The Database Report – April 2005

Welcome to another edition of The Database Report – where we examine the goings on in the DBMS market place during the past quarter. This time around we look at the first
quarter of 2005, and there was a lot of activity on which to report. IDC released their DBMS market share figures for last year, Oracle tied up the loose ends of its Peoplesoft acquisition and got
embroiled in another one, and IBM made an acquisition of its own. We’ll discuss these issues, and more, in this edition of The Database Report.

DBMS Market Share Figures

In early march industry analysts at IDC released their relational DBMS market share rankings for the past year (2004). For database professionals there was a lot to be happy about. The overall
market grew by almost 12 percent reaching approximately $15 billion. This doubled the 6 percent growth experienced by the RDBMS market in 2003. Additionally, IDC asserts that database deployments
grew faster than revenues, so database usage is likely growing even faster than the revenue numbers show. The disparity between deployment growth and revenue growth was cited as being caused by
downward pricing pressure due to increased competition among the big three RDBMS vendors, as well as by the growth of open source RDBMS software.

There was no change in the order of the leading RDBMS vendors in 2004, with Oracle coming in at number one (41.3 percent), followed by IBM (30.6 percent), then Microsoft (13.4 percent), with Sybase
(3.1 percent) and NCR Teradata (2.6 percent) lagging far behind the big three.

The growth numbers though, tell a different story. Oracle experienced a healthy growth of 14.5 percent year over year. And Microsoft’s growth was outstanding at 22 percent from the previous year.
Of the big three, IBM’s growth was the slowest rising just 8 percent over its 2003 market share. All five of the vendors though improved their business over the previous year – and all three grew
at a faster rate in 2004 over the previous year than they did in 2003.

North America is still the biggest market in the world for RDBMS software, but Western Europe is not far behind. Interestingly, IDC placed a caveat on their market share numbers due to currency
exchange rates. In other words, taking into account the weakening US dollar the growth rates are less impressive.

Finally, the trending seems to point to the small and medium sized business (SMB) sector becoming the battleground for RDBMS. Microsoft SQL Server experienced the largest growth rate and its
traditional position is as a strong SMB provider. Furthermore, the growth in open source DBMS products is also perceived to be mostly an SMB phenomenon.

But, if you are a database professional, there really is no other way to look at this report than positively. The bottom line is that the RDBMS market experienced its strongest growth since the
days of the Internet bubble.

Acquisition Accomplished

Now let’s turn our attention over to the Oracle acquisition of Peoplesoft. As reported last quarter, Peoplesoft agreed to be acquired by Oracle after their offer was increased to $26.50 per share
(for a grand total of approximately $10.3 billion). So, finished chewing, the time has come for Oracle to digest this tasty Peoplesoft morsel.

In January, Oracle started shuffling the deck chairs in its applications software division to integrate Oracle’s applications business with the acquired Peoplesoft. After a long tenure in charge
of the division, Ron Wohl was replaced by John Wookey. Wookey joined Oracle in 1995 and worked his way up through Oracle’s applications software business. Also, Juergen Rottler was named to
succeed Michael Rocha as the executive in charge of Oracle’s global support services group. This was good news for Peoplesoft employees because Rottler, a former HP executive, had been with Oracle
for just four months. So the perception is that he would be more open to working with Peoplesoft employees.

However, executive shuffling notwithstanding, Oracle had to deal with some unfinished business. As of early January the Peoplesoft acquisition had not yet been finalized, and Oracle had to extend
its tender offer. Oracle needed 90 percent of the stock to be tendered to close the deal, but it only had 89.4 percent as of January 4th. But by extending the offer until January 6th Oracle was
able to gain the additional .6 percent – and more – needed to close the deal. On January 7th Oracle reported that more than 97 percent of the outstanding Peoplesoft shares had been tendered to
Oracle.

