Taking On the Database Giants
Rick Herman is awash in digital data. He's vice-president for business and legal affairs at Sony Online Entertainment, the division of Sony (SNE) that handles Internet gaming. It's his job to ensure that the company's databases manage that information properly and on budget. To do that, Herman has traditionally relied on one of the three main database vendors: Oracle (ORCL), IBM (IBM), or Microsoft (MSFT). But lately, he's doing a bit more shopping around.
It's not that the big three don't do a good job. There's a reason they have 85% of the $15 billion database market, notes Herman. But as you would expect in any market dominated by a few players, Herman is on the lookout for better prices and more flexibility to tailor database features for Sony's unique needs.
Herman's search has taken him in an unexpected direction. He's spending a lot of time evaluating databases built around the open-source software that's disseminated and developed freely over the Internet. Sony, like most big companies, has been conservative when it comes to open source.
But that has changed since Linux, the open-source operating system, started making big inroads with servers, the computers that run Web sites and corporate networks. Those gains have let companies see firsthand the benefits of open source, which include lower costs and more control over the code.
Switching to an open-source database can slash costs for one of the most expensive segments of the software budget by as much as 90%. "If you had told us four or five years ago we would be considering these types of products at the rate we are, I would have looked at you like you were insane," he says. "But open source isn't going away, and I'm pretty excited about it."
So now Herman and executives like him are the spoils in what's shaping up to be a heated round of database wars. On one side are the defending champions -- Oracle, IBM, and Microsoft -- against a ragtag bunch of coders and some more organized corporate ventures, all going to market in different ways, but all trying to take down the Big Three using the power of open source.
This isn't the first time tech titans have defended the database turf. Oracle, now the world's No. 1 database vendor, was the clear winner in a round in the 1980s. It succeeded largely due to better marketing and execution. In the early 1990s, amid a shift in technology, a new raft of nimble competitors such as Sybase (SY) again tried to knock Oracle back on its heels -- and largely failed.
This time around, the dominant players still won't cede ground easily, especially Oracle. It's the longtime market leader with a 41% share of the biggest part of the market, relational databases, which Oracle pioneered in the late 1970s. Growth is slowing -- hence Oracle's $19 billion investment in applications -- but revenue from databases is still its lifeblood.
Open-source databases come in a wide variety of flavors. It's not like when Linux fought the server wars, and the choice was Linux against some patent-protected variety. Now it's proprietary software against the likes of Postgres, Ingres, or MySQL.
Of these, Sweden's MySQL has the most momentum. It has been at the open-source database game for a decade, but only in the last few years has that hard work started to pay off. Its free database has been downloaded 100 million times since it was released. A souped-up version, 5.0, was released last October and has been downloaded more than 4 million times.
ORACLE ON BOARD?
But staggering as those numbers may seem, very few translate to paying customers. Of every 1,000 downloads, one database is actually implemented, and only one customer ends up paying for service and support. MySQL's annual sales are just $40 million.
Still, revenue has been doubling year-over-year, and some think MySQL could be the next big open-source company to go public. "We think it would make sense," says MySQL Chief Executive Marten Mickos. "But are we in a hurry? No."
The market got considerably more crowded in November. Ingres, a loser in the first round of database wars, was spun out of Computer Associates (CA). The open-source community around Postgres, which was written by the founders of Ingres and shares some similarities, published a new release of its database software. And a startup using the Postgres code, EnterpriseDB, started making hay in the market after launching in August.
Even Oracle announced a free scaled-down version of its database for developers to play with, though the code isn't open. The reaction of MySQL's Mickos? Told you so. "We said a long time ago that most databases will go open-source once people realize that we are not just a glorified file system and that people would jump on this train," he says.
Each upstart is going at the market differently. MySQL freely admits that its database is totally different from the high-end offerings of IBM and Oracle. It's trying to be the Ikea of the database world: cheap, needs some assembly, but has a sleek, modern design and does the job. "If you are equipping some very fine room for your old relatives, maybe you buy antique furniture. But everyone else uses Ikea," Mickos says.
Even though some contend that its cheap databases are putting pressure on prices, MySQL is also expanding the market, bringing powerful technology to small businesses or niche divisions of big companies that never could have afforded a database before. MySQL largely relies on customers who have downloaded the database to contact it when they want support, cutting out the costly direct sales force that most enterprise software companies employ.
Ingres, on the other hand, looks more like a traditional software company and is going after Oracle head-on. It was purchased out of CA by private-equity firm Garnett & Helfrich Capital and is being run by Terry Garnett until a permanent chief executive is hired. Garnett is no stranger to the database world. In the early 1990s, he started work at Oracle on the same day his wife quit the company to head development at scrappy up-and-comer Sybase.
GET A LIFE.
This time Garnett is the one with the scrappy upstart. Ingres is private, flush with cash, and already boasts a sizable base of paying customers. His first priority is keeping them happy. Nearly half of his team members are ex-Oracle folks, who are well versed in what made Oracle the victor the first time around.
Bowater, a $3 billion paper and pulp manufacturer, says it's happy to stick with Ingres. J. Tyler McGraw, Bowater's staff database administrator, says Oracle is too complex. "I administrate over 40 databases across the company, and I couldn't do it on Oracle," he says. "I took an Oracle class one time, and I thought, 'How do you guys have a life?'" The big question is whether Garnett & Co. can expand that base. A big first hurdle is rebuilding the Ingres brand, Garnett says.
Then there's EnterpriseDB, a company built around Postgres. Its total downloads to date are only a bit bigger than what MySQL sees in a given day. However, some say EnterpriseDB has the most innovative business model of the three: Its products look and feel exactly like Oracle's, allowing almost no downtime for retraining database administrators.
One thing all three have in common: They're all tuned in to the kinds of rumblings that Sony Online Entertainment's Herman had: The databases work fine, but as data volume grows, so do the checks to Oracle, IBM, or Microsoft. Many users aren't clamoring for more features, and some don't even use the bells and whistles they already paid for. They would happily trade some to get their hands on the source code and a better deal. "We're all throwing rocks at the same empire and trying to get customers to see that by default you don't go with this one vendor," Garnett says.
Oracle sharply disagrees. Robert Shimp, its vice-president for technology marketing, says his customers prize innovation, and that's a game Oracle won in the 1990s and continues to excel at. He also argues that customers want to buy more software from fewer vendors, to simplify their lives. That's why Oracle has been aggressively building its position in other parts of business software, such as middleware and applications, through purchases of Siebel, PeopleSoft, J.D. Edward, and others.
Who's right? Analysts say both are. One group of customers wants the latest in databases and will pay up for it. And -- as the runaway downloads of MySQL show -- another group is hungry for a different way.
The wild card in all of this will be whether big, successful tech companies get behind the upstarts. Linux hit prime time only when IBM, Oracle, and others got behind it, rewriting their software to make it compatible and convincing worried CIOs that it was robust and reliable enough to entrust their business to it.
A company such as SAP (SAP) could be pivotal. The German software giant is locked in an applications war with Oracle, but the bulk of companies running SAP applications run them on Oracle databases. So even when SAP wins an application deal, it's often making money for its archrival. That doesn't sit well with ultracompetitive SAP, which already has a burgeoning partnership with MySQL. Closer ties there could mean more SAP applications on MySQL databases. Elsewhere, Red Hat (RHAT) has endorsed both MySQL and Postgres, as did Sun Microsystems (SUNW) last November.
Microsoft has never been a friend to the open-source movement, and don't expect much backing from IBM or Oracle either. As the latest round of the database wars heats up, they have far too much to lose.