The Database Report – October 2008

The third quarter of 2008 is now behind us, and it is time to investigate what happened in the database market over the past three months. We’ll track the usual suspects and their activities
including acquisitions, product releases, patches and earnings announcements. So let’s spread some light on the activities that transpired during July, August and September of 2008.


The DBMS Market: By the Numbers

According to research conducted by IDC, the worldwide relational database management systems market grew by 12.6% in 2007. The total market grew from $16.7 billion in 2006 to $18.8 billion in 2007.

The big three DBMS vendors remain the same: Oracle followed by IBM followed by Microsoft. After the big three, number four is Sybase with 3.5% market share and number five is Teradata with 3.3%
market share.

SQL Server has been growing faster than its competitors, but it is still far behind market leaders IBM and Oracle in overall sales. Oracle is number one, with 44.3% of revenues in 2007; IBM came in
second place with 21%; and Microsoft came in third with 18.5%. In terms of revenue growth rates, both Oracle and IBM grew 13.3% on a year over year basis, whereas Microsoft grew at 14%.

Not to be outdone, competing market research firm, Gartner, Inc., also published its numbers of the DBMS market in August. And Gartner’s research is comparable to IDC’s. The top three
remain in the same order: Oracle, IBM, and Microsoft. But, according to Gartner, the gap between number one and number two is larger: Oracle leads the 2007 worldwide RDBMS software segment with a
share of 48.6% – nearly 28 share points ahead of the nearest competitor.

Of course, Oracle embraced the Gartner research. “Gartner’s findings show that Oracle is the industry’s most popular database by more than a two to one margin over its closest competitor,” said
Willie Hardie, vice president of Database Product Marketing, Oracle. “Customers are turning to Oracle Database 11g to help them manage more data more efficiently and at a lower cost.”

Even in the Gartner report, Microsoft is the fastest growing vendor in the space, up 16.5% over last year. Gartner finds that Oracle grew at 14.9%, while IBM grew at 10%.

So, the analysis of the RDBMS market from the analyst firms produced similar results. But you have to sort of wonder where they get their information from if the numbers do not match exactly. After
all, these are public companies, aren’t they?

Part of the problem is how the companies allocate their earnings. What constitutes RDBMS revenue? The way the analysts slice and dice that must make up the difference.


Microsoft Releases SQL Server 2008

Perhaps the biggest new of the quarter came in August, as Microsoft unleashed an upgraded version of SQL Server that offers many improvements including better data compression, improved
scalability, and improvements to concurrent workload management. You can read the
announcement
for yourself.

Originally planned for a first quarter 2008 launch, Microsoft SQL Server 2008 was finally released in August.

By concentrating on bolstering its availability and data warehousing features, Microsoft hopes to gain more ground and close the gap between it and the market leaders. So what can users expect from
the new Microsoft SQL Server 2008 database management system? Here are some of the new and improved features:

Transparent Data Encryption enables encryption of an entire database, data files, or log files, without the need for application changes.

Extensible Key Management enables SQL Server 2008 to support third-party key management and HSM products.

Improved Auditing capabilities improve compliance allowing users to create and manage database auditing via DDL.

Enhanced Database Mirroring builds on earlier functionality by providing a more reliable platform that has enhanced database mirroring, including automatic page repair, improved
performance and enhanced supportability.

Log Stream Compression provides the ability to compress of the outgoing log stream between data mirror participants thereby delivering improved performance and minimizing the
network bandwidth used by database mirroring.

Automatic Recovery of Data Pages enables the principal and mirror machines to transparently recover from data page errors by requesting a fresh copy of the suspect page from the
mirroring partner transparently to end users and applications.

The Resource Governor allows organizations to define resource limits and priorities for different workloads, which enable concurrent workloads to provide consistent performance
to their end users.

Predictable Query Performance enables greater query performance predictability by providing functionality to lock down query plans, enabling organizations to promote stable query
plans across hardware server replacements, server upgrades, and production deployments.

Data Compression enables data to be stored more effectively, and reduce the storage requirements for your data.

Hot Add CPU allows users to dynamically scale a database on demand by adding CPU resources to SQL Server 2008 on supported hardware platforms without forcing any downtime on
applications.

Policy-Based Management is a policy-based system for managing one or more instances of SQL Server 2008. It can be used to create policies that manage entities on the server, such
as the instance of SQL Server, databases and other SQL Server objects.

Performance Data Collection offers more extensive performance instrumentation, a new centralized data repository for storing performance data, and new tools for reporting and
monitoring.

Microsoft Office Integration provides new Word rendering that enables users to consume reports directly from within Microsoft Office Word. In addition, the existing Excel
renderer has been greatly enhanced to accommodate the support of features, like nested data regions, sub-reports, as well as merged cell improvements. This lets users maintain layout fidelity and
improves the overall consumption of reports from Microsoft Office applications.

