The Database Report – January 2006

Here we are at the end of another year. And it is time to analyze the fourth quarter of 2005. This time around we investigate some smaller acquisitions, new software releases, revenue
announcements, and news of the open source DBMS market – among other interesting tidbits. So let’s start our review of the quarter with Oracle, a company that is always making news and noise.

Oracle Continues Its Buying Spree

Oracle bought four more companies during the fourth quarter of 2005: Global Logistics Technologies, Innobase, Thor Technologies Inc., and OctetString. This represents Oracle’s tenth, eleventh,
twelfth, and thirteenth acquisitions over the course of the past year or so.

Global Logistics Technologies is a maker of logistics and transportation management software. The application software it develops allows users to plan, analyze and execute their supply chain, as
well as to chart and execute logistics planning. This deal was announced at Oracle’s annual Open World conference in San Francisco.

The second, and really, more interesting deal is the acquisition of Innobase. Innobase develops InnoDB, an add-on storage engine for MySQL. InnoDB is distributed under the GNU GPL open-source
license. MySQL bundles this software with its open source DBMS and it is this engine that provides MySQL with much of its ability to handle transaction processing requirements. The MySQL contract
with Innobase to supply the InnoDB engine comes up for renewal next year. And there has been a lot of speculation on what will happen now that Oracle controls Innobase. Oracle has indicated that it
expects to negotiate an extension of the contract, but MySQL may be wary of continuing along its current path now that Oracle is in the mix.

In the wake of the Innobase acquisition many industry pundits have proclaimed many ridiculous things, such as “InnoDB is now dead” or “MySQL is in trouble now.” In reality things are not going
to be that severe. First of all, Oracle seems to be committed to expanding its involvement with open source. It has been an advocate and supporter of Linux helping to solidify its place as an
operating system of choice in large organizations. And by supporting Linux, Oracle bolsters a Microsoft competitor. Microsoft competition is something to think about in this context, too.

MySQL competes more strongly against Microsoft in the SMB market than it does against Oracle in larger organizations. Oracle could have purchased Innobase to bolster InnoDB, and possibly to create
additional storage engines for the open source market. If doing so bolsters competition against Microsoft, then Oracle is happy.

But let’s take a little different tactic in trying to assess why Oracle would make this acquisition. A little while ago SAP made a deal with MySQL to hand over its SAP DB to MySQL. SAP did not
want to compete in the DBMS market, but they hoped to have an enterprise capable “cheap” database option for its SAP R/3 application. By turning SAP DB over to MySQL, SAP thought it could get
that option without building the DBMS itself. Well, it seems that MySQL has not done much with SAP DB other than renaming it MAXDB. Evidently its plans were to switch user over to MySQL. Now, here
is where it gets interesting. In order for MySQL to support the large, transaction processing environment of SAP its users will need to deploy the InnoDB engine. Perhaps Oracle saw this and decided
to control this crucial technology to throw a monkey wrench into the works. SAP is a larger competitor to Oracle than MySQL is.

Furthermore, if things ever get to the point where MySQL plus InnoDB starts to hurt Oracle DBMS license revenue, then all bets are off. Oracle will take action to protect its gravy train. But
Oracle’s acquisition of Innobase does not mean that MySQL can be immediately thwarted by Oracle whenever it chooses. Remember, the InnoDB code was distributed under GPL so the source is available
to MySQL if they want to take it and move ahead on their own.

Now to continue debating myself on the issue, we need to remember that MySQL is not a pure 100 percent open source offering. The GPL version of MySQL can take the GPL version of InnoDB and move
along as if nothing happened. But MySQL also has a traditional commercial license, as well — and Oracle controls the commercial licensing of InnoDB. I would expect Oracle to capitalize on that.
Why wouldn’t they?

Of course, MySQL has other options, too. It can build its own storage engine that provides transactional capabilities or it can license another one from a company that is not Oracle. One option
would be to revive its earlier talks with Sleepycat, the company that develops and markets the open source Berkeley DB.

Only time will tell what the future holds for the unholy trinity of MySQL, InnoDB, and Oracle. We’ll look at other developments in the open source database market later, but for now let’s turn
our attention back to Oracle.

Then, in mid-November Oracle snagged a couple of security software vendors: Thor Technologies Inc. and OctetString. Oracle did not disclose how much it paid for these two private companies, which
indicates that it is not paying very much for them.

