In-Depth

SQL Closes the Distance

Redmond is gaining, but when will it -- or can it -- overtake longtime market leader Oracle?

It's certainly been done before. Over and over.

Microsoft takes on an established incumbent, one that often has a prodigious market lead. It comes up with a sometimes-weak, first competitive response. It steadily updates and refines. It chips away by adding features and cutting prices.

Within years the seemingly impossible becomes the reality and Microsoft is the market leader, leaving the incumbent lying and bleeding in the dust. Several of these has-beens were acquired, while others are significantly downsized.

Just ask Lotus Development Corp. Or WordPerfect. Or Novell Inc. Or Borland International. Or Netscape.

Now, on the heels of Oracle Corp.'s release of its 11g database -- on Linux anyway, with other versions scheduled to follow -- and Microsoft promising SQL Server 2008 by next June, the database battle will only get hotter.

Today's multibillion-dollar question is: Could Microsoft now do to Oracle, the long-time database leader, what it has done to the others?

The answer is (drum roll, please): Yes, probably.

There are some big caveats and issues to consider, however, so let's take a look.

Microsoft Upending Oracle: Pros
By one important measure, Microsoft has already passed Oracle in database sales. It already moves more database units -- most think way more units -- than Oracle. Of course no market researcher has the real numbers, but the consensus is that it's a given. SQL Server is available in an itty-bitty embeddable version and, with the SQL Server 2005 release, it has gained credibility in enterprise deployments running on high-powered -- if inexpensive -- blades.

In fact, if Microsoft Business Division Vice President Jeff Raikes is to be believed, SQL Server already sells more database units than IBM Corp. and Oracle combined. That's a big statement with little granularity to back it up, but database analysts, including IDC Research Vice President Carl Olofson and Gartner Inc. Research Director Colleen Graham say it sounds plausible.

"That's not totally off the wall. If you look at the midmarket and the low end, on little machines, there's a lot of SQL Server. [Raikes' claim] could be quite true," Graham says.

But how many of those purchased SQL Server licenses are in active use is another issue, Olofson says. The "shelfware" stigma, however, is hardly specific to Microsoft.

Oracle still leads the pack, ahead of both IBM and Microsoft in terms of database revenue as parsed by both research houses. Gartner's most recent numbers reflecting worldwide database revenue in calendar year 2006 show Oracle logging $7.17 billion in sales for 47.1 percent market share. IBM, with its DB2 franchise stretching from small servers to mainframes, is second with 21.1 percent market share and $3.2 billion in revenue. However, IBM did see its share fall slightly from the previous year when it held 22.1 percent market share.

Microsoft SQL Server by all counts is No. 3, but it's No. 3 with a bullet. Between 2005 and 2006 SQL Server share climbed from 15.6 percent to 17.4 percent. Its database revenue for 2006 was $2.65 billion.

More dramatically, Graham says, Oracle was at $6 billion in database revenue in 2004 for 40 percent share compared to Microsoft's $2.2 billion or 15 percent share. Last year, Oracle was just under $7.2 billion and Microsoft was at $3.2 billion. That's Oracle at 40.5 percent and Microsoft at 18.5 percent.

Microsoft upped the pricing ante in late September when it offered Oracle database users incentives to migrate. For example, a company using Oracle 10g or 11g Enterprise Edition would get a 50 percent discount on SQL Server 2005 Enterprise Edition's list price of $25,000 per CPU. Oracle Standard Edition users would likewise get a 25 percent markdown on SQL Server Standard Edition, which lists for $5,999 per CPU.

Oracle Enterprise Edition costs $40,000 per processor or $800 per user. Standard Edition lists for $15,000 per processor or $300 per user. But, given the discounting that goes on in both Oracle and Microsoft shops, that offer is not as generous as it seems, database specialists say. Volume purchasers say they doubt anyone has paid anything close to list price on either database for a long time.

You might even argue that Oracle CEO Larry Ellison's own actions point to a huge change in the company's database thinking. Some argue that Oracle wouldn't have invested north of $20 billion -- yes, billion -- on PeopleSoft, JD Edwards and Siebel Systems business applications if it didn't suspect that databases -- its core business -- are in a category under fire. Databases are becoming a commodity.

Still, persuading a company to rip and replace an existing standard is a tough task. In truth, the real story is this happens in shifts over time. A company may keep its incumbent database while surrounding it with a new corporate standard at the departmental level. That's why the question of total migrations from one database to another is mostly moot.

The Open Source Contenders

While Microsoft attacks Oracle Corp.'s hold on enterprise-class databases, it should also watch its low-end flank where open source-oriented databases are gaining traction.