More Extensive Data Type Support in SQL Server 2008 adds improved data and time data types, Hierarchy IDs, FILESTREAM data, integrated full text search, sparse columns, large
user-defined types, and spatial data types.

Additional interesting new features include partitioned table parallelism, star join query optimization, change data capture, and support for the MERGE statement. Many significant business
intelligence features are also included, such as an Enterprise Reporting Engine, report builder enhancements, Internet report deployment, predictive analysis, and more. Space limitations prohibit a
complete and exhaustive listing of all the new functionality provided in the new Microsoft SQL Server 2008 release. Suffice it to say, it is a very significant release with a lot of new
capabilities aimed at large enterprises.

If you are interested in learning more about the functionality included in Microsoft SQL Server 2008, check out the product overview.

And if you are counting, there are seven different editions of Microsoft SQL Server now. SQL Server 2008 Enterprise is the enterprise-class offering; SQL Server 2008 Standard is for those who
don’t need the high availability of the Enterprise edition; SQL Server 2008 Workgroup offers core database features and is designed for running branch applications;
SQL Server 2008 Web is designed for highly available, Internet-facing Web-serving environments running on Windows Server; SQL Server 2008 Developer includes the full functionality of the Enterprise
edition, but is for building and testing applications only; SQL Server 2008 Express is a free edition of SQL Server that features core database functionality and is ideal for learning and building
desktop and small server applications; and SQL Server Compact 3.5 is a free embedded database designed for developers and is ideal for building stand-alone and occasionally connected applications
for mobile devices, desktops and Web clients.

So which one will you need?

Finally, at least with regard to Microsoft SQL Server 2008, the pundits are already trying to determine when, and how rapidly, users will migrate to the new version. In September, Database Trends
and Applications reported that it seems likely that 2008 will be embraced much more rapidly than the previous release (2005) due to a number of issues and market conditions.

They broke the market down into three broad classes of users: existing SQL Server 2000 users, existing SQL Server 2005 users looking for improved service, and existing SQL Server 2005 users seeking
new functionality. And all three of these constituents have compelling needs that should drive them to implement SQL Server 2008 in a speedier than normal fashion.


Acquisitions This Quarter

Oracle continued its acquisitive ways by grabbing Skywire Software, a leading provider of insurance software and document management business applications. Skywire Software’s insurance software
assists insurers in managing the life cycle of an insurance policy, including insurance policy creation, rating, insurance agent/broker management and information exchange solutions. With Skywire
Software and the pending acquisition of AdminServer, Oracle improves its application coverage of the insurance industry. Details on AdminServer can be found here.

“Insurance is a strategic industry for Oracle with growth focused on integrated packaged applications. Insurance applications, such as Skywire Software’s for insurance policy life cycle
management, help insurers navigate an increasingly complex business environment,” said Oracle President, Charles Phillips. “Adding Skywire Software to our growing portfolio of insurance software
products further accelerates our investment in and commitment to providing the most modern and complete software solutions for this industry.”

The addition of Skywire Software also expands Oracle’s Enterprise Content Management solution with customer communication management and document automation capabilities, enabling Oracle to
provide an end-to-end, multi-channel content capability spanning multiple industries including financial services, legal and utilities.

But, of course, Oracle was not content making only one acquisition this quarter. In early September, the company also announced plans to acquire ClearApp, a Mountain View, CA-based maker of
application service management software. ClearApp provides software that helps companies manage applications that combine two or more SOA-based services, sometimes called composite applications.

“As customers deploy more SOA-based applications, the task of effectively managing them becomes paramount,” said Leng Leng Tan, Oracle Vice President, Applications and Systems Management. “With
the addition of ClearApp’s technology to the Oracle Enterprise Manager product family, our customers are expected to get continuous and uninterrupted top-down views of their business services and
applications, helping them maximize service availability while reducing IT operations costs.”

The challenge ahead for Oracle will be to build a comprehensive strategy and offering for supporting SOA development and management. To do so effectively, they will have to take IBM and HP head on.

But Oracle was not the only acquirer this quarter. Microsoft made news with its plans to acquire DATAllegro, a provider of data warehouse appliances. As mentioned earlier, Microsoft is working
feverishly to improve SQL Server in terms of scalability and data warehousing in order to support large enterprise users. This acquisition hits the bull’s eye in terms of furthering
Microsoft’s agenda. DATAllegro helps to move SQL Server further into large enterprises by improving data warehousing performance.

Microsoft will have some challenges though as it moves to optimize the DATAllegro platform for SQL Server. Many DATAllegro customers had been using the appliance with open source Ingres databases.
Another challenge will be integrating hardware into Microsoft’s software approach. DATAllegro is an appliance, which couples hardware and software to deliver services.