Even so, the technology Oracle gains by acquiring these companies is significant in this day and age of data protection requirements and regulatory compliance. Both Thor Technologies and
OctetString provide identity management software to ensure that only authorized users can read and change sensitive data. Look for Oracle to incorporate these capabilities into its other offerings.

Finally, Oracle continued to work its way through its still pending acquisition of Siebel Systems, Inc. The acquisition, Oracle’s second largest after Peoplesoft, is expected to close sometime in
2006. In late October Oracle responded to a request for information from the U.S. Department of Justice. The request for information was to comply with the Hart-Scott Rodino Act, legislation that
ensures antitrust laws are followed, and it does not seem to imply legislative action on the part of the government to stop the acquisition.

My guess is that no legal action will be taken and the acquisition will be allowed to occur. Oracle’s current share of the CRM market is tiny so it would be very hard to levy monopolistic charges
at Oracle with regard to its pending acquisition of Siebel.

TimesTen Again

Regular readers of this column know that Oracle purchased TimesTen software, makers of the TimesTen in-memory database, in June 2005. Well, in Mid-October Oracle confirmed its commitment to the
product by announcing an upgraded version, Release 6.0 of the TimesTen database engine.

The TimesTen DBMS keeps data in memory, which optimizes application performance by removing the disk processing. The company also is touting the product as an enabler of horizontal applications and
SOA because it overcomes many of the bandwidth challenges such implementations encounter.

One interesting feature of TimesTen 6.0 is the Cache Connect option that complements Oracle Database 10g. Cache Connect loads a subset of data into TimesTen, propagates updates in both directions,
automates SQL requests for non-cached data and resynchronizes data after failures. This feature combines the high performance of TimesTen with the high scalability of Database 10g.

Additional highlights of the new release include tighter integration with Oracle databases, support for larger in-memory databases, improved throughput, advanced replication, and broader support of
Java (JDBS, JMS, J2EE). Also, several SQL statements that were implemented differently in TimesTen and Oracle have been standardized.

The Executive Turnstiles

Let’s take a quick look at the comings and goings of Oracle and ex-Oracle executives. The first big news of the quarter was that Oracle CFO Greg Maffei resigned after completing a very short stint
with the company. The former Microsoft executive was employed by Oracle for only months. Although not announced at the time of his exit, later stories report that Maffei will become the new CEO of
Liberty Interactive, a newly-formed subsidiary of Liberty Media Corp. Liberty is a holding company with a large portfolio of media investments and annual revenue of more than US$7 billion.

Oracle’s CFO position has operated something like a revolving door since Jeff Henley vacated the CFO position in 2004 to become Oracle’s chairman. Oracle Co-President Safra Catz will once again
take over CFO duties as she did before when Harry You departed in March 2005 to become CEO of BearingPoint, Inc. And You was only in the position for nine months when he departed. It is enough to
make you wonder how horrible the job of being Oracle CFO must be if they can’t keep anyone there for more than a year, isn’t it?

Oracle indicated that Catz will permanently fill the job and the company is not going to conduct a search for a new CFO.

In other executive comings and goings we turn our sights to the next gig for Craig Conway, former CEO of Peoplesoft, former thorn in the side of Larry Ellison, and former Oracle employee. Conway
has joined up with Salesforce.com – a competitor of Oracle in the CRM applications market. Conway was appointed to Salesforce.com’s board of directors.

So it looks like Conway once again is poised to do battle against his former employer. It will be interesting given the heated rhetoric of past skirmishes. Conway has called Ellison a “ruthless
warlord” and when he was CEO of Peoplesoft referred to Salesforce.com as inconsequential. Hmmm… I wonder whether the warlord now views Conway as inconsequential?

Now that Conway is on board, Salesforce.com boasts two ex-executives of Oracle since Salesforce.com CEO Marc Benioff is also an Oracle alumnus. If I were a betting man I’d gamble that Oracle might
acquire Salesforce.com at some point in the future since Larry Ellison seems to revel in acquiring the companies of his former executives (e.g. Peoplesoft and Siebel). By employing two former
Oracle executives, Salesforce.com seems to be painting a big old target on its back.

Updated Lawsuit Settlement

Last quarter we reported that Larry Ellison reached an agreement to settle a 2001 lawsuit in which he would pay $100 million to charity over the course of five years. Well, the settlement
provisions were revised. The new terms leave the $100 million charitable payment intact while also requiring Ellison to pay $22m in legal fees.

