Microsoft to buy data-warehouse appliance vendor

IDG News Service — Thu, 24 Jul 2008 14:38:40 -0700

Microsoft continues its shopping spree to bolster its SQL Server database platform to make it more suitable for large-scale enterprise deployments. On Thursday the company said it plans to buy DATAllegro, a privately held maker of data-warehouse appliances.

The terms of the deal, which comes on the heels of one announced last week to purchase data-quality technology vendor Zoomix, were not disclosed. Microsoft will retain most of the 93 DATAllegro employees, who will continue to work out of their existing office in Aliso Viejo, California.

DATAllegro provides data-warehouse appliances, which combine data-storage functions with business-analytics software. According to the company, its appliances allow companies to rapidly query large volumes of data and have the flexibility and scalability enterprises need, but at a cost-effective price.

The acquisition will allow Microsoft to "compete with the highest-end enterprise data-warehousing solutions," said Bob Muglia, senior vice president of Microsoft’s server and tools business, at the company’s analyst meeting in Redmond, Washington. "It will scale well beyond what Oracle can do today," he claimed.

Microsoft plans to use DATAllegro's technology to extend the capabilities of SQL Server for enterprise customers, making it easier and more cost-effective for them to manage and mine data. The company is expected to reveal more details about what it plans to do with DATAllegro's technology in October at its Business Intelligence Conference, according to IDC analyst Dan Vesset.

Microsoft may run into some challenges when integrating DATAllegro's technology with SQL Server. One technical challenge will be to replace the open-source Ingres database that the acquired company's appliance is based on, wrote Forrester analyst James Kobielus in a research note released Thursday.

Another will be to convince customers to use SQL Server in favor of Ingres, he wrote. "Clearly, that migration to SQL Server may alienate a substantial portion of DATAllegro’s existing customer base," Kobielus wrote, adding that it also will likely raise the price of Microsoft's version of DATAllegro's appliance.

However, on the plus side, Microsoft will provide what "DATAllegro has most critically lacked -- global sales, marketing and support -- "in spades," he wrote.

Muglia said an offering based on DATAllegro will be proof of Microsoft’s commitment to meet enterprises' high-end data-warehousing requirements at a competitive price.

Managing and getting relative business intelligence from data has always been a problem for business customers, particularly large enterprises, and customers long have used data warehouses to store and manage large quantities of data.

The data-warehouse appliance market, which combines storage and management with analytics, has been growing over the past several years because it provides an all-in-one package, Kobielus wrote.

"Over the past several years, the DW [data warehouse] appliance -- a preconfigured, pre-optimized bundle of hardware and software components -- has become the predominant go-to-market approach among both established and start-up DW solution providers," he wrote.

Microsoft's purchase of DATAllegro signals that there will be more consolidation in the data-warehouse space, with large enterprise data-warehouse vendors snapping up smaller, niche players, both Kobielus and IDC's Vesset said in separate research notes.

According to Kobielus, Forrester expects that incumbent enterprise data-warehouse vendors, such as Oracle, SAP and Hewlett-Packard, will follow Microsoft in the coming year to make strategic acquisitions in the market. Other pure-play companies still up for grabs in this space include Greenplum and Dataupia, he wrote.

Microsoft expects the deal to buy DATAllegro to close at the end of this month or the beginning of the next.

(Nancy Gohring in Seattle contributed to this report.)