New front opens in database war

Although the database market is clearly mature, e-commerce, content management, and integrated business intelligence are causing many larger IT shops to more closely examine their database platforms, which figure to be the driving forces for those initiatives.

According to a recent survey of IT executives conducted by AMR Research, almost half the respondents said databases will be their top investment area in 2001 and will remain the most important through 2002.

Furthermore, Dataquest estimates that by 2004 the database market will reach $12.7 billion, no mere pittance.

"As users expose more functionality over the Internet for e-business purposes you will have intense demand for data that is immediately accessible online. This in turn causes demand for [database] software that manages that data," said Carl Olofson, an analyst at IDC.

Besides the financial rewards, vendors are jockeying for advantage in the marketplace by tying their database strategy to an e-business infrastructure. Sybase, like Oracle and IBM, chose such a course.

With Sybase and Informix recently losing market share and the SQL Server from Microsoft still not up to the level of IBM and Oracle products, the major competitors appear to be Oracle and Big Blue.

At Oracle's OpenWorld show in San Francisco recently, Oracle chairman and CEO Larry Ellison claimed that the Oracle9i Application Server, working with the Oracle8i Database Server, could triple the performance of Web sites running on IBM DB2, and he brashly offered $1 million to anyone who could prove him wrong.

"It is important for Larry to be competing with someone for both internal and external purposes. Internally, it is good for a company like Oracle to be focused and motivated on a single competitor. Externally, it is Larry's way of picking one competitor to beat and therefore marginalising everyone else," IDC's Olofson said.

Ellison, on a number of occasions over the past year, has criticised IBM for becoming a services-only company and abandoning technological innovation.

But IBM, uncharacteristically, is fighting back publicly. With a sizable amount of IBM's revenue linked to its database products, it has good reason. And market share gains of the last couple of years, particularly with its distributed DB2 Universal Data Base line, emboldened IBM to take Oracle to the mat.

"We are not going to give an inch. We will outspend them, out innovate them, be cheaper, and deliver better function and support. It is our intent over the next couple of years to make this a living hell for Larry Ellison," said Steve Mills, IBM senior vice president and group executive of IBM's software group.

One area in which IBM believes it has gained an advantage over Oracle is in content management.

"The whole landscape around data management, which will be a $US10 billion market by 2003, is changing. And the biggest growth opportunity for us overall is in the content management space," said Janet Perna, general manager at IBM's data management solutions group, and the prime mover in shaping IBM's database strategies.

Jeremy Burton, Oracle's vice president of server marketing, countered that "we can provide e-business with software that will cover 80 per cent of what they do, we'll manage all their data, we'll run all their applications, and we'll automate all their business. We want to provide companies with all that infrastructure. And we are going to be able to deliver it faster and cheaper."

What is perhaps stoking these competitive fires recently is that IBM has put a few dents in Oracle's market share. Dataquest reported that for 1999 Oracle held only a slim lead over IBM for revenue gained from new licences with Oracle holding a 30.7 per cent share compared to IBM's 29.9 per cent. Microsoft was a distant third with 13.1 per cent.

Dataquest, however, does not include revenue from maintenance and support, from which Oracle makes a healthy living. When revenue from maintenance contracts is counted as part of product sales, which is how IDC reports the companies' revenues, Oracle controls 39 per cent of the market as compared to IBM's 22 per cent.

Customers, in the meantime, are still faced with choosing a database platform.

Eaton, for instance, is standing at a crossroads. The Cleveland-based industrial manufacturer was a DB2 shop until 1996, when it committed to implement only Oracle solutions, according to John Schindler, an Eaton program manager who is also on the board of directors of the Oracle Applications User Group.

Schindler said that Eaton is weighing in its e-commerce push and is considering vendor strategies, pricing, and, most important, product openness.

"At this point, we're not going to battle about the technology; it's a business decision," Schindler said.

Pricing becomes contentious

Oracle has come under fire lately for revamping the pricing structure for Web usage of its database to a scale based on the power of the systems running it. The new scheme charges customers based on the number of processors and the megahertz power of each processor.

"Power pricing is the worst thing that could happen," said Henri Asseily, CTO of BizRate. "Per-MHz [pricing] is the worst of all pricing schemes for the customer because it is not a good proxy for how much you're using the software."

Oracle CEO Larry Ellison has claimed that customers by and large like the pricing structure, adding that it aids small companies and saves large companies money.

"There is some logic to it but I think it will need some fine-tuning. I would be surprised if Oracle wasn't thinking that it would have to adjust the model as they go forward with it," said IDC analyst Carl Olofson.

In the meantime, some customers are looking elsewhere for better pricing.

The predominantly Oracle shop BizRate opted for a Sybase product to run its Web site and pays between one-quarter and one-fifth what the Oracle pricing schema would have cost.

"Oracle makes me rethink my entire strategy based on pricing, and I will never allow a vendor to do that," Asseily said. "I just want to do the right thing."

Oracle maintains that the pricing model is here to stay.

"We thought long and hard about the pricing before we did it," said Jeremy Burton, Oracle's vice president of server marketing. "The reason we are more expensive is because we have a better product."

Specifically, the pricing scheme is: $US100 multiplied by the number of processors, multiplied by the megahertz of each processor for the enterprise edition; and the standard edition costs $US15 multiplied by the same variables. So licensing the database for an eight-way 700MHz Intel processor costs $560,000. In the same vein, however, customers that need to support fewer users can license the standard edition on a single-processor 700MHz machine for $US10,500.

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