The settlement was modified when a California judge declined to approve the original settlement because it called for Oracle to pay $24m in lawyers’ fees. This was deemed to be unfair to Oracle’s
shareholders – and rightly so in my opinion.

Project Fusion Continuing As Planned

In early October, Oracle delivered on its promise to continue upgrading its acquired software with Release 8.9 of its Peoplesoft Enterprise Supplier Relationship Management, Enterprise Supply Chain
Management, and Enterprise Financial Management applications. Oracle hopes to convince its customers that it is serious about its ongoing Project Fusion initiative to cobble together the
applications software from its many recent acquisitions. To that end, much of the new IT asset management capabilities come from the J.D. Edwards applications that PeopleSoft acquired shortly
before it was acquired by Oracle.

Oracle’s Second Quarter Results

In mid-December, Oracle announced quarterly earnings results for its fiscal second quarter and the news was so-so. Given its recent spate of acquisitions, investors are now looking for Oracle to
start raking in the cash. The company met analyst expectations, but earnings were down.

Oracle earned 15 cents a share which equates to $798 mullion. This is a 2 percent decline from the $815 million (16 cents per share) earned during the same quarter last year. Total revenue came in
at $3.29 billion, a 19 percent year over year increase over last year’s $2.76 billion total. But these gains are attributable to acquisitions (mostly Peoplesoft).

The good news is that Oracle would have earned 19 cents per share excepting accounting charges (mostly due to the Peoplesoft acquisition) and this marks the third straight quarter that Oracle has
met or beat expectations following its acquisition of Peoplesoft. Another piece of good news: Oracle’s new license revenue increased to $1.06 billion, which represents a 9 percent increase over
last year.

But Oracle is not so upbeat on the immediate future as it informed analysts that third quarter earnings would likely come in it 19 cents a share (1 cent below analyst’s current expectations).
Another way to look at this is though Oracle’s application business may be up by more than 80 percent over the past quarter, comparing Oracle’s current results to the combined revenues of Oracle
plus the companies it acquired shows a decrease. And that should be concerning to the folks at Redwood Shores.

An interesting fact: Oracle’s valuation is less today than it was before its acquisition binge began. Oracle’s market value declined approximately 6 percent over the course of 2005. Of course, to
be fair, Oracle will need a little bit more time to swallow everything and begin seamlessly delivering on a cohesive application strategy.

Oracle Tackles Security

In mid-October Oracle unveiled its quarterly critical patch update consisting of 23 patches that addressed 85 vulnerabilities. Seven of those patches involved the Oracle 10g Database server. Oracle
plans to continue releasing quarterly patch updates on the Tuesday closest to the 15th of the month each January, April, July and October.

Interestingly, David Litchfield, a security researcher at Next Generation Security Software, found the patch to be insufficient. Litchfield noted “Having downloaded and given the Oracle October
patch a cursory examination, some of the flaws Oracle told me were being fixed, remain exploitable.” More details can be found at http://www.securityfocus.com/archive/1/413827/30/0/threaded.

Then, in early November, source code for a worm that targets Oracle databases was released on the Internet. The code was posted anonymously, under the title “Trick or Treat Larry,” to the popular
security mailing list, Full Disclosure. The worm is not a very significant threat, but it serves as a proof-of-concept for future attacks on Oracle databases. The worm is designed to scan networks
for Oracle databases and upon finding one it tries to logon using a series of default user names and passwords. Upon succeeding it creates a table. Not too damaging, but one can easily imagine a
worm that uses similar code to do much more nefarious things.

A Free DBMS From Oracle?

Early November launched another interesting bit of news from Oracle – its plans to release a free version of its database software. Oracle announced a beta release of Oracle 10g Express Edition,
also known as Oracle Database XE. The software is targeted at students and small vendors which can choose to embed the database into their software and applications.

This tactic makes a lot of sense. With open source software growing in popularity Oracle is wise to create a choice in the “free” world. Oracle obviously hopes that a free version of Oracle can
stave off the advance of MySQL and other open source database software. As you should know by now though, open source and free are not the same thing. And Oracle Database XE is not open source.

Another reason this tactic makes sense is that a free version of Oracle for students will keep the Oracle DBMS top of mind in universities. Such early training can help to create future influencers
who will think of Oracle first because that is what they used in college.

Of course, Oracle is not alone in offering a free version of its DBMS. IBM also unveiled a free version of DB2 this quarter as part of a PHP development package. And Microsoft also shipped a free
version of SQL Server 2005, also subtitled Express, later in the quarter. So the good news seems to be that there will be many choices available if you’re looking for free database software!

