May 26, 2004 3:05 PM PDT

Database sales bouncing back

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The market for database server software, seen as a barometer of overall software market health, grew slightly last year, fueled in part by sales of Linux.

Overall sales of relational database software grew by 5 percent to $7.1 billion in 2003, compared with a decline of 6 percent a year earlier, according to a study released Wednesday by research firm Gartner.

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What's new:
The market for database server software, which is seen as a barometer of overall software market health, grew last year.

Bottom line:
Linux tops the lists of many database shoppers, and much of the gains for the software comes at the expense of Unix.

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While new license sales rose in 2003, a "significant part" of the overall increase came from currency conversion gains due to the weak dollar, said Colleen Graham, the Gartner analyst who authored the study. The research firm based its study on database revenue reported by vendors and on Gartner's own estimates.

The top three database makers maintained their relative positions in the market. IBM kept its overall lead, at just less than 36 percent, driven by sales of its DB2 database on iSeries midrange servers and zSeries mainframe hardware. Oracle slipped slightly to 32.6 percent, while Microsoft gained a point to 18.7 percent.

Despite the allowance for currency gains, 2003 shaped up as a strong year for software makers. Strong database software sales usually indicate a growing number of new projects being initiated at big companies. "This is infrastructure software; these are the roadways that you put down before you build the housing developments and stores," Graham said.

The good news for the software market in general is that many big companies appear to have used up much of the database software they purchased in the Internet boom years of the late 1990s through 2001 and are coming back for more. Sales in 2002 dipped, as companies cut information technology budgets and canceled projects.

"Now they're ready to buy more," Graham said. "But these are very skeptical people who got burned badly. They will be purchasing more, but not nearly as much or as fast as in the past."

According to Gartner's study, Linux tops the lists of many database shoppers. Sales of database software on Linux systems nearly doubled in 2003, to nearly $300 million, Gartner said. That's still a drop in the bucket, compared with overall sales. But it shows that companies are seriously considering Linux for new enterprise systems, Graham said.

Much of the gains for Linux came at the expense of Unix, the big loser in 2003, according to the study. Sales of database software on Unix systems dropped by 6 percent overall, as more customers moved to other operating systems, primarily Linux, Graham said. Unix has for years been seen as the best choice for high-end databases.

IBM maintained its 35.7 percent share of the market, mostly though sales to small and midsize businesses, according to Gartner.

One trouble spot for IBM is in its Informix database software line, which it acquired in 2001. Sales dipped by 16 percent in 2003, indicating that IBM hasn't been successful in converting those customers to its DB2 database, Gartner said. While a decline in Informix revenue was expected, the research firm had predicted that those customers would remain with Big Blue. Instead, some Informix users appear to have defected to rivals. An IBM representative acknowledged that its Informix installed base is "not as strong" as last year.

IBM instead focused its new sales on small and midsize businesses buying iSeries servers. "That's a good plan, because large enterprises are saturated," Graham said. Mainframe deals typically involve upgrades to existing systems already owned by customers, she said. "They buy upgrades, but few new licenses."

Oracle jumps on Linux bandwagon
Oracle, the dominant Unix player, is now focusing on open-source operating system Linux. "The Unix market in general is declining," said Bob Shimp, vice president of technology marketing at Oracle. "Linux is growing rapidly."

IBM led the Linux database market in 2002, with $67 million in sales, compared with Oracle's $45 million. Now Oracle controls nearly 70 percent of the market, with $207 million in sales in 2003, compared with IBM's $85 million.

Graham said the growth in Linux sales is part of an orchestrated move by Oracle to cannibalize its own installed base on Unix before the company's competitors can step in and make a deal. "Because Oracle is the dominant player in a declining Unix market, they are telling customers to move to Linux," she said.

Oracle's Shimp said much of the company's Linux sales are due to consolidation from Unix. "But we are also seeing migrations from Windows to Linux. The trend in terms of new purchases is that people are choosing a lot of Linux for new systems," he said.

The lone bright spot in the Unix market is NCR's Teradata unit, which posted a 6 percent gain in 2003, according to Gartner. The company sells specialized databases for data warehouse and decision support applications.

Sales of databases on Windows remained strong, climbing 4 percent in 2003, due mainly to strong growth of Microsoft's SQL Server database. While Microsoft gained 11 percent in the Windows market, its rate of growth has slowed, Gartner said. The company increased Windows database sales by 17 percent in 2002.


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Part of the reason for the slowing growth comes from the popularity of Linux. IBM and Oracle, which in years past targeted Windows for sales to smaller businesses, have largely ceded that market to Microsoft, Graham said. Customers that might have moved to Windows are instead looking at Linux. "Oracle was the No. 1 vendor on Windows in 1999. Then Microsoft took over and has tailored Windows to make SQL Server run better. Now Oracle sees Linux as a strategic platform," she said.

Microsoft disputes Gartner's assessment of the Linux market. "Customers are looking at Linux, but they aren't necessarily moving," said Tom Rizzo, Microsoft's director of product management for SQL Server. "It's not always free. And support is a big concern for customers as well. We're one neck to choke. On open source, I don't know," he said.

Microsoft is expected to get a boost from the release of SQL Server 2005, a new version of its database server, in the first half of next year.

What's unclear from Gartner's report is the effect that increasingly popular open-source databases such as MySQL are having on market share overall. Gartner didn't include MySQL in its new study, because the researcher doesn't see the company's databases as "enterprise" class.

Other analysts believe that MySQL is steadily growing in popularity and could be taking share from Microsoft and Oracle on the low end of the market through aggressive pricing.

The MySQL database is taking over the lower-price, lesser-need market that Microsoft started with, analysts said, because that's a niche underserved by database industry heavyweights.

 

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