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May 21, 2002

Sitting on the Database Throne

Oracle looks to save its reputation, while IBM shines its crown as the new database king.

By Jeanette Perez

The recent Gartner Dataquest report on the worldwide DBMS industry did a lot more than name the new database market share leader. It also highlighted the current struggle of database giant Oracle. The report is one more thing that Oracle must defend itself against, as the last 12 months have brought scandal and decreasing numbers. IBM, on the other hand, took advantage of Oracle's tribulations and came out on top with 34.6 percent of the 2001 market, just edging out Oracle, which had 32 percent.

How did IBM overtake the lead? In 2001, despite releasing a new version of its database, it seemed every step Oracle took landed them in mud. In contrast, IBM made a lot of the right decisions — the biggest being the decision to buy Informix Corp. Revenue from Informix products accounted for 3 percent of overall market share. Without that 3 percent, Oracle and IBM would have been toe-to-toe. IBM, which has worked hard to make their database product a cheaper, viable option for companies, has achieved 20 consecutive quarters of growth in its database software business. Oracle database software sales have declined partly due to the fall of the dot-com industry that gave Oracle a good chunk of business.

"IBM showed some good strong growth without the Informix acquisition," said Betsy Burton, Gartner's vice president and research area director. "The surprise is the fact that Oracle is losing market share across the board. I think this for the first time shows what everyone suspected and Oracle has been denying."

Oracle retaliated and points out that although it may be a little behind in the overall database market, it is the hands down leader in relational databases with 39.8 percent of the market share. IBM comes in second with 34.1 percent. However, even this number is down from last year, when Oracle had 42.5 percent of the relational database market. After pointing out it still has the lead in what it calls the "modern database market," Oracle attacked the Gartner study.

"In this time when financial reporting is under scrutiny, it is sadly ironic that the revenue and growth data provided to the industry analysts by the vendors themselves is not independently validated, outside of Oracle's," said Oracle chief financial officer Jeff Henley. "Until our major competitors, IBM and Microsoft, provide audited database financial numbers, the data that makes up these analyst reports is suspect." Gartner analyst Colleen Graham was quick to point out that Oracle had no problems with the study last year, when it was number one.

Also in jeopardy is Oracle's overall reputation with customers, which could play a part in Oracle's future market share. The company has been hit with a California political scandal and a criminal investigation into Oracle's $95 million contract with the state was launched. Also, two years ago customers expressed dissatisfaction with some of Oracle's pricing methods, yet another reason why customers could be turning to IBM, which many view as cheaper, in these tough economic times.

However, Larry Ellison, never one to be held down, and Oracle are already looking ahead. Oracle released version 2 of its 9i database with new features such as more fluency in XML and 15 security evaluations. Oracle hopes that customers that were reluctant to buy the first release will embrace the second and plans to aggressively market the release to the Linux and Windows operating system markets. Also, last summer, Oracle revamped its pricing methods to better compete with IBM and Microsoft. Oracle also released a report of its own, calling Oracle the number one database choice with Fortune 100 companies.

"9i adoption has been slow, but people always approach the first release tenuously," Burton said. "With the second release, people will be more open to move to it. That in turn will increase the number of customers willing to consider the additional options."

Whether these steps put Oracle back on track remains to be seen, but Oracle does not expect a quick fix, recognizing that software spending is still soft. The more important tactic now may be saving its reputation.