IBM taking Oracle database share
IBM software breaking away in UNIX database growth
Why did Oracle buy Sun Microsystems? Perhaps to stem the steady flow of database customers using UNIX to IBM DB2 and Informix software.
Maybe bundling its database with Sun's Solaris operating system and hardware might retard IBM DB2 software and Power System growth.
While both Oracle and IBM have claimed to be taking database share from one another on recent earnings calls, the two top industry studies of 2008 market results agree IBM has the momentum.
This is not a fluke, but the result of a solid client-centric information agenda contrasting sharply to Oracle's customer gouging with high maintenance fees.
Reality check
The truth is, it's not a huge landslide of customers going IBM's way, but a significant demographic trend. Oracle still holds nearly half the total Relational Database Management System (RDBMS) market to IBM's 22 percent, according to Gartner
But Oracle client defections are real and measurable. Gartner places IBM RDBMS growth at 12.5 percent overall for 2008, while IDC pegs it nearby at 12.0.
Gartner says IBM took .1 percent from Oracle's total RDBMS share, while IDC says we took three times that amount. Either way, the tide is in our direction.
UNIX matters
Numbers are much more dramatic within the Windows, Linux and Unix environment. While Gartner reports that IBM finally pulled even with Oracle in Linux revenue growth percentage, IBM clearly outsold Oracle with 18.2 percent revenue growth in the UNIX space, compared to Oracle's 2.2 percent loss of share.
This gives IBM a relative growth of 20.4 percent over Oracle in this segment, and some real velocity.
What's happening in a challenging economy to fuel such a differentiation? First of all, IBM is winning in head-to-head competition. There are many examples (see sidebar for one recent example).
Why? Our Information Agenda provides a solid roadmap while Oracle is two years late with it's Fusion middleware solution to integrate disparate application data repositories. DB2's handling of "pureXML" provides great flexibility while its data compression provides a real cost savings in the short term. Informix's speed is also a key differentiator.
Compounding the trend
Oracle is seeing a decrease in database revenue while IBM DB2, for example, has been growing in double digits for the last few years. Oracle management needs to make up for this loss to shareholders.
From where is this revenue coming? From its clients base! Not only did Oracle greatly increase its license fees one year ago in June, but the company has been jacking-up the maintenance on its acquired offerings to match ts already-high Oracle software maintenance fees, 22 percent of its license fees.
When a client buys DB2 or Informix, IBM provides the routine software fixes and security patches for free to all licensees, even if the customer hasn't signed an ongoing support agreement.
Oracle customers don't get this support without payment of its steep maintenance fees, and adding maintenance after the fact has proven more expensive than buying them up front. According to IBM business analysts, clients who challenged these high fees ended up paying more than they would have had they not complained.
IBM is working to make companies smarter, but Oracle customers are already wise enough to question high maintenance fees. In the mean time, Oracle appears to be making its staff dumber.
Brain drain
Oracle gets high marks from industry analysts and stock analysts alike for running companies it acquired at high profitablity. Oracle ran its business at a 51 percent operating margin in its most recent 4Q09 quarter, and that's even higher than Microsoft.
But from where do these Oracle savings come? It appears that many savings may come from reducing headcount at the software companies Oracle continually acquires. Reviewing Oracle staffing on a case-by-case basis, IBM analysts see Oracle letting go of as many as 60 percent of the employees of the companies it acquires.
Layoffs provide Oracle shareholders with great value, but what does it do for Oracle clients who are paying a huge premium for support when the company gets rid of huge chunks of its expertise? Even Sybase took some share from Oracle last quarter in the UNIX space. Oracle customers are angry.
In the few hours since this story was originally posted, LSI, a leading provider of innovative technologies, has agreed to replace Oracle's database with DB2 not only for SAP, but 40 different custom applications over the next nine months. The deal includes software, IBM Power Systems hardware and IBM Migration Services to replace LSI's HP and Oracle environment.
Lessons from Windows?
Interestingly, in the Windows market, both Oracle and IBM outperformed Microsoft SQL Server. So much for having an advantage by marrying the operating system and database sales. But, in this case operating system issues might be more of a liability than an asset.
