More big money pours into big data, and it's worth much more

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By Matt Asay March 19, 2014, 9:15 AM PST

Matt Asay discusses the first major change in data infrastructure in 40 years, and how investors are piling on. Do you think big data is worth $200 million? 

Three years ago, Cloudera raised what was then considered a mammoth pile of $40 million in cash. Today, the Hadoop vendor is reportedly raising $200 million at a $2 billion valuation. It’s a colossal amount of money, topping MongoDB’s $150 million raise just last year. Ironically, it may not be nearly enough.

In what amounts to a tectonic shift in how the industry stores, manages, and analyzes data, $200 million may be the barest of table stakes.

You say you want a revolution?

Let’s be clear. Something big is happening here. Call it big data. Call it whatever you want. We’re witnessing the first major change in data infrastructure in 40 years, and investors are piling on. As Cloudera chief strategy officer Mike Olson put it some three years ago when I questioned his need to raise $40 million:

"I have been in the database industry for a quarter century. I've done [been deeply involved] in open source software for a long, long time. I have been watching this roulette wheel go around a whole bunch of times now, and I am convinced that I have the pattern. I know where it's going to stop next. You want to tell me how much money I should put on that spot?"

At the time, it wasn’t clear that Hadoop was going to become the 800-pound elephant in the room and would quickly assemble a vibrant community constantly upgrading and extending its functionality. It wasn’t obvious that some NoSQL databases would move well beyond the web companies to go mainstream in the enterprise. Big data was just a catch phrase that mostly meant “VCs latest hype.”

No more.

As Hortonworks' vice president of strategy Shaun Connolly highlights:

"Apache Hadoop didn’t disrupt the datacenter, the data did. The explosion of new types of data in recent years has put tremendous pressure on the datacenter, both technically and financially, and an architectural shift is underway, where Enterprise Hadoop is playing a key role in the resulting modern data architecture."

Today, there is a veritable gold rush to put data to better use than possible or practicable with legacy technology. In fact, companies are rushing so fast into Hadoop and other technologies that sometimes key considerations like security are given secondary importance, as Gartner’s Merv Adrian points out. Over time, however, such issues will iron themselves out. For now, adoption seems to be the top consideration.

Picking winners

Given how much is at stake (literally tens of billions of dollars), it’s not surprising that VCs would be betting big and trying to pre-determine a winner. This, however, is hard.

Peter Goldmacher, an analyst with Cowen & Co.,acknowledges that “picking winners is hard,” yet stresses that “it’s clear that this opportunity is not an opportunity for legacy vendors,” however much they may want to join the party. In open source, she who contributes most influences project direction and the ability to directly monetize the code. We’reseeing the same thing with Hadoop.

Despite all the money pouring into vendors, it’s important to remember that the biggest beneficiaries of Hadoop and the changing data landscape are the enterprises who put it to use. As Goldmacher notes:

"[N]early all Big Data customers initially buy technology to solve problems they know they have, and once the users get facility with the technology, they are able to envision entirely new opportunities to drive growth. It is a significant mental hurdle to transition from technology being a limitation to technology being an enabler, but as with all things Big Data related, that transition is accelerating. We believe that as this transition gains momentum and scale, the legacy vendors will increasingly struggle."

Customers are the biggest beneficiaries of big data, assuming they learn to use data effectively. This starts, as Goldmacher says, with solving known problems and then quickly transitioning to taking on completely new challenges. Is that worth $200 million? Yes. It’s actually worth much, much more.→ fr