Marketing departments and business leaders have long understood the value of collecting and analyzing data to help drive ad campaigns and make strategic business decisions. Generally, information was housed internally on a company's database, and creative folks would slice and dice it to determine consumers' behavior patterns and business trends.
But with the advent of the Internet of Things, or IoT, an exploding mobile market, and an all-time high capacity to track consumers' behaviors, the internal database simply won't do. There is too much data to assimilate, and most companies are not equipped to maximize their data's value using supercomputers capable of predictive analysis, or "machine learning." Enter Big Data and big opportunities for early adopter IBM (NYSE:IBM) and fellow tech behemoth Microsoft (NASDAQ:MSFT).
How big is Big Data?
According to IDC, Big Data and the analytical tools used to generate actionable results will become a $125 billion industry this year. As impressive an opportunity as that represents for IBM, Microsoft and other players in the business, expected growth of the market in the coming years is even more staggering.
Over the next five years, per IDC, off-premise cloud-based spending will grow three times faster than traditional in-house expenditures, and a fair portion of that will be for predictive analytics tools; there's simply too much information to use "old" technologies. In fact, 2015 is expected to be a blowout year for machine-learning tools in association with Big Data, growing nearly two-thirds faster than the market for nonpredictive solutions.
Signs of life
It has become apparent that the providers that will eventually dominate the Big Data space are those that offer a bevy of solutions rather than a piecemeal approach. That requires not only the capacity to store reams of data, but to do so in the cloud using predictive analytics. As IBM demonstrated in 2014, CEO Ginni Rometty and team are delivering on her strategic imperatives, namely cloud -- and by extension Big Data and analytic -- sales results.
Big Blue's cloud service revenue jumped 75% last year, and IBM is now tracking for $3.5 billion in annual revenue. Customers are looking to IBM for cloud solutions. As its recent deal with the U.S. Army indicates, IBM is recognized as a leader in Big Data. The Army's logistics systems generate over 40 million transactions a day and are now powered by IBM's Hybrid Cloud. Given the company's leading analytic capabilities, the U.S. Army won't be the last Big Data customers to partner with IBM.
A leader and a follower
Microsoft's virtual assistant Cortana, while a simpler example than IBM's machine-learning Watson supercomputer, is capable of analyzing data and predicting future needs. CEO Satya Nadella is using Cortana as the basis for enhancing Microsoft's predictive analytics services. Considering the relatively quick transition Nadella, and to some extent former CEO Steve Ballmer before him, is making into budding industries such as mobile and Big Data, it likely won't be long before Microsoft has a Watson of its own.
Microsoft's success in the cloud and related software-as-a-service sales is already undeniable. Last quarter marked the sixth straight period of triple-digit growth in cloud sales, and Microsoft is now tracking at a remarkable $5.5 billion in annual revenue. Microsoft's Azure cloud platform is also leading the charge into Big Data. One advantage Microsoft has over other players is the familiarity of businesses and consumers with services such as Excel, which is integrated into its cloud-based Big Data suite.
For the same reason, developers are likely to find Microsoft Big Data solutions easy to work with, in that its now-open source .NET language can be used for programming, along with several alternatives. Microsoft leads in the cloud, and IBM is ahead in predictive analytics, but both are moving fast to shore up their relative shortcomings to get a jump-start on this exploding industry. Now toss in the value both represent compared to their peers, along with a nearly 3% dividend, and there's much to like about the Big Data futures of Microsoft and IBM.
Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.