It's tough to calibrate open source database market share, although Gartner Inc.'s most recent database survey of RDMBS revenue gives some clues. For example, Linux was the third-largest database operating system in 2006, growing 67 percent year over year, far outstripping the growth rates of Unix and Windows, which lead the OS field.

That hot growth rate doesn't necessarily correlate to open source database sales, however, since both Oracle and IBM Corp. sell commercial -- i.e., non-open source -- databases for Linux. On the other hand, MySQL AB is an "open source-like" database that runs not only on Linux but on Windows and Unix as well. Anecdotally, however, even the largest, staunchest Oracle and Microsoft database shops will admit -- often begrudgingly -- that MySQL or PostgreSQL have found their way into some of their departments.

The open source databases have definitely become a threat to the database incumbents in some arenas, says Frank Cullen, principal of Blackstone & Cullen Inc., an Atlanta-based database specialist. For example, MySQL et al are making a splash in query-based environments and front-ends, even if they're not viewed as ready for heavy-duty transaction systems.

The issue is that most companies see them as now being good enough for many other applications, something that wasn't true a few years ago, Cullen says. "All those databases now have stored procedures and other important features and functions." Those additions have made the inexpensive databases contenders for a great number of business applications.

Others, on the other hand, including Gartner Research Director Colleen Graham, see no immediate threat from the open source-like insurgents. Graham does, however, warn that the database powers must keep an eye out over time: "Microsoft will have to start worrying about them in about five years. Right now the functionality is not there."

Still, the fact that departments or even individuals in Microsoft and Oracle reference accounts are trying out the open source contenders is worth noting. That use is often happening without IT sanction -- and that's precisely what should worry Microsoft.

If any company recognizes the threat posed by grassroots computer users, it's Microsoft, which cultivated this very constituency to bring Windows, Office and yes, SQL Server, into their businesses. -B.D.

Surrounding Legacy Environments
Nancy Myers, the assistant vice president of application development for Toll Brothers Inc., one of the country's largest housing developers, is the kind of technology buyer that gives Oracle fits.

The Horsham, Pa.-based company was a big Oracle shop. It remains a customer, but the clear trend is toward SQL Server, says Myers. New application development is solely on the Microsoft database, she says.

She won't use the "m" word because the company's existing intranet, chock full of content and images, runs on Oracle/Solaris and will continue to do so.

But all internal development is now on Windows and SQL Server, a trend that's about three-and-a-half years old, going back to when the company started building Web applications in SQL Server. It also put its PeopleSoft human resources suite on SQL Server. The soft underbelly of Oracle's application acquisition strategy is that many PeopleSoft and JD Edwards accounts run their apps on Microsoft and IBM databases. Oracle has pledged to keep supporting those databases, although one can almost sense crossed fingers there.

Toll Brothers, with more than $6 billion in sales last year and more than 5,000 employees, is by most measures an enterprise account. If it's putting its future database investment in SQL Server, that has got to impact Oracle.

WorkflowOne is also surrounding its legacy Oracle database with a slew of SQL Servers. The company continues to run on Oracle Financials for commissions and other tasks. "But, as we looked at business intelligence, we thought that SQL Server would let us build out of the box without having to buy a separate OLAP tool or Informatica," says Jeff Noffsinger, director for the large Cincinnati-based print production and fulfillment house.

Cost savings on business intelligence was one factor -- another was the fact that the bulk of WorkflowOne's customers run Windows and Excel.

"This was a grassroots initiative that let us build a data warehouse without spending millions. We could get in the game at a reasonable price and build a very robust system," Noffsinger says.

Microsoft's buyout of Proclarity for its data slicing-and-dicing expertise only strengthened its hand, he says.

Granted, the company continues to pull data from Oracle, as well as DB2 and Ingres Corp. But WorkflowOne will be using considerably less Oracle -- on Solaris -- than it had expected, Noffsinger says.

Database Solutions Inc. is a Cherry Hill., N.J.-based solution provider that works with all the major databases. But General Manager Amy Abrams sees the writing on the wall, and that Microsoft has the momentum. In the past year, she has seen an increasing number of executives in Big Blue shops running DB2 or Informix as well as the top dogs in Oracle shops wanting to hear more about SQL Server. Microsoft has made its product a contender at even the big enterprise level. "I'd say in 99.8 percent of the big accounts out there, SQL Server scales just fine," she notes.

One driver is cost: SQL Server, by all accounts, is less pricey when compared by per-processor licensing costs. But Abrams' argument that it has grown into enterprise-class applications resonates with many IT buyers.

