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Compe&&veTrendsinDataWarehouseIndustry & IBMsStrategicMove

Sushant Mohanty Sushant0473@gmail.com

Tradi&onalDataWarehousesolu&onhelpscustomersinstoringvaluable businessdataandinextrac&ngstrategicinforma&onfromthedatacluBer
Business Users

Business Intelligence/ Analytical Applications

Customer value proposition


Stores and retrieves large amount of important daily and historical data Helps users create complex queries to retrieve data in a user friendly way Provides security for sensitive data

COGNOS, Oracle, SAS, Microsoft,

Data Warehouse Databases

Oracle, Microsoft, IBM, Netezza, Teradata

Assists decision makers to get meaningful information form large piles of data by performing complex analyses Data is the most valuable business asset and analytical information helps business stay competitive in the market

Servers, Storage...

Company Operational Data Sources

Order

Sales

Marketing Accounting

Data Warehouse is a ~$9 Billion global industry, out of which US market contributes 50%
Global DW Market Shares 2010

Which is growing at an impressive double digit annual rate


DataWarehouseRevenue
$12,000.00 $10,000.00 $8,000.00 11% CAGR

15% 50% 35%

$6,000.00 $4,000.00 $2,000.00

DataWarehouse Revenue

America

EMEA

Asia/Pacic

$-

A highly consolidated industry with ~90% market controlled by top 4 players

Source: IDC report

Highlyconcentratedindustrywherecompe&&onisbasedonpriceand product/serviceporPoliocoverage
-Need large investments to setup

Barriers to Entry (Medium)


Threat of new entrants

-IP protection -Incumbents will retaliate or acquire the new entrants

Suppliers Power (Low)

Bargaining power of suppliers

Industry Competitors (High)

Bargaining power of buyers

Buyers Power (Medium)

-High switching cost -Price sensitive and often demand upgrade to new technology

-Large numbers of firms are backward integrating -Cost advantage is diminishing with the outsourced suppliers
Threat of substitutes

Substitutes (Low)
-Open source technologies

-Competition is based on price and product and service portfolio coverage -Consolidation is on the rise; big players are acquiring smaller or niche players -Growth driven by M&A -Competition is also based on differentiation of product and service

Adapted form Porters Five Force Framework

DataWarehouseIndustryValueChainandProtPool
1
Database andDW SoRware Vendor

2
Thirdparty Applica&on andAnaly&cs SoRware Vendor

3
StorageDevice andAppliances Manufacturer

4
Systems Integrator and Service Provider

5
Supportand Maintenance

Profitability

2
Oracle, Microsoft, IBM, SAP and Teradata

3
Netezza, Exadata 3PAR

1
Oracle, Microsoft, IBM

Oracle, Microsoft, IBM, Accenture, Deloitte and Teradata

5
IBM, Accenture, Deloitte, EDS, Infosys and other Outsourcing Firms

Market Size

Adapted from Profit Pool Framework by Gadiesh & Gilbert, 1998

Businessesarefacingchallengeswithuncontrollablegrowthindata
Businesses are planning to store more data than ever to compete successfully Resulting in a massive growth in data storage requirements (According to Netezza)

According to TDWI report

According to Netezza report

FromdatacluBertointelligentinsight,drama&cshiRindatausageis transformingDataWarehouseindustry

Changeincustomerdemandforadvancedanaly&csandeverevolving technologiesins&tutedDataWarehouseApplianceindustrysubsegment
Data Warehouse Appliance and the New Customer Value Reduce
-Solutions Complexity -Overall Cost (Capex and Opex) -Time to Readiness -Multi-Vendor Dependencies

Eliminate
-Need for redundant data warehouse solutions

A New Value with DW Appliances

-One stop solution for advanced DW with DW Appliance -Provide high capacity DW with storage up to 1.5 petabyte - Provide highly efficient Business Analytics solutions with MPP processing -Provide power to end users with industry specific analytics solutions like Retail, Biotech and Financial industries -High ROI at low cost

Create

-Ability to store large amount of data in Data Warehouse and Data Mart format -Ability to process large amount of data at the maximum -Ease in customer usability

Raise

Blue Ocean Strategy for Data Warehouse Industry

Riseofthemachine;TheDataWarehouseApplianceisaonestopsolu&on thatcanstoreenormousamountofdata,processatlightspeedandcapable ofrunningadvancedanaly&cs


Traditional Data Warehouse system was complex and was a nightmare to manage

And customers faced many challenges


Extremely complex system Many products from different vendors Dependency on IT department Slow performance Data clutter Valuable information lost Lost ROI Limitation in data storage Expensive SMB companies cant afford

Customer value proposition


Affordable cost Lox CAPEX and OPEX Faster time to value Plug in and go Save time Breakneck processing power 100 times faster than traditional Data Warehouse system Save time Massive data storage capacity Capable of storing 1.5 petabyte data

Withonly20%currentmarketpenetra&on,DataWarehouseApplianceisa poten&algrowthmarket
Growing customer confidence on the DW Appliance is boosting the product visibility and is also improving the technology adoption of the Appliance products

MarketPenetra*on Maturity CustomerAdapta*on

520% EarlyMainstream Increasing


Source: Gartner Hype Cycle for Data Management Industry, 2010

Bigplayersareacquiringnicheinnovatorstocompeteoneverystepofthe valuechainbyforwardintegra&ng
Database andDW SoRware Vendor Thirdparty Applica&on andAnaly&cs SoRware Vendor StorageDevice andAppliance Manufacturer Systems Integrator and Service Provider Supportand Maintenance