After completing the takeover Oracle announced that it was laying off 5,000 employees from the workforce of the now-combined companies. That move brings Oracle’s payroll to about 50,000 employees.
Reports indicate that only about 300 of the layoffs were to come from Peoplesoft’s Pleasanton, CA headquarters. Prior to the acquisition there were about 3,900 employees at Peoplesoft’s
Pleasanton location. So Oracle obviously intends to place great value on its acquired assets, with plans to support Peoplesoft customers. Indeed, Larry Ellison pledged that Oracle would retain 90
percent of Peoplesoft’s developers and 90% of its support staff. By taking such actions, the company does a good job of communicating its intent to Peoplesoft customers.

From a product perspective Oracle stated that it intends to carry out PeopleSoft’s development plans for the next several years. Oracle expects to continue development through PeopleSoft 9.0 in
2013. Regarding its existing applications, Oracle continues to plan for the release of Oracle Applications 12. It seems that Oracle wants to keep existing customers and reduce the FUD in the market
place. This is a good idea.

Eventually Oracle plans to merge the Oracle and PeopleSoft applications and that project has been dubbed Project Fusion.

In late January Larry Ellison was reported as stating that Oracle would not buy another company until it had successfully integrated the Peoplesoft acquisition. “We’d be foolish to take on
another company until we have proven that we had successfully completed the integration,” Ellison said. A couple of days later Ellison claimed that the integration was complete. Does anyone out
there reading this actually believe that? I guess he had to say that in order to acquire another company (more on that later).

On a final note about this acquisition, Oracle intends to merge its annual Oracle World conference with Peoplesoft’s Connect conference, into one large Oracle OpenWorld event. Oracle will
integrate Peoplesoft and JD Edwards content into the event. Oracle’s annual conference is already one of the industry’s largest, and with the added Peoplesoft content it will only get larger. So
keep your schedule open for the week of September 18, 2005 to be in San Francisco for this new mega-event.

Another Nasty Battle?

In late February SAP announced its intent to acquire Retek, a Minneapolis-based retail software maker, for $8.50 a share. Retek is considered the leader in the space for application software that
supports large retail companies.

Then Oracle entered the fray. Oracle started buying Retek stock after SAP announced its intent to acquire the company – already Oracle has acquired more than 5.5 million of Retek’s outstanding
shares. And then in early March Oracle made a competing offer of $9 a share. Oracle and SAP both want to acquire Retek to improve their ability to support large retail customers. Retek earned $8.2
million on revenue of $174.2 million in 2004.

So you can see what it was important that Larry announced that the Oracle/Peoplesoft integration was complete – it had to be so Oracle could acquire again. Seriously though, this is a good move for
Oracle. Either they get the market leading retail application provider for $9 a share ($525 million), or they make SAP pay more.

Retek is probably a better fit for Oracle than SAP – at least in terms of how it would impact Retek’s customers. SAP already has applications offerings for retail customers and they would have to
figure out how to combine the two product sets. Oracle does not currently compete in this space, so it would likely just maintain the Retek software substantially as it is.

I’m sure that the final price on this deal has not yet been set – it is sure to be higher than $9 a share. Indeed, by mid-March the stock was trading at over $10 a share. (And right as this
article was being finished SAP upped its bid to $11 a share.)

Oracle versus SAP: Round 2

And the Retek battle is not the only fight being waged by SAP and Oracle. In mid-January SAP acquired TomorrowNow, a customer support provider for Peoplesoft and JD Edwards applications. Then SAP
introduced its “safe passage” program, designed to lure companies using Oracle’s applications over to SAP’s mySAP and NetWeaver offerings. The program offers terms and conditions to ease the
migration.

Of course, Oracle did not take the news sitting down. During Oracle’s analyst day Larry Ellison warned SAP that Oracle will protect its intellectual property. The assumption seemed to be that SAP
would continue to deliver support for Oracle applications via TomorrowNow. I think SAP’s goal is more along the lines of converting those customers than to continue supporting them – at least in
the long term. Other News From Redwood Shores

In other Oracle related news, Oracle added to its security certifications and now boasts 22 certifications. Oracle now has completed Common Criteria Evaluations at EAL4 for the following products:
Oracle Internet Directory, Oracle9i Database Release 2, and Oracle9i Label Security Release 2. This is the highest level generally achieved by commercial software.