Oracle Updates Multi-core Chip Pricing

In our final bit of Oracle news for this quarter, late in December Oracle updated its pricing policy for servers using multi-core chips. Even though Oracle will continue to recognize each core as a
separate processor, it changed the definition of processor that is used to determine the number of processor licenses required. This pricing action helps to keep Oracle competitive as hardware
makers continue to move forward with mutli-chip technology.

SQL Server 2005 Arrives

In perhaps the biggest story of the year in the database market, in early November Microsoft finally released SQL Server 2005. Why is this big news? Well, in a market where new versions typically
come out every 18 months or so, this is the first new version of SQL Server since the year 2000 – and five years is a long time to wait for new functionality.

It seems, though, that the wait may have been worth it. SQL Server 2005 is loaded with new features. Microsoft’s goal for the release was to continue building enterprise level support into SQL
Server. And with 64-bit support, partitioning, online reindexing, database mirroring, and failover clustering Microsoft has gone a long way toward achieving that goal. Furthermore, SQL Server 2005
supports high-end servers. Some benchmarks show SQL Server 2005 running on Opteron-based servers as performing comparably to proprietary, RISC-based platforms.

What else does SQL Server 2005 offer? Security improvements include data encryption, stronger auditing, and improved integration with Windows passwords. Additionally, programmability has been
upgraded with enhancements to T-SQL as well as integration with CLR (Common Language Runtime) and .Net. XML support is improved with XQuery support, native XML and Web services integration.

One of the most important new features is the improved business intelligence capabilities including data integration, analysis, reporting and Report Builder. Further, SQL Server 2005 integrates
better with Microsoft Office. Microsoft also plans to improve Microsoft Excel by offering Excel Services, which are basically server-side Excel capabilities. That is important because it will
enable DBAs to centrally secure, share and manage spreadsheets on the server. And we’re all familiar with the big problem of disparate, duplicated data stored on desktops throughout our companies.

And DTS (Data Transformation Services) has been rewritten from scratch and is now called SSIS (SQL Server Integration Service). SSIS is capable of handling much larger data loads than DTS and it is
easier to use and more functional. What used to require many lines of code can now be done with just a few mouse clicks.

So what does this new and easier to use SQL Server mean to the database market? Well, a lot is going to depend on the uptake of the product. Lately, many shops have been lagging in terms of
upgrading their servers to the latest and greatest version of DBMS software. Indeed, eWeek reported in recent surveys that 80 percent needed more time before deciding when to upgrade, whereas 46
percent indicated they would wait at least a year before trusting SQL Server 2005 with their mission-critical systems. So it may take some time for there to be a groundswell of support for SQL
Server 2005.

At any rate, I think that the battle for the SMB (small- to medium-sized business) market will now heat up. With Microsoft back in the game, IBM and Oracle will stoke up the marketing fires and
things will likely get quite interesting over the course of the next year or so.

Future SQL Server Releases

According to Mark Souza, head of Microsoft’s Software Reengineering Initiative (SRI), there will be no more five year release cycles for SQL Server. Instead, Microsoft has instituted new practices
that will ensure new releases will ship every two years. Evidently, if development is not far enough along on new features they will be pulled in order to meet the two year cycle. This practice
will put Microsoft in line with the established release practices of the other two big DBMS vendors: Oracle and IBM.

And Over at IBM

The next version of DB2, going by the code name of Viper, entered beta testing in mid-November. IBM plans to ship Viper for general availability in the middle of 2006.

The key selling point of Viper is its ability to combine the management of structured and unstructured data. Viper should be able to search and analyze structured data in a relational data
repository and unstructured data such as multimedia files, spreadsheets and documents in an XML repository without the need to reformat it. The approach is novel in that it will support native XML,
basically enabling dual storage engines – the traditional SQL/relational engine and a new XML engine that uses XQuery and XPath.

You can find additional details about DB2 Viper as well as information on registering for the beta program on IBM’s Web site at http://www.ibm.com/db2/xml/.

IBM Beats Expectations in Third Quarter

In mid October IBM announced results for its fiscal third quarter, and IBM beat analysts’ expectations even though it experienced a small revenue shortfall. In the three months ending Sept. 30,
IBM earned $1.52 billion, or 94 cents per share, on revenue of $21.5 billion. During the same period last year IBM brought in revenue of $23.3 billion to earn a profit of $1.55 billion, or 92 cents
per share. Of course, it is tough to compare these two periods because last year’s numbers include IBM PC revenue which has since been sold to the Chinese company, Lenovo. Without that charge and
the PC operations, the continuing operations last year earned $1.03 a share.

