San Diego’s ParAccel, Which Sprang From Netezza, Prepares for Next Database War

12/8/09Follow @bvbigelow

I discerned a couple of recurring themes when I sat down with ParAccel CEO David Ehrlich to discuss the venture-backed startup that specializes in database management systems technology.

One is that ParAccel’s industry seems prone to what Ehrlich calls “database wars,” which might be best exemplified by the intense competition that broke out in the 1990s between Oracle, Sybase, Informix, and others. Another is that the computerized data storage networks that were designed for data warehousing have not proved to be well-suited for data analytics.

Both themes weave through the ParAccel story, which was founded in 2005 by Barry Zane, a co-founder and system architect at Netezza who left the Framingham, MA, company to start ParAccel in San Diego, and who now serves as its chief technology officer. Ehrlich says another key technologist is Rick Glick, ParAccel’s vice president of technology and architecture, who was previously the chief technology officer of the San Diego-based database engineering group at Teradata of Ohio.

Ehrlich, who divides his time between Par Accel’s offices in Cupertino, CA, and San Diego, says the company’s “center of gravity is in San Diego” largely because Zane started here, and both Zane and Glick continue to live in San Diego. Another factor is the emerging cluster of software analytics in San Diego, as well as the presence of Teradata’s engineering group. As Ehrlich puts it: “You just can’t find people anywhere else in the world that have 15 to 20 years of experience in parallel processing database computing.”

ParAccel, which has raised about $53 million in venture capital and now has 70 employees, specializes in relational database software that enables its customers to combine the benefits of data warehousing with analytics processing. Its technology is designed as a column-based database management system that runs on a massively parallel processing hardware platform.

As Ehrlich tells the story, it became clear to experts in database management in the late 1990s that the exponential growth of data and increasing sophistication of software analytics and business intelligence were creating new demands on systems that were essentially designed for data warehousing. “As it turns out, database architectures that were designed for warehousing are terrible architectures for data analytics,” Ehrlich says. “Oracle can do lots of little questions, but stumbles when it comes to 10 terabytes of data and really difficult questions.”

The industry developed tools—Ehrlich calls them “crutches”— to make traditional databases work with software analytics. “With every new innovation,” Ehrlich says, “the demand [for analytics] went up and the innovations struggled”—with two notable exceptions. One was a decision at Teradata to develop data warehousing equipment based on massively parallel processing computer technology that ran Sybase IQ relational database software in what Ehrlich described as a “brute force” approach to the analytics problem. The other was Netezza, which was founded in 2000 with the idea of re-inventing the enterprise-class data warehouse appliance. By developing an innovative system architecture and integrating the server, database, and storage in a single machine, Netezza made it substantially easier to analyze large amounts of data.

While  Zane helped to develop Netezza’s architecture, Ehrlich says, “What he learned was that Netezza had gone after the market without column-oriented data storage or commodity hardware.” Column-oriented database management systems, which store content in columns rather than by rows, can be used to analyze and compare data more efficiently—and commodity hardware offers advantages through lower pricing.

Zane brought both approaches together at ParAccel, which offers a relational database management system that supports standard SQL applications and can be implemented on hardware from Sun Microsystems, HP, or any other vendor—or as a virtual or packaged data warehouse appliance. Today, the company’s enterprise customers include OfficeMax, PriceChopper, Fidelity National Info, Nielsen IAG, BrightCloud, Travelzoo, and Database Architects.

In June, Menlo Park, CA-based Menlo Ventures led a $22 million Series C round of venture funding to expand ParAccel’s product development, accelerate sales and marketing, and ramp up services and support for its rapidly growing customer base. “The last couple of years have been focused on completing and refining the product,” Ehrlich says. “Now we’re investing in sales and marketing.”

The company’s other institutional investors are San Francisco’s Walden International; Menlo Park, CA-based Mohr Davidow; Palo Alto, CA-based Bay Partners; and San Diego’s Tao Venture Partners.

In keeping with the database industry’s tradition of intense competition, ParAccel also has taken an aggressive approach to capturing market share.

ParAccel contends that Netezza has based its technology on a proprietary system that locks customers into expensive Netezza hardware. So ParAccel moved to exploit its more affordable solution in September by provocatively announcing what it calls a “cash for clunkers” offer to any Netezza customers who switches to ParAccel. In a separate announcement, ParAccel issued a “Faster or Free” industry challenge and performance guarantee in which it promises to give away its software in any customer proof-of-concept test in which ParAccel fails to outperform all other competitors.

“No other company is willing to bet their revenue on beating out the platforms out there,” a spokesman for the company wrote me. “It’s an industry challenge that’s definitely an aggressive move.”

As Wade reported in July, Netezza, has not been indifferent to increasing competitive pressure from ParAccel and others. The Massachusetts company introduced a new line of hardware built around commodity blade servers (instead of their previous custom architecture) at one-third the cost.

While ParAccel’s “cash for clunkers” program specifically targets Netezza, the company also faces rising competition from a new generation of analytic database companies that includes Aster Data Systems, Greenplum Software Inc., Kognitio, and Vertica. It also remains to be seen how the traditional database vendors like Oracle, IBM, Sybase and Microsoft will respond to ParAccel’s challenge. But Ehrlich talks like he’s ready for another database war.

In discussing ParAccel’s rivals, Ehrlich says Oracle has positioned some of its recent offerings to compete in the burgeoning database analytics sector. “But it’s window dressing on a dinosaur,” Ehrlich says. “You can put a hat on, sunglasses and a mustache, but it’s still green and scaly, and if you want to go out on a date, there are better options available.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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