Hadoop Hits the Big Time with Hortonworks IPO
The founders and investors in Hortonworks got an early Christmas present today when the company raised about $100 million in its first day of trading on the NASDAQ exchange. As the first Hadoop distributor to go public, Hortonworks’ IPO will shine the spotlight on the fast-growing Hadoop software stack and ecosystem.
While Hadoop is a household word for those working in the big data bubble, it’s a foreign concept to people living in the real world. That could change in a hurry as people begin to equate the little yellow elephant with a new class of systems and software designed from the ground up to make sense of massive data flows.
“Get ready to hear this word a whole lot in 2015: Hadoop,” wrote CNBC’s senior tech reporter Ari Levy on a story about Hortonworks’ IPO earlier this morning.
“Big data” isn’t a foreign concept to the smart guys and gals on Wall Street. The term has been adopted (some same co-opted) by nearly every company hawking enterprise and cloud software. But if an investor wanted to place their chips on Hadoop, the best way right now might be investing in Hortonworks, which to date is the only pure-play Hadoop company that trades publicly.
While you can get a piece of the Hadoop action by buying tech bigwigs like IBM, Oracle, Hewlett-Packard, EMC, Intel, Teradata, and Microsoft, those companies do lots of other things besides Hadoop, thereby watering down the Hadoop investment.
Hortonworks may be the first Hadoop pure-play to go public, but it almost certainly won’t be the last. Executives for its closest competitors, Cloudera and MapR Technologies, have publicly discussed possible IPOs.
All three Hadoop distributors have seen massive venture capital investments this year, with Hortonworks snagging $100 million in March, MapR taking in $110 million in June, and Cloudera getting $900 million, most of it coming from Intel, which exited the Hadoop market in March.
Hortonworks planned to raise about $100 million today by selling about 6.25 million shares at an offering price of $16. The stock, which trades under the symbol HDP (the acronym for the company’s flagship product, Hortonworks Data platform) rose soon after the exchange opened and was trading at about $23 when this article went to press, representing a 45 percent increase.
While the future for Hadoop is promising, the present is a bit of a struggle. Hortonworks lost $86.7 million through the first nine months of 2014 on revenues of $33.4 million, according to its Form S-1 filed with the SEC last month.
Hortonworks, which is based in Palo Alto, California (just a few miles from Cloudera’s office, by the way) has been growing its employee and customer bases quickly. It added about 180 new paid customers over the 12 months ending September 30, according to the S-1. And like many big data firms in the Silicon Valley, it’s been hiring new employees as fast as it can find them.
The Hortonworks IPO is a promising indicator that 2015 could be the year that Hadoop finally goes mainstream. For years, executives have been predicting that companies are on the verge of beginning to shell out for enterprise software licenses and professional support contracts.
Those predictions, for the most part, have failed to come true. The open secret in the industry is that most of the Hadoop distributors’ “customers” are using free versions of the software, which is predominantly open source. In fact, you can download Apache Hadoop right now if you like.
Several prominent industry analysts estimated that the entire Hadoop customer base to be between 1,000 and 2,000, according to TPM’s October analysis in EnterpriseTech. About 50 percent of those deployments are using basic Apache Hadoop, not one of the third-party distributions, according to the latest Big Data Analytics Survey from Wikibon.
The fact that no vendors have hit Hadoop out of the ballpark yet is not really the issue. All the signs point to big things ahead for Hadoop and its related cousins, including Apache Spark, which may help drive Hadoop adoption even faster. What started out as a nerdy distributed computing project at Google and then Yahoo has morphed into something far bigger. The smart money says Hadoop eventually breaks out to become a big money-maker for the companies best positioned to deliver the applications, tools, and services that surround it. Hortonworks’ IPO is a signal that we’re one step closer to that goal.