Big data acquisitions pave way to fast, effective innovation

Increasing focus on big data among enterprises also driving slew of acquisitions among industry players looking to quickly bolster product offerings and market position, observers note.
Written by Jamie Yap, Contributor

The growing importance of big data to enterprises has also led to a "scramble" among tech vendors to beef up their product portfolio and position in this lucrative market. And the fastest, surest way to do so is acquiring big data companies for their technology and talent, observers say.

Mark Koh, Asia-Pacific senior industry analyst for ICT practice at Frost & Sullivan, said information is growing at a "tremendous rate" and data is coming from various sources including sensors, connected devices and social networks. This, he said, is driving the slew of acquisitions of big data companies, particularly those providing analytical capabilities.

There also has been growing realization among enterprises on the reality and challenges of coping with big data, he pointed out.

They realize data in its various forms is simply laying around unused or discarded without being utilized to provide key competitive advantages, he noted, adding that technology has advanced to a point where it is now cost-effective to store, organize and analyze large volumes of data.

Market up for grabs
According to Charles King, principal analyst at Pund-IT, given that the big data market is still in an emerging state, there is "a scramble" for a strategic position among tech vendors serious about this space.

"Larger vendors have enough cash and leverage on hand to move quickly, lest they get left behind," King added.

Andreas Stavropoulos, managing director at venture capital firm Draper Fisher Jurvetson (DFJ), concurred.

With the advent of the Internet, and hence explosion of data in nearly every aspect of everyone's daily lives, companies of all sizes are investing in big data capabilities--be these database structures, architectures, or hardware and cloud services, Stavropoulos explained.

"We are just at the beginning stages of ecosystem formation around big data capabilities," he noted. "The big guys [in the market] tend to innovate mostly through acquisition these days, so I'm not surprised about increasing level of acquisition activity, which I expect to continue for the next couple of years at least."

Last month, social software company Jive bought Proximal Labs, which supplies data mining software.

David Gutelius, Jive's chief social scientist, said the current trend of acquiring big data companies and capabilities is not exclusive to technology vendors. He said in an interview with ZDNet Asia: "The trend is [a result] of the latent promise of the big data space and the desire on the part of large incumbents, with enough cash, to make rapid strides into a space they generally don't understand that well yet."

Consumer companies such as WalMart, for instance, may want a specific set of capabilities around using data to drive business processes and decision-making, spanning procurement to store design and personalizing shopping experiences of customers, Gutelius pointed out. "Big data is big business, it's a competitive edge and companies are increasingly willing to act fast to acquire that edge."

Acquisitions to advance, accelerate innovation
Between developing big data capabilities in-house and via acquisitions, market watchers said it was less an issue of comparing the pros and cons of each method, and more about how to best build up a portfolio of offerings that are in demand among enterprises.

Alex Paris, big data segment leader for growth markets at IBM, said the vendor was "betting big on big data", having made investments in both R&D (research and development) as well as acquisitions to help drive new innovations into the marketplace. Big Blue in April acquired Vivisimo, which automates the search discovery and navigation of all data within an organization. IBM aims to address big data problems enterprises now or will eventually face, he said.

Big data is not just about volume, but complexity and variety, Paris explained, and most organizations will already be struggling under the weight of too much data, to be able to effectively understand and act on it to make informed business decisions.

He added that the availability of open source software tools for big data such as Hadoop have made it possible and cost-effective for organizations to trial and explore on their own, at least the basics of big data techniques and capabilities.

However, companies that see utilizing big data software as a critical infrastructure will look for the robustness and reliability that only enterprise software vendors can offer, he said.

Koh said while vendors are ramping up their big data capabilities, for instance, with open source software, in many cases it is quicker and often cheaper to purchase some key capabilities than developing them internally.

Ultimately, vendors make acquisitions to get specific big data capabilities to supplement their portfolios and provide customers with fully integrated products, from storage to analytics, the Frost & Sullivan analyst said.

Jive's Gutelius added that acquisitions can offer a manpower advantage. Growing a big data team completely organically "is a long haul" due to a lack of talent that have the hands-on experience in big data toolsets as well as the associated skills such as data science.

"There just aren't that many people [like that] out there, and you're competing for every one of them," he said. "At some point, it becomes more effective to simply acquire whole teams and their products."

Pund-IT's King said: "The more complex a technology, the more difficult it is to develop the skillsets necessary to develop truly compelling, competitive solutions.

"Acquisitions provide the means for larger players to pursue commercial opportunities more quickly, and for startup employees to be rewarded for their innovative work."

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