Mike Hoskins, CTO of Actian, suggested to me in a recent conversation that we have entered the Age of Data. Is this the case? Let’s examine this idea by reviewing the history of the IT industry.
The dawn of the IT industry could certainly be described as the Age of Iron. Even in the mainframe days there were many hardware companies. Not just IBM, but Burroughs, Univac, NCR, Honeywell, Siemens, ICL, Bull and quite a few more. The advent of minicomputers brought Digital, Hewlett-Packard, Data General, Wang, Tandem, Sun, Pyramid, Sequent and others into the picture. And then came a wave of PC companies: Apple, Compaq, Dell and many others.
Despite the fact that computers are only useful if you have applications, the money was made primarily from selling hardware, and the large and growing companies in that Age of Iron made money from the machines.
The Age of Software
We can think of the next computing era as being the Age of Software. It began with the advent of independent software companies selling system management products, databases and software applications (apps as we call them nowadays). In the Age of Iron many applications were built in-house and the hardware vendor provided the development tools. The software industry changed this, and the hardware vendors lost control of the software market.
So in the database market there was Cullinet, Software AG, soon to be joined by Oracle, Ingres, Sybase and a host of others. The server applications market came alive with the advent of SAP, Siebel, Peoplesoft and many others. But even before that was off and running, the PC market spawned a host of software vendors: Microsoft, Digital Research, Lotus, Wordperfect, Adobe and also many others. Indeed the PC software market was more active than the server market.
All of these disparate markets and companies gradually rationalized and thinned out. So now when we look around we see only a few hardware giants. IBM is still there. Hewlett-Packard and Dell still persist. Oracle has entered the hardware market in a significant way by acquiring Sun and now straddles both the hardware and software markets. The enterprise software giants are IBM, Oracle and SAP, all of whom have vacuumed up a wide portfolio of products. And of course there are Microsoft and Adobe.
This market has been challenged by the Open Source Movement, but the primary vendors still manage to make a good living. Nevertheless we see this market as mature, and we also see it as gradually being undermined by the Age of Data.
A significant reversal happened as we moved from the Age of Hardware through the Age of Software to The Age of Data. Initially the buyers of computer capability, both hardware and software, were large organizations. This began to reverse with the emergence of the PC, with consumers gradually becoming the driving force in the market. The dynamics were that products were sold to consumers earlier or at the same time that they were sold to companies. The advent of the internet and mobile technologies strengthened this trend in a major way, and consumers who adopted new consumer technology were well ahead of organizations.
The Age of Data
In our view, two companies characterize the dawn of the Age of Data: Apple and Google. Apple, a survivor from the hardware and software eras, focuses on content and its delivery, profiting strongly from the underlying hardware and softwar. On the content side, we can consider Netflix, Amazon and a whole host of cable companies as having, like Apple, a primary focus on content. The technical problems of distributing digital content have been largely solved. No doubt there will be further innovation, but probably only a little.
By contrast, the Google business model focuses much more on analytics – value derived from data. Its advertising revenue is driven by high quality analytics. Google is, of course, also in the content business with YouTube and its TV ventures, but analytics is where the gold is. It is now challenged to some degree by other “analytics” players – Facebook, Twitter, Linked-In and many more smaller web operations.
There isn’t much of a corporate market for digital content. Because of this, the consumer-facing companies – Apple, Google, Facebook and so on – have become holders of very large customer/user databases that must be the envy of many corporations. They are not alone in this. Banks, insurance companies, government, retailers and e-retailers also have big consumer databases. Because all such databases are kept reasonably current they are potential data analysis goldmines.
Right now, however, they are islands of data. There is considerable value in them, and there may also be immense value in combining them with other data sources, but there is no formal market for trading such data at the moment. When the value of such data collections becomes more apparent, such a market will inevitably develop.
But the field of Big Data is still in its early days. A good proportion of analyzable data has not yet been effectively mined. When it is mined, and if it is found to have value, then the businesses that collect such data will reap the rewards. In the near future we have the deluge of data that will inevitably flood out from The Internet of Things. This will likely prove to be a gold mine of sorts as well.
It is apparent at the moment that few companies (Google, Facebook, Linked-in, etc. are exceptions) know how to drive their businesses from data analytics. In our view it is very early in the game, so there is good business to be had in selling tools to manage and analyze data, and also good business in providing consultancy. Whether or not those opportunities will remain is hard to say. Most likely the companies that harvest the data will want to own the data refineries and profit from the value it contains before – if it is possible – selling that value to others.