Ask a database vendor about the rough patch the industry is goingase industry need to shrug its recent downturn in fortunes? through and the response will probably be bullish. Databases are a bread-and-butter business, it will say. Everybody needs to store and manage data, so despite the tribulations of vendors like Informix, Sybase and Oracle, the long-term future of the genre is not in doubt.
A few years ago, a baker might have said much the same about bread - a staple food, and thus a good market to be in. But that was before supermarkets began selling it for less than it costs to bake. The poor baker, lacking a wide range of products on which to recoup the loss, has found it difficult to compete. If he has survived, it is either because he is a good cook and customers are prepared to pay extra, or because he has stocked up with fancy foreign delicacies and opened a coffee shop.
The same choice is facing the database industry. 'Databases are commodity items, and the only people who don't realise it are the database vendors,' says Stuart Ashton, chairman of Infuse, the Informix user group. 'I think the database market is saturated and that can only impact these companies' database revenue.'
The market for straightforward relational database (RDB) engines - the sort that still handle 95 per cent of the things a business wants to do with a database - has levelled off, and prices have plummeted. Sybase, for example, reckons the revenue per seat has dropped by two-thirds in the past two years. This is partly due to market saturation, but it has not been helped by the millennium and EMU, which have stalled the kind of new development projects that are critical to healthy database sales.
However, there are still potential growth areas within the database market and related fields. These include data warehousing, which is no longer the preserve of the wealthy corporate, but being expanded to include implementations for medium-sized businesses. There is also mobile computing and the need to integrate the growing number of remote users into company data structures; middleware, which according to a report by Ovum's European Software Markets Service, is the 'intelligent plumbing which is becoming as important as the shape of the water tank'. There are universal databases - an attempt to integrate the RDB with the object database will be the mainstay of future information processing and will be essential for effective integration with multimedia data and the internet.
The RDB will handle transactions, and the object database will be responsible for content. In quality and functionality, the major database engines are evenly matched.
They can all perform the standard transaction processing which the majority of database systems require. Where they differ is usually in peripheral features which are of interest to relatively few customers. So the way the database vendors cope with the supermarket challenge, and with the new opportunities outlined above, will dictate their future success and their viability as channel partners.
The supermarket in the database arena is Microsoft. If anything illustrates the commoditisation of the database market, it is Microsoft's strategy of virtually giving SQL Server away free with BackOffice - a route which accounts for half the copies of SQL Server shipped. This has made competition at the lower end difficult, and only Oracle has the might to fight on equal terms. The current version of SQL Server does not scale well. But the next one, scheduled for release in late summer or autumn, promises to handle enterprise-sized data volumes and transaction rates. If it delivers, then, combined with Microsoft's plans for the distributed systems market and mobile computing, it could make the company a serious competitor in the core database arena - especially since its rivals' traditional home ground is Unix rather than the up-and-coming NT.
Significantly, Microsoft has no immediate ambitions in universal databases, which it believes will take two or three years to become popular. Microsoft likes to make its money by following trends rather than setting them.
The antithesis of Microsoft, at least in marketing terms, has been Informix.
It has taken the master baker approach, eschewing the distractions of coffee shops and dedicating itself to core database technology. It presumably hopes to use its reputation for technical excellence to persuade customers to overlook the higher costs of buying unbundled products, as well as the less-than-certain future of the company.
Loss-making in 1996 and 1997, beset by class actions and investigation by the Securities and Exchange Commission, forced to shed 20 per cent of its staff, and reduced to issuing poison pill options to ward off hostile takeover bids, Informix hardly looks like the kind of rock on which to build one's core IT systems.
'Our troubles have been largely self-inflicted,' admits Informix UK marketing manager, Terry Lawlor. 'We mismanaged the business in 1996. It started with the universal database. There has been a tendency among database vendors to push universal technology too far and too fast, overestimating the demand for multimedia and internet features and underestimating the marketing spend required to establish such a new approach to data handling.
Leading the rush to the cliff edge was Informix, which two years ago bought universal database company Illustra. The Illustra product was amalgamated with Informix's existing RDB offering and launched as the hybrid product Universal Server. This was a technical success but a marketing disaster, as the Informix management predicted a rapid sales curve, which never materialised.
'It has done an excellent job integrating the two technologies, and if there had been market demand for the technology at the time, it would have leaped ahead,' says Graham Twaddle, technical director of financial systems house Sherwood International, a major Informix and Oracle user. 'But it was too far ahead of the game and people weren't prepared to pay the price in terms of retraining overheads and so on.'
