Will Google Buy Confluent?

Learn why we think Google will acquire data streaming startup Confluent!

Since Thomas Kurian left Oracle and joined Google, there has been a sense of positive change in Google Cloud Platform (GCP). At Oracle Kurian was known to be at odds with Larry Ellison - who was not keen for Oracle to make its suite of software available to run on public clouds such as Amazon Web Services (AWS).

Kurian also seems to learn from Satya Nadella in recognizing the importance of building trust and partnership with the open source developer community.

Google has a long history of developing technology and making it available in open source to foster innovation. Recently the open source community has found cloud providers are not partnering with them, but attempting to take away their ability to monetize open source. We as Google do not believe that is good for customers, the developer community or for software innovation.

Thomas Kurian, CEO GCP

Confluent In a Nutshell

Confluent was spun out of LinkedIn in 2014 from a team of engineers inspired to create a commercial venture around Apache Kafka - a popular open-source data streaming platform that uses the "event streaming" architectural pattern.

Source: Confluent Series D funding announcement.

Being an open source VC backed startup, means large exit via IPO or M&A is #1 priority for Confluent’s backers, and that`s OK, after all VCs also need to deliver high returns to their own backers!:) But in order to deliver significant returns to their VCs, Confluent needs to deliver great value to its customers and gain significant market share — meaning increased adoption of its hosted data streaming platform, fast revenue growth and other enterprise support services. Unfortunately these business objectives become harder to meet if big cloud vendors with high distribution power such as AWS are offering similar hosted services. Hence Confluent reacted with licence changes soon after AWS announced their Amazon Managed Streaming for Kafka (MSK) — after all this will probably have a massive negative impact on the revenue growth of Confluent’s own hosted service.

Fortunately for Confluent, Google recently launched a partnership program aimed at a companies behind notable open source projects including; Confluent, DataStax, Elastic, InfluxDB, MongoDB, Neo4J and Redis Labs. The partnership is not just about enabling these companies to natively integrate with GCP, it is also thought to be based on revenue sharing model with GCP. If true, this gives Google an incentive to not fork the open source code to create a competing hosted service on GCP. For Confluent’s customers already using GCP, the partnership also adds the following great benefits:

  • Unified billing - customers can get one invoice from GCP that includes the Confluent’s hosted service.

  • Fully managed services - running natively on GCP, means Confluent’s platform is optimized for better performance and latency between other services/applications running on GCP.

  • A single user interface to manage apps - this includes the ability to provision and manage Confluent’s service from the GCP Console.

  • Google Cloud support - customers can manage and log support tickets in a single window and not have the hassle to deal with different providers.

Why Should Google Acquire Confluent?

According to Gartner’s Magic Quadrant below, GCP is currently in 3rd place - well behind AWS and Azure!

By acquiring a notable data streaming company born out of a popular open source project like Kafka, GCP will overnight become a very relevant infrastructure player in the emerging data streaming space. Confluent can also enable GCP to expand its services across various use cases of modern enterprise data architectures. Indeed Apache Kafka is used across a wide range of use cases within modern enterprise data architectures including the following:

Source: Confluent.com - 2018 Apache Kafka Report.

Confluent could also add a great value to Google’s recent acquisition of Looker - potentially making GCP an almost ubiquitous infrastructure for business intelligence software. This would help accelerate GCP’s revenue growth to catch up with AWS and Azure. According to IDC, the global revenue for big data and business analytics (BDA) solutions was $166 billion, up 11.7% over 2017 and could reach $260 billion in 2022, with a compound annual growth rate (CAGR) of 11.9% .

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The Kähler VC.X platform is powered by a novel quasi Topological Data Analysis (TDA) framework that is specifically deployed to help find hidden relationships that exist in data sets from various sources/formats. These hidden relationships are synthesized into actionable insights that are meaningful to VCs in respect to deal source process, M&A strategies and market trends.