Also in security news, Oracle released a critical security patch set in mid-January that addressed vulnerabilities in multiple Oracle software products. The update includes a fix for a
vulnerability that allows an attacker to gain unauthorized privileges or commit buffer overflow attacks on Oracle’s database software. The patch follows Oracle’s announced strategy of releasing
patches on a quarterly basis.

Also in January, Oracle announced the availability of Oracle Database Lite 10g. Basically this brings the grid support of 10g to the mobile platform for Oracle users.

Finally, Oracle announced two new benchmarks that achieving record performance. If benchmarks interest you, here are the details. The first is a TPC-C benchmark on a four processor Linux platform
achieving 161,217 tpmC (transactions per minute) with a price-performance ratio of $3.94/tpmC. The second is a SPECjAppServer 2002 DualNode performance benchmark with the Oracle Application Server
10g. On a Dell PowerEdge 7250 with four Intel Itanium 1.6 GHz 2 processors and Red Hat Enterprise Linux AS 3, Oracle Application Server 10g using Oracle Database 10g Standard Edition achieved a
mark of 1,674.13 TOPS@DualNode (Total Operations Per Second) with a price-to-performance ratio of $132.52 USD/TOPS@DualNode.

IBM: Does it Stand for I’ll Buy More?

IBM was busy this past quarter, too. In early January IBM announced that it acquired analytics software maker Systems Research and Development (SRD). SRD was a private company, so no terms were
announced. The move was made to continue to round out IBM’s business intelligence portfolio. The SRD software is designed to discover obscure associations in data. It uses technology called
Non-Obvious Relationship Awareness (NORA) that can sift through data elements that seem to describe different people but actually are related to a single individual. NORA can send alerts when it
detects suspicious or positive customer relationships.

Then in mid-March IBM struck again, this time announcing their intent to acquire ETL and information integration software vendor Ascential Software. The deal is an all cash transaction valued at
approximately $1.1 billion (or $18.50 per share). This values Ascential at 3.5 times revenue. The acquisition is expected to close in the second quarter of 2005, subject to customary closing
conditions and regulatory approval.

Ascential Software was formed in 2001 from the bits of Informix that IBM did not acquire at that time. This move completes IBM’s total acquisition of the former Informix Software. IBM plans to
make the acquisition as seamless as possible by vowing to honor all existing contracts and to offer existing Ascential employees similar jobs at IBM once that acquisition is finalized.

There will be some overlap with existing IBM technology but I would think that the EII stuff will get incorporated into their Information Integrator line; it will be interesting to see what IBM
does with regard to Data Propagator (its ETL product for DB2) and DataStage (which it acquires with Ascential). Both Data Propagator and DataStage have large committed installed bases and IBM is
probably going to continue to support both products, at least for a while.

These acquisitions are smart moves for IBM because they bolster IBM’s BI and data integration portfolio. The data integration market is a growth market – IDC predicts it will grow from $9.3
billion last year to $13.6 billion by 2008.

I think the biggest impact of the Ascential deal will be further consolidation in this market. Look for Oracle and Microsoft potentially to make acquisitions in this space. Informatica is now the
leading independent software vendor in this market and my guess is that they will soon be swamped with propositions. There are other smaller players, such as Golden Gate and Sagent, which might
become acquisition targets.