Microsoft Unseating Oracle: Cons
Of course all of the arguments stated above can be re-stated in other ways. That's what makes a horse race. Where Microsoft stalwarts say the Oracle apps' buying-binge proves that even the database leader considers databases a commodity, Oracle partisans sniff that these apps all require databases and will drive more Oracle database sales.

They contend that Oracle will parlay its prodigious direct-sales might to move JD Edwards' applications from DB2 to Oracle 10g or 11g and PeopleSoft HR from SQL Server in the same direction.

"You have to understand that all those applications require a database and Oracle sees this as a way to bolster its overall solution sales," says Mick Gallagher, CEO of LS Technologies LLC, a longtime Oracle life sciences partner based in Fallbrook, Calif.

Even some Microsoft stalwarts are loath to claim overall victory for SQL Server over Oracle. For one thing, it could take an act of God to move dyed-in-the-wool financial services, universities and other accounts from Oracle to SQL Server, which many of them still view as a departmental database.

A former Microsoft executive who remains a huge SQL Server-booster concedes, "installed databases never move. The real battle is for new business and net new sales." He's certain SQL Server indeed outsells both Oracle and DB2 in units, but Oracle retains the key revenue crown and will likely keep it for the foreseeable future.

Others say Oracle's embrace of Linux has given it a toehold in accounts where total system cost is an issue -- precisely the kinds of accounts one might expect to pick SQL Server over Oracle because of price.

Oracle's price segmentation into a Standard Edition One low-end database -- $149 per user or about $4,995 per processor -- is a credible response to SQL Server in smaller accounts. Standard Edition is $300 per user or $15,000 per CPU, and with some clustering included suits upper-to-midmarket accounts. The Enterprise Edition -- with its $40,000 per processor price tag or $800 per user -- remains a huge presence in large accounts.

It's also worth noting that no large Oracle shop will admit to paying even close to list price for Enterprise Edition. In a world of volume-software agreements and one-off negotiations, list prices are more a goal than reality for Oracle, Microsoft and IBM alike. For SQL Server Enterprise, the per-processor list is just under $24,000. Microsoft lists the "retail" price for the server, plus 25 CALS, at just under $14,000.

While Microsoft partisans talk up the beauty of its integrated stack, naysayers counter that the cost of that stack -- Windows Server plus SQL Server plus Visual Studio plus the Windows client and apps -- versus a Linux-plus-Oracle stack may not be as big a delta as one would expect. Indeed, Oracle's strategy appears to be to bleed as much margin out of the non-database parts of the solution -- from the hardware and operating system -- so that the cost differential is no longer so huge.

Need for Reliability
Oracle can also point to Russ Donnan, CIO of Kroll Factual Data, as their poster boy for Oracle versus SQL Server wins.

As with the other organizations cited above, Kroll still has a heterogeneous database situation. "To be fair, I still do have some SQL Server, but all of our back-office ops software and internally written software is running Oracle," he notes. His preference, however, would be to rid himself entirely of SQL Server, he admits.

Oracle got the leg up initially because of Kroll's need for reliability. Kroll provides business information to mortgage and consumer lenders, property management firms and other businesses.

So why Oracle? "Our customers expect us to be up and operational 24-7. This is a transaction-based business on the Internet. We can't be down. The problem we faced [before] on an all-too-regular basis was that SQL Server would go down and then we'd have to figure out the issue," he says.

"We put in all sorts of third-party apps. The LifeKeeper product by SteelEye was our final attempt to duct-tape in order to make it enterprise class [and] highly available-and even then failover was two minutes. That could mean hundreds of transactions," he says.

While many users complain about high maintenance and support costs for Oracle -- typically 22 percent of license costs annually -- Donnen says the backup he gets from Oracle is far-and-away superior to what he's seen from Microsoft. And support in databases counts.

One thing is clear: In databases, unlike in other categories, Microsoft faces not one but two huge, well-endowed rivals in IBM and Oracle. Analysts expect Microsoft's momentum to continue with growing credibility among large accounts as well as maintained dominance in SMBs. As for Oracle? Well, its got billions of dollars worth of databases out there.

It's possible for Microsoft to overtake Oracle in database revenue, concedes IDC's Olofson. "Anything is possible. Oracle could make a mistake. I think Microsoft will get closer, but I don't think it's probable because Oracle is well aware of the situation and is making adjustments."

Frank Cullen, principle with Blackstone & Cullen Inc., an Atlanta-based solution provider with database expertise, seems weary of handicapping the database race.

"The battle is at the presentation layer and the data layer, and Microsoft, IBM and Oracle are all enriching their data layers and extending them to Web services. Look, there will be a group of people who'll think ill of Microsoft until the day they die. The same is true of Oracle and IBM. It's a religious war," Cullen says.

Passions aside, folks just seem to use what works for them.

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