IBM-Netezza poised for data warehouse appliance battle with Oracle

IBM-Netezza will be well positioned to compete with Oracle Exadata at the lower end of the data warehouse appliance market, industry experts say – if Big Blue plays its cards right.

IBM’s planned acquisition of Netezza puts the hardware and software giant in a strong position to battle rival

Oracle Corp. in the market for relatively low-cost and high-performance data warehouse appliances, according to analysts and customers.

Industry experts say Netezza’s technology fills a gaping hole in IBM’s product portfolio that has prevented the company from seriously competing with Oracle’s Exadata platform at the lower-priced end of the data warehousing market.

But that newfound position of strength against Oracle could be short-lived if Big Blue takes a heavy hand with Netezza and disrupts the team which made that company a success, according to one longtime customer.

“[IBM-Netezza is] a wonderful marriage for our business as long as – and I would say this directly to the IBM team – as long as they don’t screw it up,” said Eric Williams, CTO of St. Petersburg, Fla.-based Catalina Marketing Corp., a firm that specializes in data intensive promotions tailored to individual shoppers.

Williams said IBM would be wise to follow the same path it took when it acquired Israeli storage technology firm XIV back in 2008. In essence, he explained, IBM should treat Netezza like an independent yet wholly owned subsidiary.

“[IBM] did a fantastic job when they acquired the XIV technology organization,” Williams said. “They left it with its name, with its president and with all of his team, and they are absolutely just destroying the market.”

IBM yesterday announced plans to purchase Marlborough, Mass.-based Netezza in a cash deal worth about $1.7 billion. Founded in 2002, Netezza made a name for itself by selling relatively easy-to-deploy data warehouse appliances with built-in business analytics functionality. IBM expects to close the deal in the fourth quarter of 2010.

Officials from both companies say Netezza’s technology will help IBM provide analytics capabilities to a wider variety of rank-and-file business users.

“The idea of bringing the simplicity, ease of deployment and speed of Netezza to IBM will really help IBM accelerate its initiatives to bring analytics to the masses,” Jim Baum, CEO and president of Netezza, said in a press conference yesterday.

IBM currently offers two data warehouse appliances -- IBM Info Sphere Balanced Warehouse and the IBM Smart Analytics System. Those products compete with Netezza’s flagship data warehouse appliance, Twin Fin. Netezza also sells a scaled-down appliance called Skimmer.

Analysts point out that the IBM-Netezza deal is the latest in a series of acquisitions by software vendors looking to add high-speed analytics capabilities to their portfolios. During this past year alone, EMC Corp. acquired Greenplum Software and Teradata acquired Kickfire Inc.

IBM girds for data warehouse appliance battle with Oracle

A newly combined IBM-Netezza should provide Oracle’s Exadata data warehouse appliance platform with some solid competition, according to analysts.

Oracle yesterday unveiled four new versions of its Exadata Database Machine X2-8 at its annual OpenWorld conference in San Francisco – leaving analysts to speculate that the timing of IBM’s Netezza announcement was no coincidence.

“[IBM] just didn’t see themselves as competitive against Oracle, but now they clearly are because Netezza does compete very well with Exadata,” said Donald Feinberg, a vice president and information infrastructure analyst with Stamford, Conn.-based Gartner Inc.

But Exadata has been quite successful in its own right. Although some Oracle customers balked at Exadata’s total cost of ownership when it was introduced in 2008, the product line has seen significant interest and uptake, analysts say. Oracle has said that it expects sales of Exadata Version 2 to reach about $1 billion in 2011.

Customers who eventually find themselves faced with a choice between Oracle Exadata and IBM-Netezza should keep in mind some of the key differences between the two products, according to Feinberg.

For example, Exadata boxes come with flash memory capabilities, and they use the performance-enhancing InfiniBand input/output architecture for connections between storage and servers.

“Another thing Oracle has that the others don’t have is something that today is called Hybrid Column Compression,” Feinberg said. “Because of that, they get a higher degree of compression, which gives them better performance because of less I/O.”

But Netezza has a not-so-secret yet powerful weapon against Oracle in the form of a field-programmable gate array (FPGA) integrated circuit, which is generating significant interest in the marketplace, Feinberg added.

“It’s a programmable chip,” he said. “Effectively, Netezza has taken parts of the DBMS and put it on a chip, on a core, and so they get good performance from that, and I think IBM would like to look at how they can use that.”

Kickfire is an example of an organization that uses FPGA technology.

“The reason that I think Teradata was interested in Kickfire was because of the data flow that goes through that FPGA,” Feinberg said.

A key data warehouse appliance differentiator

The battle for data warehouse appliance supremacy gets even more interesting when one considers the entire breadth of Oracle and IBM’s product lines, said James Kobielus, a data management analyst with Cambridge, Mass.-based Forrester Research Inc.

Once the Netezza acquisition is complete, Oracle and IBM will be the only two vendors in the IT market that can honestly be called “one-stop shops” for everything needed – from software to hardware – to deploy a complete data warehousing, business intelligence or business analytics system.

“There are really only two vendors that can [provide] a complete soup-to-nuts integrated solution appliance for BI and analytics from their own product portfolio,” Kobielus said. “And that’s IBM and Oracle.”

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