CNN/Money  
graphic
Technology > Tech Investor
graphic
Is Oracle about to get Netscaped?
Ellison faces pressure from both sides of the database market -- IBM on top, and Microsoft below.
May 28, 2003: 10:34 AM EDT
By Eric Hellweg, CNN/Money Contributing Columnist

Sign up for the Tech Investor e-mail newsletter

SAN FRANCISCO (CNN/Money) - A little more than a year ago, Gartner Group principal analyst Colleen Graham issued a study that showed IBM taking the lead over Oracle for the first time in the cutthroat corporate-database market.

Investors reacted strongly to the report, nearly doubling trade volume immediately following its release. The findings sent Oracle scrambling to control the damage however it could. Press releases were issued, and CEO Larry Ellison slammed the findings at every opportunity.

"Three months after the study came out, he was still talking about it," Graham recalls. "I was like, Get over it, Larry!"

Last week Graham issued another report on the database market, this time looking at 2002 results. These findings are perhaps even starker for Oracle (ORCL: Research, Estimates) than those of a year ago.

Not only is the Redwood City, Calif.-based company still under pressure from IBM (IBM: Research, Estimates) in the corporate market, but it now faces serious competition from Microsoft (MSFT: Research, Estimates) on the lower end of the market and in the Windows space. Though Microsoft's database product, SQL Server, has been around since the mid-1990s, in the past three years it has improved dramatically, and last year Microsoft for the first time became the top vendor in the Windows-based database market.

Microsoft's tactics in the sector -- enter with low-price, "good enough" technology and nibble away market share from entrenched rivals slowly but surely -- sound familiar to anyone who followed the browser battles of the late 1990s. So, is Oracle in danger of getting Netscaped?

Look at the findings

Before we answer that, let's look at what the Gartner study found. Not surprisingly in this era of corporate investment austerity, the overall worldwide database market shrank by 7 percent in 2002 from $7.1 billion in new-license revenues to $6.6 billion.

The top three companies have maintained their rankings. IBM remains the overall leader, with roughly 36 percent market share. Oracle is again No. 2, with about 34 percent of the market. And Microsoft is third, with 18 percent. But even though Oracle held on to second place, its new-license revenues for the overall market were down 20 percent during the year. IBM held pretty firm, but Microsoft caught fire: Its new-license revenues increased nearly 17 percent.

Recently in Tech Investor
graphic
Sour BlackBerries
Giving iTunes a careful listen
From $2 to $10? Dream on

Microsoft's SQL Server is well positioned for these tough times. Its per-processor cost (a common base-pricing metric in the database market) is half of what Oracle charges, and slightly less than IBM's price. The cost factor helped push Microsoft deep into the small and midsize business market, one of the few growth spots in the database sector -- and a market Oracle and IBM barely addressed a few years ago.

"Microsoft's growth is reflective of the environment we're in," Graham says. "Their database isn't as robust and scalable as Oracle and IBM, but for an enterprise where cost is the No. 1 factor, Microsoft is good enough."

Oracle is fighting off Microsoft's low-end entry in two ways. First, it's pitching its products as the upgrade path for SQL Server users who find they need more features and user capacity than they can get from the relatively bare-bones Microsoft product.

Second, it's put new energy into marketing its Linux offerings, which address the cost-of-ownership issue. Robert Shimp, an Oracle VP, sees a legitimate silver lining to Microsoft's entry into the low-end market. Before, neither IBM nor Oracle offered products geared toward it, and neither really knew how to approach it.

Now, thanks in part to Microsoft, a market exists. And Oracle, perhaps mindful of the Netscape lesson, isn't sitting on its hands. "Microsoft created an awareness and an interest in databases for these customers," Shimp says. "Microsoft has made a market that we're now ready to move into."


Sign up to receive the Tech Investor column by e-mail.

Plus, see more tech commentary and get the latest tech news.  Top of page




  More on TECHNOLOGY
Honda teams up with GM on self-driving cars
The internet industry is suing California over its net neutrality law
Bumble to expand to India with the help of actress Priyanka Chopra
  TODAY'S TOP STORIES
7 things to know before the bell
SoftBank and Toyota want driverless cars to change the world
Aston Martin falls 5% in its London IPO




graphic graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.