Database Wars: Who Will Survive?
Sybase Inc. reports losses
for 1997 totaling $55 million. Informix Software Inc. reports losses
of $366 million over three quarters, with a fourth
straight quarterly loss expected. And Oracle Corp.'s earnings fall
33 percent in its second quarter, as sales of database
servers grew just 3 percent. While the Asian flu
sometimes gets the blame, their troubles are rooted much
closer to home. With Microsoft Corp. capitalizing
on the success of its Windows NT operating system,
databases that are vital to the online economy are
becoming more of a commodity product.
Winners and
losers - as Wall Street sees it
Stock price changes for major software companies
Legend: MSFT - Microsoft Corp, ORCL - Oracle Corp, SUN - Sun Microsystems, SYBS - Sybase Inc
Oracle Chairman and Chief Executive Officer Larry Ellison
blames weakened demand from companies in Asian and
Pacific nations for his company's slowdown. But Oracle
was unable to deliver network versions of its key
applications or provide its developers with Java tools
until mid-January. Meanwhile, Ellison has been ardently
pushing a new architecture for network computing for the
past 18 months.
Sybase Chairman Mitchell Kertzman blames a general market
slowdown, plus development dollars being redirected by
corporate information managers to attack the year 2000
problem, as well as Asia. In Japan, in particular,
incorrect accounting procedures prompted a Sybase unit to
restate its 1997 revenue, chopping out $43 million.
There is a malaise hanging over the database market.
Databases should be in greater demand than ever with
their increasing use on the World Wide Web for
applications ranging from online retailing to human
resource tracking. But the malaise is not likely the
Asian flu.
Forrester Research Inc. analyst Donald DePalma said:
"The problem is much less in Bangkok than in Redmond
[Wash.]." The relational database arena is fast
becoming a commodity market, analysts said. And at
Microsoft, software engineers said if it isn't already a
commodity market, they'll do their best to make that
happen. Once Microsoft trains its sights on a market,
prices erode and profit margins follow suit.
"Historically, Microsoft has made consumer products
ubiquitous," said John Nordlinger, lead product
manager for Microsoft's SQL Server database system.
"Now Microsoft is going to make enterprise database
products ubiquitous."
Such a pronouncement should give the established database
vendors pause. Microsoft statisticians claimed SQL Server
licenses grew by 125 percent in 1997 to 4 million since
1993. Such figures are hard to substantiate because
independent market researchers, such as Dataquest Inc.,
haven't compiled their 1997 figures yet.
But Microsoft's presence, if nothing else, changes the
playing field. Since the mid-1980s, the established
database vendors have had a blank sheet on prices. They
don't disclose, or allow their customers to disclose,
what they charge on the grounds that each deal is
customized and includes services. Deals might start at
$50,000 and top out at more than $1 million, analysts
said.
But today's hot market is for databases that run on
Microsoft's Windows NT Enterprise Server operating
system, which will ship 1.5 million copies this year,
according to Microsoft officials.
"NT's use as a database server is relatively new. NT
servers are being sold that would have been Unix servers
in the past," said Carl Olofson, database research
director at International Data Corp.
Microsoft said it sells the most SQL Server database
licenses in the NT market, and SQL Server Enterprise
Edition runs from $7,999 for a 25-user version to $28,999
for a version that serves 250 or more users. Microsoft's
Nordlinger conceded that Oracle gets more revenue from
Windows NT database sales because its products have
higher prices. But he claimed Microsoft is selling more
copies.
Ellison countered that Oracle is the database leader in
the NT market in both revenue and licenses. And it's not
just a two-horse race. IBM Corp. is part of the
action with a revamped DB2 Universal Database, and so are
Informix and Sybase.
How quickly databases for NT servers have become a factor
is evident by looking at the last year for which figures
are available - 1996. At that time, Oracle led the pack
on all platforms, including Unix, with 25.5 percent of
database sales; IBM, 22.5; Microsoft, 11.5 percent;
Computer Associates International Inc., 6.5 percent;
Informix, 6.4 percent; and Sybase, 5.5 percent, according
to Dataquest/Gartner Group.
"The NT market will grow faster than the Unix
market, but there's still more dollars in the Unix
market," where database management systems
frequently sit on large servers and work for more users,
said Merv Adrian, database analyst for the Giga
Information Group Inc.
But the Windows NT market is growing faster than Unix,
according to Dataquest. The Unix market grew from $2.0
billion in 1995 to $2.5 billion in 1996; the NT market
grew from $180 million in 1995 to $1.5 billion in 1996.
In 1997, Adrian figured IBM and Oracle probably gained
ground, while Informix and Sybase lost it. And Informix
and Sybase have been dependent on sales to companies
using the Unix operating system, not NT.
Oracle could respond to Microsoft by lowering prices in
the NT market ("I know they're cutting prices,"
said Microsoft's Nordlinger). But Oracle, to date, has
said it will not price NT products differently from Unix
products, IDC's Olofson said.
NT is not the only area of fierce rivalry. Another
fast-growth area is business intelligence, or the
products that go into building and operating data
warehouses and data marts, analysts said.
Here a host of new competitors abound. Arbor Software
Corp., Business Objects SA and Microstrategy Inc. are
fast-growing companies that supply data extraction and
analysis products that compete effectively with those of
the mainstream database vendors. And there's another
newcomer on the horizon: Microsoft, again, which plans to
launch its Plato online analytical processing (OLAP)
engine with SQL Server 7.0 in the second half of this
year.
"It's going to shake up the industry. Plato is the
equivalent of OLAP systems that cost $100,000 or more,
and it will run on Windows 95," said Steve Murchie,
product manager. And it will be priced, much like SQL
Server, in the $3,000-to-$7,000 range for up to 25 users,
he said. Informix's MetaCube OLAP engine starts at
$37,000 on a Unix system, while Arbor's Essbase starts at
$25,000.