Microsoft plans to retain the majority of the DATAllegro team, along with its corporate headquarters in Aliso Viejo, CA. The plan is to turn DATAllegro into the Microsoft “Center of Excellence”
for data warehousing.

And the final acquisition of note this quarter was initiated by IBM. Late in July IBM made public its plan to acquire ILOG, a developer of business rules software. The company will pay
approximately $340 million to acquire ILOG, which is based in Paris, France.

IBM plans to combine ILOG’s business rules management software with its business process management, business optimization and service-oriented architecture products. The combination enables IBM
to offer “a full set of management rules for complete information and application lifecycle management,” IBM said in a statement.

“Companies across all industries are looking for technologies to help them manage their processes with more flexibility so they can keep up with changing business conditions,” said Tom Rosamilia,
general manager, IBM WebSphere. “ILOG’s software allows businesses to more effectively manage and automate the decision making process, giving companies an opportunity to react with incredible
speed and accuracy. IBM has partnered with ILOG for over a decade, and by adding ILOG’s capabilities to IBM’s software portfolio, this is a great combination to provide value to our clients.”

IBM said ILOG’s technology has the potential to enhance the capabilities of many of its software products, including its Information Management, Lotus, Tivoli and WebSphere lines of software.
Perhaps IBM will use this technology to combine data integration and business rules in a more cohesive manner that has been promised by many, but never fully realized by anyone.


What About that Ongoing Lawsuit Between SAP and Oracle?

For those who have not been following this lawsuit, let’s first describe what we’re talking about here. It all started early in 2007 when Oracle sued SAP claiming that SAP stole
Oracle’s trade secrets. Oracle’s claim is that TomorrowNow, a subsidiary of SAP, had accessed Oracle’s software documentation inappropriately. You can read the complaint in its
entirety here. But you really should also take a look at the amended complaint here.

The long and the short of it at this point is that the trial is not scheduled to begin until February 2010, so we will probably be covering the histrionics accompanying this case for at least the
next three years.

This quarter, the first “interesting” news actually came late in June when SAP admitted that “some inappropriate downloads” were made. But SAP was also quick to discount
Oracle’s damage claims. And who can blame them when attorneys representing Oracle in the company’s lawsuit for the first time put a dollar figure on the damages – “likely” $1 billion
or more. This figure is contained in a court document that can be found here.

And, in late July the next bombshell dropped: SAP will be shutting down TomorrowNow effective October 31, 2008. SAP had been trying to find a buyer for the subsidiary, but failing that, opted to
close TomorrowNow. SAP said that it will try to help TomorrowNow’s remaining 225 customers to transition them to Oracle support or to other third-party support services.

Finally, SAP did not expect the shuttering of TomorrowNow to a material effect on their financial results.


And in Other Oracle Legal News

In early September, Oracle’s CEO Larry Ellison was in the news because he did not save his emails. The emails that should have been preserved were related to materials for a book called
Softwar. They should have been supplied during discovery for a shareholder lawsuit filed in March 2001.

Evidently Oracle only produced 15 emails sent or received by Ellison from his files, but more than 1,600 Ellison emails from the systems of other company workers. So it was clear that stuff was
missing!

“Having established with certainty that numerous e-mails were not produced from Ellison’s e-mail files … it is impossible to know whether additional unproduced e-mails were also deleted or not
turned over,” the judge in the case wrote. “This uncertainty about the existence of other e-mails is precisely the reason all of Ellison’s e-mails should have been preserved and produced.”

As such, the jury will be told they can infer the missing materials “would demonstrate Ellison’s knowledge of, among other things, problems with Suite 11i, the effects of the economy on Oracle’s
business, and problems with defendants’ forecasting model.” In other words, the jury can assume the worst about the missing information.

You’d think a data management company would better protect its data, wouldn’t you?


Quarterly Earnings Announcements

What about the financial news from the major DBMS vendors this quarter? Well, let’s start with Oracle, where everything looks bright and rosy. For fiscal 2008 Q4, earnings per share came in
up 27% over the same quarter last year, at $0.39.

Fourth quarter revenues were up 24% to $7.2 billion, while quarterly net income was up 27% to $2 billion. Total software revenues were up 26% to $6 billion. New software license revenues were up
27% with database and middleware new license revenues up 23% and applications new license revenues up 36%. Service revenues were up 18% to $1.3 billion.

For the fiscal year 2008, earnings per share were up 30% to $1.06. Fiscal year 2008 revenues were up 25% to $22.4 billion, while annual net income was up 29% to $5.5 billion. Total new software
license revenues for the year were up 28% to $7.5 billion with database and middleware new license revenues up 24% and applications new license revenues up 38%.

“Non-GAAP operating margins were up 200 basis points in FY08 to a record 43.0%,” said President and CFO Safra Catz. “Non-GAAP earnings per share were up 29% for the year and non-GAAP EPS has
tripled over the last five years. Oracle has delivered solid results year after year.”