Innovators IBM Oracle Microsoft Teradata

Innovators COGNOS SAS Second Movers IBM Oracle Microsoft Teradata

Innovators Netezza Exadata Second Movers IBM Oracle Microsoft Teradata HP

Innovators Innovators IBM IBM Oracle EDS Microsoft Teradata Second Movers Second Movers HP HP Infosys Infosys

The race is on to compete and capture the evolving and profitable Data Warehouse Appliance market

ThedrivetollinthegapsintheirApplianceproductporPolioresultedin DataWarehousemarketconsolida&on
Major M&A deals in the Data Warehouse industry Missing in the M&A race is Big Blue - IBM

Withrapidindustryconsolida&onandcapabilitygap,IBMismissingouton theopportuni&esintheDataWarehouseindustry
ProductCoverage
IBMiscurrentlymissing inac&oninthismarket segment
MissedMarket

MarketCoverage
SmallandMediumBusinessesLooking forAordableAnaly&csSolu&on Purposedbuiltandonestopsolu&on applianceataordableprice(Netezza andExadata) Largeormediumenterpriseswithsome analy&csneeds Mediumbudgetanaly&cssolu&ons DisparatesoRwareandhardware solu&onsfromcompe&ngvendors LargeenterpriseswithbothDatabase andDataWarehouseneeds (Transac&onalsystems) Clientswithexpensiveandmul&&er IBMdatabaseanddatawarehouse productsuites(DB2,Bladeservers,ISAS orInfoServerandCOGNOS) Longandcomplicatedimplementa&on lifecycle

SoRwareDB2,Info
Server/ISAS, COGNOSandother specializedanaly&cs applica&ons

ServedMarket

Penetrated Market

HardwareBlade
Server

Services6000trained
consultants

Strong

Missing

inaddi&on,challengerssuchasNetezzaisclosinginthecompe&&vemarket

Injustfouryears,costleadershipandproductdieren&a&onhelpedNetezza evolvedfromanicheplayertoaleaderintheDataWarehouseindustry
NetezzahasoutdonedatagiantssuchasMicrosoRandSybase,and closingintowardsIBM

IBMisfeelingcompe&&vethreatforitsmarketincumbency

Source: Gartner Magic Quadrant

M&Aisthenaturalcourseofac&onwhenchallengersarethreateningthe incumbencyofmarketleaders

Strategy
Growth by acquisition Deter competition

Opportunities
Capture evolving market Increase market share Increase customer and geographical foot print Increase customer dependencies and life-cycle by cross selling Premium pricing because of differentiation Become a supplier or integrator for the leaders Increase the sale-off value

Leaders

Challengers

Collaboration with industry leaders Create niche and differentiation Merge with leaders Continuous innovation and patent portfolio

MarketforcescompelledIBMtojointhepurposebuiltDataWarehouse Appliancerace

Compe&&ve Pressure

Global Growthin Analy&cs

Factors droveIBM toacquire Netezza

Technology Patents

Complete Product PorPolio

IBMacquiredNetezzatoenterthepurposedbuiltDataWarehouseAppliance marketandtogeneratesustainablevalue

Netezzasacquisi&onpriceof$1.7B(6.5xsalesmul&ple)isinlinewiththe recenthighgrowthdataindustrytakeoutmul&ples

Date

Acquirer

Target

PremiumPaid Oer Enterprise Value 9.8% 242.0% 92.2% $1.7B $2.4B $2.1B

EV/Sales Mul*ples 6.5x 9.8x 5.4x

09/20/2010 09/02/2010 07/08/2009

IBM HP EMC

Netezza 3PAR DataDomain

Source: Morgan Stanley Report

Withminimalfeatureoverlaps,IBMhasnowcompletecoverageoftheData Warehouseandappliancemarket
Existing IBM Data Warehouse Capabilities Overlaps Netezza Data Warehouse Appliance

Highly optimized analytics Multi vendor enterprise solution Data Mart offerings DB2, COGNOS and other products Monitoring Solutions Specialized Data Marts Transactional and Analytics SAAS and Cloud offering

In database and in memory analytics High speed processing and storage Capable of running with both expensive proprietary storage and off the shelve affordable storage Advanced analytics

DatabaseandLegacy solu&on

DataWarehouseand Analy&cs

AdvancedAnaly&csand Appliance

SoRware

Hardware&Storage

Services

IBMandNetezzatogethercantrulycreatevaluefortheircustomersand shareholdersbyleveragingeachotherscompetencies
IBMandNetezzaValueChainInterrela&onshipandValueCrea&on IBM
Market Research R&D/ Innova&on
SoRware Development BuildHardware

Marke&ng/ Sales

Implement

Supportand Service

Market Research

R&D/ Innova&on

SoRware Development BuildHardware

Marke&ng/ Sales

Implement

Supportand Service

Netezza
Synergies
Complementing product capabilities will help IBM cover the complete market segment IBMs deep pocket will help Netezzas long term R&D and product planning Netezzas patents will strengthen IBMs market leadership IBMs global market reach will help Netezza enter new markets IBM can leverage its consulting workforce to create Appliances related new service offerings Capable of storing 1.5 petabyte data
IBMwillu&lizeitscapability Sharedcapabili&es ShadowedChevron Netezzasredundant ac&vi&eswillbe consolidatedbyIBM

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