Welcome to Digital Transformation Digest, Constellation's daily compendium of news and analysis covering forward-thinking enterprises, mega-vendors, startups and developers.
Amazon-Whole Foods deal spurring grocers to transform: The Albertsons grocery chain is planning to overhaul its e-commerce systems in the coming year to better serve customers and shore up its play in food delivery, the Wall Street Journal reports. The move comes in the wake of Amazon's $13.7 billion deal to buy Whole Foods, a organic foods chain Alberstons was reportedly interested in buying earlier this year.
There's still time for counter-offers to come in for Whole Foods, possibly from Albertsons or Walmart. The latter is the U.S. grocery market share leader, with various estimates ranging from 15 to 20 percent, but Albertsons is no small player, with more than 2,000 stores and $60 billion in revenue. (Another suitor could be Kroger, which already has a robust organic foods business and is the second-largest U.S. grocer after Walmart.)
Beyond technology, Albertsons has invested in e-commerce related talent, bringing in executives from Macy's, Levi's and Disney with an eye on applying fresh ideas to the grocery space.
POV: While Amazon certainly has the infrastructure and potential to scale up a major grocery delivery business, it's interesting to note that Whole Foods, on a revenue basis, barely moves the needle toward that goal, given it has just about 1 percent of U.S. market share.
However, in terms of accelerating transformation in the grocery industry, the deal is clearly feeding the fire, evidenced by Albertsons' plans and no doubt many other chains. It could also help drive more business toward grocery delivery startups such as Instacart—a current Whole Foods partner—as chains choose to outsource. Overall, there are changes coming to the grocery business that will be felt by consumers going forward.
As for those potential counter-offers for Whole Foods? Here's how to look at that scenario, says Constellation Research founder and CEO R "Ray" Wang. For one, Amazon wants high-end customer data and Whole Foods delivers that. "It has distribution and customers, but needs data for pricing and selection," Wang says. "Other acquirers are seeing scale in their own industry but really need a technology or marketplace partner. Buying another grocery is really stupid. But if they bought Pepsico for distribution, that'd be interesting."
"Amazon is cross-industry and working across industries," he adds. "Other grocers who put in a bid are just there to raise the price. If they do buy Whole Foods, they’ll just kill it over time because their business models are not a good fit."
Encryption ends up low priority at Five Eyes meeting: This week, the "Five Eyes" nations of Australia, Canada, the United Kingdom, the U.S. and New Zealand held their annual meeting on intelligence, counterterrorism and cybersecurity measures in Ottawa. Many observers expected the two-day meeting to result in some concrete proposals around cryptography, specifically how law enforcement could circumvent it in the name of fighting and solving crimes.
But the official joint communication released after the meeting spends just a couple sentences on cryptography, and appears to essentially punt the problem toward technology companies:
[E]ncryption can severely undermine public safety efforts by impeding lawful access to the content of communications during investigations into serious crimes, including terrorism. To address these issues, we committed to develop our engagement with communications and technology companies to explore shared solutions while upholding cybersecurity and individual rights and freedoms.
POV: Go here to read Constellation Research VP and principal analyst Steve Wilson's take on why the encryption debate is far from simple.
Meet Kinetica, the GPU-powered database with NSA roots: Kinetica, an in-memory relational database startup that leverages NVIDIA GPUs in conjunction with commodity hardware, has scored $50 million in Series A funding, with investors including former Oracle president Ray Lane.
Kinetica's founders, Amit Vij and Nima Negahban, were hired in 2009 by the National Security Agency and U.S. Army Intelligence Security command to create a real-time terrorist tracking system. The database is now on its sixth product release but even the initial version was reportedly quite impressive, as Vij said in a statement:
At the time, our database ingested data from more than 200 different streaming big data feeds. This included drones that tracked every asset that moved at 30 frames per second; mobile devices that emitted their metadata every few seconds; social media like Twitter and Facebook; and cyber security data. We were evaluating billions of signals to find that needle in the haystack.
