with Teradata, and at least according to Gartner's magic quadrant does so more effectively than Oracle. Why they would add anything disruptive to that I have no idea. Backing an open-source data warehouse project would fit IBM's personality better than acquiring another database vendor. (I'm quasi-serious... )

• Sybase, the red-headed step-child of the industry, already has established row- and column-oriented databases. If they follow their regular pattern they're more likely to develop the next generation of data warehousing products - e.g. their analytics appliance - and then have somebody copy it than they are to go buy another database vendor and integrate that into their product suite.

The Potential Sellers (or Not)

Now let's look at some of the potential acquisition targets.

• Dataupia, which at least one analyst thinks would be a better fit for MS than DATAllegro, is led by "the father of data warehouse appliances", Foster Hinshaw. I dunno about anyone else who's had the pleasure of meeting Foster, but I don't see him selling to anyone. Especially not Oracle or Teradata.

• Vertica has a similarly strong human personality element. Mike Stonebraker and the other guys at Vertica are really convinced that column-oriented databases are the future of analytics, and they're out to prove it. Maybe after they've done so they'll sell it to somebody else who can manage what they've built, but I don't get the "we're a small scrappy start-up hoping to get bought" vibe from anybody over there. Not for a second. To the contrary, I get a more Blues Brother's-esque "we're on a mission from God" kinda feel. Needless to say I don't see them going anywhere.

• EXASOL, which uses a custom OS kernel, produces a memory-based database and is headquartered in Germany. Not a likely acquisition target, I don't think.

• Calpont, from what little I know of them, is too new and different to fit nicely with any of the potential acquirers I can think of. I could be dead wrong about this one though, I admit, because a) I don't know much about them and b) sometimes new and different is more attractive rather than less. Who knows.

The Potential Sellers (Really)

Now, all that said, there are a few companies that I can see being acquired. I dunno by who, but...

• ParAccel has a few strong personalities of its own that would make appealing additions to an organization looking to build credibility. The two different modes of operation allowed by the product – stand-beside and stand-alone – make acquisition by both other database companies (that could use an accelerator) and non-database companies (that could use a high-speed database) sensible.

• Greenplum is, in my opinion, Teradata re-warmed, which is probably not coincidence given the bio of their Chief Architect. Though I could see somebody snapping them up a la MS/DATAllegro and using them to extend another existing database into the MPP realm, I never got the sense that the different layers of the database were as well separated with Greenplum as they are with DATAllegro. As such I'm not sure it'd be as easy to integrate Greenplum as I think it will be with DATAllegro, which in turns means they may not be as attractive to potential suitors as DATAllegro. But it's possible nonetheless.

Creative Ideas

Maybe I've just had too much time on my hands, but there do seem to be some possibilities for interesting product combinations involving database companies that might lead to acquisitions. For example...

• EnterpriseDB provides Oracle compatibility with a PostgreSQL base, and Greenplum provides MPP scalability with a PostgreSQL base. Hmmm...

• Netezza and Kognitio might go nicely together, given Kognitio's service background and my belief that Netezza's moving to blades (which Kognitio has already been through).

• ParAccel plus Sun plus MySQL would make an interesting combination. It would provide a good MySQL scalability option, and we all know Sun loves to create ways to sell hardware...

Parting Thoughts

In summary: I don't see consolidation as imminent in the database industry. The pieces of the industry puzzle that are currently available just don't seem to fit together in enough sensible ways. One or two acquisitions here and there? Sure. Enough to constitute a consolidation? I don't think so. At least not for a few years, at which point some of the companies I've mentioned will be available for $1.99 and a bag of chips, simply as a matter of attrition.

Now, I must admit that it's possible that acquisitions may be made that don't make any sense, and that enough of those could result in an effective consolidation. Desperate companies sometimes do desperate things. I don't see any of the companies with enough money to buy another as being desperate enough to do anything dumb, however. At least not yet.

And I must also admit that the odds are against me. There are too many new database companies on the market right now, and not all of them can win. At least a couple of acquisitions in the next few years seems inevitable, statistically. But long term my money's on companies faltering and being fire-sold rather than companies being snapped up in any kind of rational consolidation. Especially given that I think that there's probably time before that happens for one or two more companies with new and different ideas to arrive and shake things up. InfoBright, for example, is sufficiently different to make you stop and re-think. More things of that nature are likely, I think.

Whether I'm right or wrong, however, it's been fun to think about. And it'll be even more fun to watch it unfold.