Data isn't the new oil; it's the new gold. And in any gold rush, the ones who make the most money in the long run are the tool makers and suppliers.
Enterprise tech vendors have long peddled a vision of corporate America centered around so-called "big data." But there was a big problem: Many of those projects failed to produce a return. An army of new providers think they've finally figured out the problem, and investors and customers are taking note.
If the first stage of this gold rush centered around collecting data, the current stage is rewarding businesses that help companies sort, manage and analyze that data across different corporate departments and applications. Siloed data is nothing new; organizations faced that challenge even when information was stored on-premises and they largely relied on only relational databases from the likes of Oracle and Microsoft.
But the landscape has changed dramatically. Enterprises are sprinting to the cloud and, after a rush in adoption of web-based applications that largely operated independently from one another, they're trying to enable those systems to work better together. Companies are also now relying on a much broader array of storage options, including data lakes, data warehouses and graph databases.
That's making the longstanding challenge of unifying that corporate information borderline impossible — at least, right now.
"Data is becoming increasingly distributed, disparate and diverse. That is placing an inherent stress on our data and analytic architectures," said Gartner Research Vice President Adam Ronthal. "If we had a silo problem when everything was on-premises, well that just got worse. And it's going to get worse before it gets better."
But organizations remain steadfast in their efforts to tackle that problem. And vendors are sprinting to own part of the estimated $216 billion big data and analytics market.
The bonanza spans everything from integration technology that helps companies share data easier between applications to tools that connect data from multiple cloud platforms. That broader exchange of information between systems, coupled with an increasingly diverse set of end users like data scientists, is mandating new tools that can create an enterprisewide governance layer.
The rise of increasingly specialized databases is adding new complexity to IT stacks, forcing organizations to find ways to defragment that storage layer. Evolving corporate needs are also spurring the adoption of newer tools like reverse ETL, a flip on the typical extract, transform and load paradigm for data transfers that helps ensure that information stored in web-based systems like Salesforce is consistent and up to date.
And that's only a taste of all the different data-focused services that are currently in the marketplace.
"There's a lot of different stress points in the market right now that are giving rise to their own set of vendors," said Ronthal. "But the end state is they are all going to be participating in a broader ecosystem."
'Some assembly required'
The world of data storage, analytics and governance is fast becoming a major area of investment. Among the startups getting flooded with cash is Snowflake-backed Alation, which is now valued at $1.2 billion after a $110 million series D round. Collibra is reportedly set to be valued at $5 billion after a $250 million funding round. VAST Data is valued at $3.7 billion after an $83 million funding round in May. And Matillion raised $150 million at a $1.5 billion valuation, its second triple-digit funding round in 2021.
But it's not just private upstarts. Publicly-traded vendors are also seeing double-digit growth in this business.
Last quarter, sales at Alteryx rose 25% to $120 million. Pure Storage's revenue jumped 23% in the three months through July to $496.8 million. Informatica, a data management vendor that was founded in 1993 and is gearing up to go public, saw subscription sales rise 25% in 2020 to $593 million, per a recent federal filing. And in a telling sign of how lucrative the market is, private equity firm Thoma Bravo spent $2.4 billion to take Talend private.
The intense focus on data and the gravity of the problem facing enterprises, including those managing an IT landscape split between on-premises and the cloud, is forcing some vendors to revamp their product suites. Pure Storage, for example, recently rolled out a new platform that makes it easier for IT departments to manage disparate data clusters by combining data sets and overlaying specified governance structures, helping developers tap the ones that work best for a specific project.
"Right now, storage is very fragmented," Pure Storage CEO Charlie Giancarlo told Protocol. "When storage is fragmented, it also means that data is fragmented. And when data is fragmented, you don't have a single source of truth and you can't get the best insight out of your information."
There's still a massive runway ahead for the sector. For example, the data analytics governance market, which includes companies like Informatica and Collibra, has been adopted by less than 1% of the potential market, Gartner estimates. The research firm doesn't expect the market to reach an "innovation plateau" for over a decade.
It's one reason why vendors are spending big to scale fast to try to get an early lead in many of the still nascent segments of the market. Fivetran, for example, spent $700 million to acquire quasi-rival HVR, a sum that dwarfs the $565 million series D funding round it announced the same day as the deal.
"It shows how serious we are about the core data movement problem," said Fivetran CEO George Fraser. "We are very determined to grind on this problem in every content, every app, every database, and just cover all the bases. It's a very hard problem and we recognize what a hard problem it is."
While industry experts say there's not yet an out-of-the-box product that will solve all of a corporation's data issues, the industry is heading in that direction. Google Cloud, for example, has Dataplex, its own unified analytics and data management tool.
As that evolution continues, it's likely the cloud vendors — namely Google Cloud, Alibaba, Oracle, AWS and Microsoft Azure — only get more powerful. That means independent software vendors (ISVs) are increasingly going to need to cozy up even closer to that small group to reap the financial benefits of being a part of whichever ecosystem an end customer primarily operates in.
"We're starting to move towards [a] 'some assembly required' approach to data management," said Ronthal. And as a result, "there will be this coalescence in the market that starts to refine itself around a half-dozen offerings."
That means a wave of consolidation is likely looming ahead. But while the crystal ball suggests a much more streamlined industry ahead, ISVs still think there's an opportunity to win without the crutch of a cloud partner.
"Do I think it will happen? I do," said Talend CEO Christal Bemont. But "to be completely beholden to one thread like that, some will do that, but the large majority will struggle with being completely single-threaded."