Interestingly, around the same time Oracle also raised list prices for its software. And hey, why not, right? Oracle offers robust software that its customers rely upon to run their business. And
they are incredibly successful selling it. Of course, no one pays list price, but a higher list probably results in a higher final sales price.

Here are a few examples of the price increase comparing Oracle Technology Global Price Lists from December 2007 and June 2008 (prices are per processor):

  • Oracle Database Enterprise Edition: $47,500, up 18.75%
  • Express Server: $47,500, up 18.75%
  • Oracle BI Suite Enterprise Edition Plus: $295,000, up 15.69%
  • Hyperion Essbase System 9: $184,000, up 15%
  • Oracle Warehouse Builder: $11,500, up 15%
  • Oracle Warehouse Builder data quality: $17,500, up 16.66%
  • Oracle Data Integration Suite: $70,000, up 16.66%

And the Data Integration Suite was just launched in February, making a price increase perhaps a bit soon. Of course, this is just a small sampling of Oracle’s offerings. So it will be
interesting to watch future quarterly results to see what impact the price increase will have on earnings.

IBM announced its fiscal 2008 Q2 earnings and it, too, is doing well. Overall revenue of $26.8 billion is up 13%. Gross margins expanded, led by services and systems, contributing 19 cents. Of
that, about 8 cents was due to the year to year benefit from retirement-related plans that flowed to cost.
System z revenue was up 32% for the quarter, on a year over year basis; capacity (“MIPS”) grew 34%. That means that the mainframe continues to gain market share, which is not the general
perception in the market.

IBM’s software business generated $5.6 billion in revenue, and growth accelerated to 17%. IBM branded middleware products grew 21% year over year and now accounts for 55% of IBM’s total
software revenue. IBM’s Information Management products grew 30% in the quarter. This was fueled by our Cognos acquisition as well as over 30% growth in distributed relational database
systems. Tivoli security and storage management products both grew double digits in the second quarter.

Details of IBM’s second quarter can be found here.

In July 2008, Microsoft announced revenue of $15.84 billion for its fiscal fourth quarter, an 18% increase over the same period of the prior year. Operating income and diluted earnings per share
for the quarter were $5.68 billion and $0.46, representing growth of 42% and 48% respectively, over the same period of the prior year.
 
For the fiscal year ended June 30, 2008, Microsoft announced revenue of $60.42 billion, an 18% increase over the prior year. Operating income and diluted earnings per share for the year were $22.49
billion and $1.87, representing yearly growth of 21% and 32%, respectively.

But what about SQL Server? It lives in the Server and Tools division, which manages the offerings of server software licenses and client access licenses (“CAL”) for Windows Server,
Microsoft SQL Server and other server products. According to Microsoft, for the quarter, server and server application revenue (including CAL revenue) and developer tools revenue increased $474
million or 19%, primarily driven by growth in volume licensing of Windows Server and SQL Server products.

For the entire fiscal year, server and server application revenue (including CAL revenue) and developer tools revenue increased $1.4 billion or 15%, again primarily driven by growth in volume
licensing of Windows Server and SQL Server products. Consulting and Premier and Professional product support services revenue increased $593 million or 29%, primarily due to higher demand for
consulting and support services in corporate enterprises.

Finally, let’s take a brief look at Sybase’s earnings. In late July, the company reported a record second quarter with revenue growth of 15%. Total revenue was up to $282.7 million, a
15% year over year increase. License revenue increased 17% year over year. And most significantly, at least to us, database license revenue increased 38% year over year

So the bottom line is this: it is good to be an enterprise software vendor that sells RDBMS software!


What Else?

Well, we’ve covered most of the highlights, but you might want to know about some of the other things that transpired this past quarter, so here is a brief rundown:

  • Oracle unveiled its strategic plans for incorporating BEA into its Oracle Fusion Middleware products. Click here for
    more information and a complete product list.

  • In July Oracle announced enhancements to its enterprise performance management system, including details regarding the integration of Hyperion.
  • Forrester Research valuated the open-source database market at $850 million, including software licensing, technical support and services. By 2010, Forrester contends that the market will grow
    to $1.2 billion, driven by Web 2.0 applications and other workloads.

  • Oracle issued a security alert pertaining to a flaw in its WebLogic software. Evidently the flaw can be exploited without the need for a username and password and could result in
    “compromising the confidentiality, integrity and availability of the targeted system.” Oracle released an out-of-cycle patch for the flaw.

  • Oracle expanded its channel program to better enable partners to sell its portfolio of products, which now stands at more than 9,000!


Summary

And so we conclude another quarter of tracking the market for data and database management software. So far, 2008 has been an active year, but be sure to join us again next quarter to close out the
year. I’m sure there will be more activity and perhaps some surprises that await us during the fourth quarter of 2008.

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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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