There is an interesting tangential point that links this story with the SAP / Oracle story above. Ascential and SAP have a relationship whereby SAP offers Ascential’s data integration offerings to
SAP’s customer base. The question here is whether SAP will continue this partnership now that IBM will own Ascential? As IBM integrates the Ascential offerings into its WebSphere product line
there will be a competitive issue with SAP’s NetWeaver offering. So, SAP may decide to abandon the relationship and pursue something with Informatica, for example. Time will tell…

In Other IBM News

Acquisition was not the only news on the IBM front last quarter. In March, IBM announced enhanced DB2 content management software in the form of DB2 Content Manager 8.3, DB2 Document Manager 8.3,
and DB2 Common Store 8.3. The new versions of these products improve XML support, provide better security features, and introduce improved indexing and searching capabilities.

In late January IBM announced its fourth quarter earnings and it beat expectations quite handily. Revenue for the quarter rose by 7 percent to $27.67 billion, with profits of about $2.04 billion,
or $1.80 per share. Software revenue was up 7 percent year over year, but data management software was up more achieving 8 percent growth.

In mid-February IBM had some bad news as security-related flaws in DB2 were discovered. The vulnerabilities made it possible to exploit DB2 for DoS attacks or to reveal sensitive information. The
news was not too bad, though. The flaws were actually uncovered by IBM and by the time they were reported IBM already had a fix pack available to resolve the issues.

On the Informix front, IBM announced their intent to deliver an Express Edition of Informix Dynamic Server this year. This is good news for Informix users as it signals IBM’s ongoing support of
the Informix market. As mentioned earlier, the SMB market is hotly contested among the DBMS vendors, and this gives IBM another entry point. However, not all was cheery for Informix users. SAP has
decided to discontinue support for Informix Dynamic Server for future releases of its ERP software. So, SAP users that currently run Informix Dynamic Server will have a choice to make: either
switch to a different ERP or switch to a different DBMS. The DBMS switch is the easier one so most will opt for that route – with most organizations choosing either DB2 or Oracle.

Finally, in a move to show its support for the open source community, IBM offered free access to 500 of its software patents. About 70 of these patents pertained to database-related technologies.
With this donation the open source community now has access to use a wealth of technology that was previously protected by IBM patents.

SQL Server 2005 Pricing

In late February Microsoft announced pricing and licensing details for SQL Server 2005, which should become generally available the second half of this year. If not, I guess it would have to become
SQL Server 2006, wouldn’t it? Any way, the news is that the price for SQL Server will be going up by about 25 percent.

Microsoft has been able to gain traction and post enviable growth numbers largely by targeting SMBs with attractive pricing. Indeed, the price of SQL Server has been stable for about 5 years now.
Even with the price hike, But SQL Server remains less costly (in terms of initial cost) than similar Oracle and DB2 implementations.

But for the really big news from Microsoft – a new version of SQL Server – we will just have to wait until later this year.

Speaking of Potentially Big News

In late February, Tom Rizzo, director of SQL Server product management at Microsoft, indicated that Microsoft is thinking about including SQL Server 2005 in Microsoft’s shared-source program. This
would allow SQL Server 2005 customers to look at the Microsoft source code.

By going down this road Microsoft could gain some of the advantages of open source without fully opening up its code as open source. The general idea is that customers looking at the code might be
able to spot potential vulnerabilities that might get past QA at Microsoft. Furthermore, it might give Microsoft some positive PR given that it is usually painted as the villain by open source
proponents.

Speaking of Open Source

In late January, Internet Storm center warned of a malicious automated bot designed to attack vulnerable MySQL installations. Basically, this is a type of DoS vulnerability, but it does show that
open source is not immune from these types of problems. Summary

And so end the first quarter of 2005. The packaged applications market continues to be a battlefield and the major DBMS vendors continue to make headlines. Be sure to check in at TDAN.com next
quarter to read The Database Report and keep up on the happenings in the DBMS market.

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About Craig Mullins

Craig S. Mullins is a data management strategist and principal consultant for Mullins Consulting, Inc. He has three decades of experience in the field of database management, including working with DB2 for z/OS since Version 1. Craig is also an IBM Information Champion and is the author of two books: DB2 Developer’s Guide and Database Administration:The Complete Guide to Practices and Procedures. You can contact Craig via his website.

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