Instead, Informix tried to meet its targets by forward selling, counting shipments to the channel as though they had been actual sales. The products didn't sell, the market became saturated, and the company was forced to re-state its revenue for 1994, 1995 and especially 1996. Heads rolled, confidence slumped and some potential customers were scared off. Informix has bitten the bullet, putting the emphasis back on its RDB engine, rechristened Dynamic Server, with the whizzy new stuff - universal database, data warehousing, Web integration and so on - as optional extras. Its technology is still impressive, but many feel that it has caught up with it. This could be bad news for Informix, which needs to stay ahead of Oracle.
Sybase, the other database company to have been in serious trouble, seems further along the road to recovery. Last year it would have made its first profit since 1994, had its Japanese subsidiary not ignored company policy and indulged in some forward selling. Sybase hopes to take the coffee shop route to profitability, reducing its reliance on core database technology and diversifying into tools and middleware.
Database licences now account for about a third of the company's revenue.
Asked if Sybase still sees itself as a database company, Sybase UK managing director Colin Tenwick replies: 'I don't think we do. People are looking for a lot more than a pure database, and the days of fast growth in pure database sales are over. We're not the market leader, so we have to be able to add value.' Version 11 of Sybase's Adaptive Server core technology is a strong contender against Microsoft and Oracle on NT platforms, as are its PowerBuilder range of tools. Now it hopes to make its fortune in three new specialist areas: data warehousing, mobile computing and electronic commerce.
It has developed tailored versions of its core database technology for the first two - Adaptive Server IQ and Adaptive SQL Anywhere - and a transaction-cum-database server for secure Web transactions, called Jaguar. But Sybase is not out of the woods yet. Tenwick will not rule out the possibility of redundancies - the company is finding it tough to break into the data warehousing market - and some analysts question whether it is selling enough middleware and tools to offset the downturn in its database revenue.
The good news for resellers is that Sybase is actively courting the channel.
From being a direct seller two or three years ago, it now has two value-added distributors - Clarity and Open Computing - and is looking for channel partners, particularly specialist resellers that could lever it into new markets. 'We need to get broader coverage in the market,' says Tenwick. 'When you say Sybase, most people think of databases. We have to get the message across that there's more.'
Oracle is the strongest of the database vendors, and its recent troubles have been less serious than those of Informix and Sybase. However, its shares took a knock in December when its second quarter results disappointed Wall Street analysts, according to Oracle, largely due to the economic crisis in the Far East.
Like Sybase, Oracle makes only about a third of its revenue from databases.
But if Sybase has turned its bakery into a coffee shop, Oracle has developed into a convenience store, selling applications for vertical and general office automation markets.
Wall Street may approve - revenue from applications is growing faster than those from database sales - but Oracle's database customers are not all cock-a-hoop at the diversification. 'It can be worrying, because what you'd like to see is more work going into the database kernel,' says the database administrator at a university site. But Oracle remains bullish. 'We just don't see Sybase and Informix as major rivals any more; they're irrelevant,' says Oracle UK product marketing manager Andy Bailey.
Microsoft is seen as the big threat, and the spat between Microsoft CEO Bill Gates and Oracle CEO Larry Ellison has more behind it than a clash of wills. Whether the quarrel is good for Oracle is a moot point. Users do not seem bothered. But Ellison's fixation on the NC and the internet has pushed the company into strange marketing, and analysts are not impressed.
'Oracle has overshadowed the bread-and-butter message,' warns Rob Hailstone, author of Bloor's latest database report. A few years ago, Oracle's main database rival was not Microsoft, but Ingres. Ingres has become the in-store bakery of Computer Associates, which bought the company in 1994.
Renamed Open Ingres, the Ingres RDB has continued to satisfy its existing customers but made few converts, due to lack of marketing more than to any inherent shortcomings in the product. CA's more interesting database is Jasmine, a fully object database with very good Web development tools.
This could become CA's core database product.
Whichever vendor wins, the commoditisation of the database market is good news for resellers, as Hailstone explains.
'The effect is not just to lower profitability, but force database companies to change the way they sell,' he says. 'They are reverting to sales through the channel instead of high-value direct sales.'
Bailey agrees. 'I don't think there's a threat to the database industry,' he says. 'People will always need to manage data. I think databases are just becoming embedded in a higher value-add sale.'
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