Current customers include GlaxoSmithKline and the U.S. Postal Service. Its being used in multiple ways, such as fraud detection, smart grid management, supply chain management, genomics research, and deep learning and machine learning.
POV: Kinetica is not the only company working on GPU-accelerated database technology, but would seem to have the early mover advantage given how long it's been in existence, and the success it's had gaining marquee customers.
The size of the Series A round, at $50 million, is much higher than typical, suggesting that Kinetica's investors are quite bullish on its prospects. Kinetica will use the money to increase engineering, sales and marketing headcount from the current 75, as well as open more offices around the world.
"The sweet spot for Kinetica has been interactive, geospatial analyses at scale, which has appealed to customers including government agencies, big retailers and big utilities," says Constellation Research VP and principal analyst Doug Henschen. "Advanced visualization capabilities have also appealed to pharmaceutical and healthcare companies."
While data-intensive geospatial and visual analyses are often performance constrained, Kinetica says its GPU-accelerated database and visual analytics platform can deliver up to 100 times faster performance than conventional systems using one-tenth the hardware, he adds. With the 6.0 release it's also diving into advanced in-database analytics applications combining machine learning and deep learning workloads, for which it's using libraries including TensorFlow, Caffe and Torch, Henschen notes.
GPU-accelerated databases have a bright future, so they're attracting healthy financial backing. In March, Kinetica competitor MapD raised $25 million in a Series B round. "GPU hardware remains exotic and unfamiliar to mainstream enterprises, however, so we're not yet in the hockey stick growth phase," Henschen says. "I expect continued experimentation, particularly in cloud environments where marketing partnerships could make a difference for these vendors. GPU-based systems won't thrive in isolation, so vendors and practitioners will have to ease the technical bottlenecks—such as getting high-scale data in and results out—of using these systems in concert with conventional systems and data platforms."
Microsoft gets multi-cloud friendly with Cloudyn buy: Microsoft has agreed to buy Israeli startup Cloudyn, which offers tools for managing consumption, spending and performance across multiple cloud services. The price tag was between $50 million and $70 million, Techcrunch reported.
While that sum is a rounding error on Microsoft's balance sheet, the deal has symbolic significance. Cloudyn was already a Microsoft partner, but supports other clouds as well as Azure. Judging from the tone of a blog post by Microsoft's Jeremy Winter, this approach may continue. Winter also notes that Cloudyn's tools helped a U.S. based Fortune 500 company realize a 286 percent return on investment.
POV: Cloudyn's capabilities could make Azure more attractive to customers, and certainly Microsoft wants to bring as many workloads to Azure as possible. However, Constellation believes that multi-cloud is the approach most enterprises need, whether they realize it now or not. Therefore, keeping Cloudyn open to other competitors would be the right move for Microsoft.
"Cloud economics are the key questions customers try to get on top of before making platform deployment decisions," says Constellation Research VP and principal analyst Holger Mueller. "The question is, as part of Microsoft can Cloudyn still be the independent, impartial third party that tracks cloud infrastructure costs and makes recommendations in regards of where loads should run?"
Legacy Watch: Medtronic's ERP integration woes: Medical-device giant Medtronic has brought a key system for customer orders and manufacturing back online after a nearly week-long outage, as the Minneapolis/St. Paul Business Journal reports.
Medtronic bought competitor Covidien in 2015 for $50 billion and has been working to bring the company onto its ERP system. A Medtronic spokesman "wasn't sure" whether the system outage was related to that project, according to the paper, but it's not too difficult to connect the dots.
POV: The thought of a week-long outage for a system that critical should make any CIO break out in cold sweat. Medtronic says it doesn't believe the outage will impact its earnings, but that remains to be seen. It is conducting a root-cause analysis of the problems; should it make those results public, they could have some valuable insights into the pitfalls of major systems migration.
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