Wikibon: Breaking Down the Hortonworks S-1

ATN-300InsightaaS: Last spring, Wikibon - an open source community of world-leading analysts that has its roots in storage and system research, and has evolved to be a leader in understanding software-led infrastructure, Big Data, and cloud, and an organization that we have great admiration for - published its Big Data vendor revenue and market forecast for 2013-2017. This kind of process requires a great deal of informed estimating, and analysts are often intrigued by the new information that surfaces over time.

In this post, Wikibon principal research contributor Jeff Kelly discusses his take on Hortonworks' S-1 filing (disclosure required for a future IPO), which provides a reality check on both Hortonwork's current position and Wikibon's forecast. The company's current revenues are roughly half what Wikibon estimated, meaning that its presence in the Hadoop market is smaller than was projected. Does this mean that Hadoop and Big Data are correspondingly smaller than is generally thought? There is conflicting evidence on this score. On the one hand, Kelly believes that much of the gap is due to Hortonworks' approach to the market: "Hortonworks’ support subscription only becomes attractive to enterprise practitioners once they are ready to move to production Hadoop deployments," Kelly says, "and, based on our recent adoption survey, only 30% of Big Data early adopters — just early adopters — are at that point today. When you consider the wider market, the percentage of enterprises using Hadoop in production is in the single digits." Wikibon is willing to concede that it may have been over-aggressive in sizing the Hadoop segment; Kelly states that Wikibon's "forecast for the Hadoop segment of the Big Data market will change." He is quick to add, though, that "the Hadoop segment makes up less than three percent of the overall Big Data market, so I do not believe it will have a material impact on our forecast for the larger Big Data market." Firms that have been using the overall Wikibon estimate of "$50 billion by 2017" are, at least at present, still safe in basing assumptions on that figure.

Hortonworks plans to go public in 2015 and its S-1 filing, revealed to the world yesterday, says a lot about the state of the Hadoop market generally and, obviously, Hortonworks specifically.

First, a mea culpa. In Wikibon’s latest Big Data market forecast, my colleagues and I provided our estimate for Hortonworks’ 2013 revenue (along with revenue estimates of all the other players in the market … more on that in a moment.) Well, we overshot the mark.

We estimated Hortonworks did $55 million in revenue in calendar year 2013. In reality, according to the S-1, Hortonworks did closer to $20 million in 2013 revenue. We don’t have the precise figure because the company didn’t report its revenue by full calendar year. What the S-1 reveals is that Hortonworks did close to $16 million in revenue in the first nine months of 2013. If we extend that run-rate through the end of 2013, we’re talking between $20 million and $25 million in revenue for the year.

Now, if you include deferred revenue, total gross billing for the first nine months of 2013 was $24 million. Extend that to the full year 2013 and gross billings — revenue plus deferred revenue — was between $30 and $35 million. Looking at 2014, Hortonworks generated nearly $34 million in revenue through September, putting it on pace to hit $45 million plus for the full year. But this revenue isn’t coming cheap. The company’s net-loss through September was $87 million...

Read the entire post on the Wikibon website: Link