IBM’s gross profit margin was 40.6 percent in the third quarter, up from 36.5 percent last year, when the low-margin PC business was still in the mix. Not counting PCs, the company’s profit
margin would have been 40.0 percent last year.

IBM’s software sales at $3.8 billion experienced a 5 percent year over year growth. Software is still IBM’s most profitable sector with gross margins of 87 percent. Revenues from IBM’s
middleware brands (which includes DB2) were $3.0 billion, up 6 percent versus the third quarter of 2004. Revenues specifically for its data management offerings, which IBM calls its Information
Management software, increased 10 percent with revenue growth of 4 percent in the DB2 family of products.

Hardware sales rose 7 percent over last year (excluding the PC business). These numbers were probably pumped somewhat by the September release of its new z9 mainframes. Revenue for IBM’s other big
business, professional services, increased only 3 percent on $11 billion in contracts.

And it looks like the upcoming fourth quarter should be a good one for IBM, too, as it stands to benefit from a full quarter of mainframe sales coupled with strong software sales.

What About Open Source?

There was much activity in the open source DBMS market in the fourth quarter of 2005. Let’s start with the current open source market leader, MySQL. There was more MySQL news this quarter than
just the quandary it finds itself in with Oracle acquiring Innobase.

In late October MySQL shipped a new upgrade of its namesake product, MySQL Version 5.0. The new release, adds quite a few long-awaited features that have been in the Big Three database systems for
some time. Topping this list are support for views, triggers, and stored procedures.

MySQL 5.0 also features new storage engines, tools and extensions. The Archive Storage Engine, for example, is for storing large volumes of data without indexes in a very small footprint. It was
conceived for handling historical data such as that needed for organizations to ensure regulatory compliance. Also, the Federated Storage Engine is for accessing data in remote databases.

This is the biggest upgrade MySQL has shipped to date. More details on the new features of MySQL 5.0 can be found at http://dev.mysql.com/doc/refman/5.0/en/mysql-5-0-nutshell.html and the MySQL 5.0 software can be downloaded at http://dev.mysql.com/downloads/mysql/5.0.html.

In other MySQL news, the company announced a relationship with business intelligence provider Business Objects. The two companies have inked a deal where they will jointly sell a MySQL Network
database subscription service with Business Objects’ BI software. This agreement comes on the heels of an earlier agreements where MySQL agreed to embed its database into Business Objects XI for
use on Linux and Unix platforms.

But MySQL was not the only open source DBMS group making news this quarter. Sleepycat Software updated its flagship Berkeley DB to Version 4.4. This new release includes new replication features,
online Btree compaction and disk space reclamation, online abandoned lock removal, and improved backup and recovery capabilities. Additionally, in an attempt to claim more mission critical
applications, this new release also comes with a transactional application developer’s guide. The Berkeley DB 4.4 software can be downloaded from Sleepycat’s web site at http://www.sleepycat.com/products/bdb.html.

Next in the news was CA and its Ingres open source DBMS. In early November CA spun Ingres off into a privately held company named Ingres Corporation. CA will hold a stake in the new company, but
will provide Ingres Corp. the intellectual property rights to the Ingres DBMS. The new company hopes to compete as an open source project, but it will be interesting to follow this development to
see if there is enough interest in Ingres (the DBMS) for it to live on as open source. The open source DBMS space is already crowded and it is getting more crowded every day.

Speaking of which, Sun Microsystems joined the ranks of open source DBMS provider in mid-December when they released Java DB, a distribution of the Apache Derby open source DBMS. IBM’s Cloudscape
is also based on Apache Derby. Java DB is incorporated by Sun into the Sun Java Enterprise System. Release 4 of the Sun Java Enterprise System uses Java DB as its embedded Java developer database.
Additionally, Java DB is incorporated in the Sun Java System Portal Server 7.0 for use in data storage. Additionally, it will be used within other open source projects at Sun. More information on
the Apache Derby Project can be found at http://db.apache.org/derby/.

Summary

And so ends another quarter, and another year. The DBMS market continues to thrive and there will be much to keep us excited as we continue to watch it in 2006. So plan to check in with us again
next year, every quarter as we keep track of the database management 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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