From IBM Netezza to the human brain

IBM is buying Netezza for $1.7B. Why is a company with $191 million in yearly revenue worth $1.7 billion to IBM, which already has products in this space?

Tech Industry

In a surprise move, IBM is acquiring a business analytics vendor named Netezza.

I say "surprise" first because few in my line of work saw this one coming (IBM already has products in this space. Why buy another?), and second because IBM is paying $1.7 billion for a company that earned $4.2 million during its latest fiscal year on revenue of $190.6 million. That's a long way away from $1.7 billion. And, need I say this again? IBM already has a whole portfolio of Smarter Planet business analytics products and services.

However, Netezza has a fast business-analytics appliance. And fast business-analytics appliances of any kind are hot, maybe even hotter than storage virtualization as represented by Hewlett-Packard's huge offer for 3Par. Why?

Let's start with Oracle and the recently concluded Oracle World show. Oracle's newest star, Mark Hurd, took the stage to announce a new version of Exadata, the all-in-one-box, hardware and software platform that does lightning-fast business analytics. By all accounts, Oracle can't keep them on the stock-room shelf.

Now turn to EMC, which recently bought Greenplum and, in the process, announced the formation of a whole new Data Computing Products division with Greenplum at the center. EMC even went so far as to preannounce a forthcoming business analytics "appliance" based on the Greenplum technology.

Next up comes IBM buying a horse it can immediately jump on and ride into this red-hot business analytics appliance race. Where will this trend end up? Ask HP and Dell.

But, beyond the short-term tactical aspect of the Netezza acquisition is a longer-term positioning of IBM that is far more significant. Traditional data warehousing--as a relatively slow process that depends on reiterative data extract, transform, and load (ETL) processes--is essentially dead. What customers are now looking for is speed to information. These appliances offer the ability to parse large data sets from multiple sources in a nontraditional ETL way and to produce information in real or near real time.

That, in itself, is a big opportunity. But it gets even bigger when one looks at what these systems are doing as compared with the human brain. Ours brains take in massive streams of sensory data and makes the necessary correlations that allow us to know where we are, what we're doing, and ultimately what we're thinking--all in real time. That's the same kind of data processing these appliances are after.

It's not often we get to watch a new style of computing emerge and grow. But that's what I think we're now seeing. Or...translating what I've said so far into analyst-speak: these appliances represent the emergence a new computing paradigm that mimics the functioning of the human brain. Driving the race to the the business analytics appliance opportunity is a race to real-time, competitive business information.

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