ARCHITECHT Daily: Cloudera's IPO will be an eye-opener on open source

Cloudera officially filed its S-1 report on Friday, in preparation for an IPO later this year. You ca
ARCHITECHT
ARCHITECHT Daily: Cloudera's IPO will be an eye-opener on open source
By ARCHITECHT • Issue #51
Cloudera officially filed its S-1 report on Friday, in preparation for an IPO later this year. You can get a high-level overview of its filing and the IPO market in various places. Here are the financial highlights, from a CNBC story
  • What they’re hoping to raise: up to $200 million
  • Revenue: $261.0 million in the year ending Jan. 31, up from $166.0 million a year ago
  • Net loss: $187.32 million, narrower than the $203.14 million from a year ago
Of course, if you’re really interested in the economics of big data, and Cloudera specifically, you should just read (or skim) the whole thing.
Cloudera’s S-1 lists a goldmine of open-source-related issues—some more worrisome than others—including the pace/continuation of open source development, licensing issues, and potential problems with the Apache Software Foundation. But I think the biggest thing to watch over the next couple of years will be broader than just Cloudera. Namely, it will be the effect of more publicly available financial data—especially from a high-profile company like Cloudera—on open source business models, whether or not companies are selling Hadoop. 
Red Hat aside, many open source companies still struggle with questions like finding the right balance between open and proprietary, balancing licensing revenue against support revenue, and balancing internal R&D investment with community investment. More evidence of what’s working and what’s not could be very useful for open source companies and investors alike.
And although this will ultimately matter across software sectors (and although Cloudera lately cites IBM as its primary competitor), the biggest immediate impact will likely be on Cloudera’s legacy Hadoop-based peers MapR and Hortonworks. I’ll ignore MapR for the time being because it’s still a private company with private financials, and I really don’t know what they look like. Hortonworks, however, has always taken a more traditional support-and-services approach to open source than either Cloudera or MapR. 
And it has experienced, shall we say, a roller-coaster ride since going public a couple years ago—in part because of that pure open-source product strategy. To its credit, Hortonworks isn’t oblivious, and has been doing some interesting things around IoT (with its DataFlow offering) and cloud computing (with its Data Cloud for AWS offering) that could help out. The company briefed me on them last week, and perhaps I’ll write up a little more on this shortly. 
I made a little chart (below) that’s simple in terms of metrics, but that highlights a very important distinction: While revenue is growing nicely at both companies, Cloudera’s net loss was smaller and shrunk during its last fiscal year. Hortonworks’ net loss was larger and grew during its last fiscal year. If I’m a Hortonworks executive or shareholder, I’m looking at that and thinking of ways to narrow the gap.
Basically, though, we’re in a period where open source is the norm for enterprise software (especially at the infrastructure level) and where SaaS and cloud services are catching on very quickly. Sunlight might be the best disinfectant, but it’s also good for illumination. As more open source and cloud-based companies go public (hello, Dropbox, in a bit!), we’re all going to learn a lot about the economics of modern enterprise software companies—the good, the bad and the ugly.

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