Oracle Database Lead Slipping

IDC market numbers show IBM and Microsoft making significant gains.

Download the authoritative guide: Big Data: Mining Data for Revenue

Oracle Corp., while holding onto its top position in the relational database market, saw its lead slip in 2001 as rivals IBM and Microsoft Corp. made significant gains, according to the most recent market numbers from International Data Corp.

IDC, of Framingham, Mass., this week announced that the database market in 2001 continued to solidify around the top three vendors. Oracle maintained the top spot with 42.5 percent market share in 2001. IBM followed with 31.1 percent share, and Microsoft was in third with 8.5 percent share, according to IDC.

Despite its lead, Oracles database revenues fell by 4.4 percent, while IBMs rose 29.8 percent and Microsofts increased 28.5 percent, said Carl Olofson, IDC research director. The overall relational and object-relational database market grew just 1.7 percent in 2001 to $12.7 billion, but IDC projects that it will increase to nearly $20 billion by 2006.

"Oracle has been challenged all year long," Olofson said. "And part of it has to do with the economy. There are other issues as well having to do with pricing policies and packaging policies."

There are some hopeful signs for Oracle. On Wednesday, Goldman Sachs issued the results of an IT spending survey of 400 executives and IT professionals it conducted in conjunction with Gartner Inc. The survey found that 45 percent of the respondents say that their spending on Oracle databases would increase this year compared with 2001, while only 7 percent said their spending would fall.

IDCs report is the second this month to show Oracle losing ground. Gartner Dataquest found that in 2001 Oracle fell to second in overall new database license sales as IBM took the top spot.

Part of the reason for the difference in the reports is that IDC, in determining its numbers, includes more than software licenses. It also accounts for revenue from maintenance contracts, Olofson said. Maintenance contracts played a role in helping Oracles and IBMs numbers, he said, but because Microsoft handles support differently than its competitors it has no maintenance contract revenue reflected in its numbers.

As the economy improves, Olofson said he doesnt expect to see Oracle continuing to slide. The software maker, though, does need to address the gap in pricing and functionality between its standard and enterprise editions of its 9i databases if it wants to start growing in the midmarket as its competitors have, he said. Currently, customers on the standard edition are often reluctant to jump to the more functional enterprise edition because it costs more. At the same time, they have no other options for adding only the additional features they want, Olofson said.

Last June, Oracle addressed some of its pricing issues. It lowered the price of the enterprise edition to $40,000 per processor, compared with $15,000 per processor for the standard edition, a spokeswoman said. Oracle also shifted to the per-processor pricing model to help address customer concerns about its previous "power unit" pricing model that was criticized for being complicated and costly. Customers have reacted positively to the changes, the spokeswoman said.

As far as IBMs growth, a significant chunk of it resulted from IBMs $1 billion acquisition of Informix. Olofson attributes about 17 percentage points of the 28.5 percent revenue gain to Informix. An IBM spokeswoman said the growth shows that the acquisition, along with IBMs other investments, is paying off for the companys DB2 database business.

Meanwhile, Microsoft officials were thrilled with the gains of its SQL Server database, saying it reflected a shift in the marketplace toward its software and toward databases on Windows.

"[This] corroborates what we are seeing, and we have a lot of momentum on our platform," said Sheryl Tullis, a SQL Server product manager. "I think Oracles numbers reflect the fact that people are moving away from them and see the value in the platform we are offering vs. what Oracle is offering."

Oracle, though, has countered claims that it is losing share by noting other research reports that show it has the strongest penetration of any database vendors among the Fortune 100 companies. The Goldman Sachs survey also found that Oracle remained the top database for large companies, with 58.9 percent of those surveyed citing Oracle as their primary database for developing and purchasing new enterprise applications, compared with 22.6 percent for Microsoft SQL Server and 13.1 percent for IBMs DB2.