Pentaho open source BI attracts more VC dollars
25/02/2008
Pentaho, a US-based provider of open source business intelligence (BI) software, has secured a $12m round of Series C venture capital funding led by Benchmark Capital. Pentaho will use the money to accelerate its product development and expand internation

OVUM. Madan Sheina

Comment:

This is an impressive third-round of investment by Pentaho, bringing its total funding to date to $26m. It also shows that despite more cautious and conservative VC spending, open source software still continues to garner attention. The lead involvement of Benchmark is no surprise as it has a contrarian history of backing open source firms - BI being the latest segment it is targeting. It has also placed bets on open source firms like Red Hat, Zimbra and MySQL (which was acquired by Sun Microsystems last month).

Open source is one of three disruptive technologies - software-as-a-service and pre-loaded appliances - that are changing the long held status quo of the BI market, characterised by on-premise software vendors like Business Objects, Cognos and Hyperion Solutions (now part of SAP, IBM and Oracle respectively) selling proprietary and premium-priced tools and applications.

The formation of Pentaho is part of a trend of former executives of proprietary software firms to bootstrap new companies using open source in various application domains.

Pentaho isn't the only open source BI vendor in the market today. But it is certainly the most ambitious play right now, offering a broad suite of functionality covering front-end enterprise query and reporting, OLAP analysis, data mining and dashboards and back-end data integration. The suite has grown in part by incorporating open source projects like Kettle, Mondrian and Weka. Others like JasperSoft and Actuate are also selling open source BI products, but have largely targeted developers with embeddable Java reporting engines.

Pentaho's suite has far greater ambitions - enterprise BI. But that also means convincing customers that have invested large sums of money on traditional on-premise software that they can do just as good a job. So far uptake has been brisk. In the four years it has been doing business, Pentaho boasts three million downloads and has over 20,000 registered community members. Customers include Cox Communications, Monsanto and the US Naval Air command. IT vendors like Savvion and Sun are also listed as users.

With source code maturing and a development community both taking shape nicely, it is up to Pentaho to monetise that interest and uptake, in the form of commercial open source licences. Commercial open source might sound like an oxymoron. But it's the only way right now to make open source work for the enterprise, giving customers a level of fall-back, guarantee and accountability (i.e. neck to choke if something goes seriously pear-shaped).

Another monetisation route is to exploit the openness of the source data in the form of mash-ups and integrated product offerings. Pentaho has already worked with Google to deliver a location intelligence dashboard that mashes up its BI software with Google Maps. Pentaho has also worked to integrate its BI software with columnar database provider Vertica and has struck a deal to certify its BI software to work with Greenplum's Bizgres-based data warehousing appliance platform and also engage in joint sales and marketing.

The latter catches the spirit of LAMP-stack (Linux, Apache Web Server, MySQL and PHP, Perl and Python) thinking for an integrated vision of source software working in concert. With more companies looking closely at integrated BI suites, the challenge for open source BI vendors is to work more tightly with each other, both with and outside of different technology domains. Interoperability standards and partnerships between open source BI systems are therefore key to pushing open source BI into mainstream computing environments.

The low hanging fruit for open source BI today might be restricted to developers and small- to medium-sized enterprises. But capturing a significant share of the enterprise BI market, which is Pentaho's ultimate goal, is still some way off. It's unlikely that Cognos, Business Objects and Hyperion customers are going to pull the plug on their investments tomorrow in favour of open source. Nevertheless the challenge of open source and other disruptive forces will press proprietary BI vendors to reconsider their own product licensing and pricing schemes. The net result can only be good for customers - more, flexible, cheaper and easier to use BI software.