The second quarter of 2011 is now in our rearview mirror and that means it time to review what happened in the database systems market during the past quarter. The quarter brought the typical news of acquisitions, lawsuits, and quarterly financial results. But it also brought some big data breaches and some interesting research and analysis in the form of a data breach report and Gartner's annual DBMS market share report.
So let's dig in to this quarter's edition of The Database Report, and examine the news and happenings in the world of data and database systems during the second quarter of 2011.
Leading IT industry analyst firm Gartner, Inc. announced its 2010 Worldwide RDBMS Market Share Report this quarter and, as in the past couple of years, Oracle is the clear leader with a 48.1% market share. Oracle touted this news by exclaiming that it holds more market share than its five closest competitors combined.
Oracle grew at 10.9%, exceeding both the industry average (9.9%) and the growth rates of its closest competitors.
In late April, Gartner also published research on the Worldwide Business Intelligence, Analytics and Performance Management Software Market, which it claims surpassed the $10 billion mark in 2010. "BI spending has far surpassed IT budget growth overall for several years, and it is clear that BI continues to be a technology at the center of information-driven initiatives in organizations. Vendors aggressively market their capabilities in this area, so revenue growth is as much a function of vendor push as a demand pull," said Dan Sommer, principal research analyst at Gartner.
The four largest vendors―SAP, Oracle, IBM and Microsoft—own 59% of the market share. In the BI platform and CPM suite segments, they hold close to two-thirds market share, while in analytic applications, SAS dominates the market. There is ongoing BI tools consolidation in the IT department, while, paradoxically, a new wave of lighter footprint data discovery tools and analytic applications are proliferating in business units.
SAP remained the No. 1 vendor in combined worldwide BI, analytics and PM software revenue in 2010, accounting for 23% of the market (see Table 1), followed by Oracle, SAS Institute, IBM and Microsoft.
In March, the Ponemon Institute released its annual study on data breach costs. Ponemon Institute conducts independent research on privacy, data protection and information security policy. Ponemon Institute research informs organizations on how to improve upon their data protection initiatives and enhance their brand and reputation as a trusted enterprise.
(And this report was particularly well-timed and interesting in light of the LizaMoon SQL injection attacks that made the news this quarter [see next story for coverage of LizaMoon]).
The highlight of this report, which can be downloaded for free (courtesy of Symantec at http://www.symantec.com/content/en/us/about/media/pdfs/symantec_ponemon_data_breach_costs_report.pdf), is that the cost of data breach has risen for the fifth consecutive year. The average cost per record registered is $218, comprised of $74 of direct costs and $144 of indirect costs. Although overall costs have increased for five years, indirect costs have declined while direct costs have been increasing since 2008.
Overall, the average organizational cost of a data breach event was $7.2 million in 2010, a 7% increase over the $6.8 million cost in 2009.
Another interesting statistic from this report analyzes the impact of how rapidly an organization responds to a data breach. And the results are probably not what you expect. The faster the response the more it costs. Organizations that notified breach victims within a month incurred an average cost per record of $268 in 2010, up 22% over the $219 cost for 2009. Companies that took longer to respond incurred an average cost per record of $174 in 2010, down 11% over the previous year. Perhaps this data will help organizations change their approach because more organizations responded faster to data breaches in 2010 than in 2009 (even though it would probably cost less to respond more slowly). In 2010, almost half of organizations (43%) notified breach victims within a month; that was up 7% from 2009.
That last sentence was most interesting because even though Itanium may not be Intel's strongest seller, Intel has never (officially, at least) abandoned the chip. Gartner's 2010 Worldwide Server Market report indicated that RISC and Itanium Unix revenues declined 19.3% in the fourth quarter of 2010 (http://www.gartner.com/it/page.jsp?id=1561014). Nevertheless, Intel announced a new Itanium chip (code-named Poulson) in February of this year. The Itanium chip is not a mass-market chip like the x86, but is targeted at very large UNIX implementations.
So, do you think that Oracle's desire to increase the market share of its Sun servers has anything to do with the decision to drop Itanium support (he asks, tongue in cheek)? The Oracle press release did state that Oracle will continue to provide customers with support for existing versions of Oracle software products that already run on Itanium. But Oracle followed up its Itanium announcement by publishing a support termination schedule for its products (as of the date I am writing this it is still up on Oracle's website at http://www.oracle.com/us/corporate/features/itanium-346707.html).
As might be expected, Hewlett-Packard (HP) was not pleased. In fact, the very next day HP followed up with a press release of their own with the pithy title of "HP Supports Customers Despite Oracle's Anti-customer Actions." In it, the gloves came off as Dave Donatelli, HP's Executive Vice President and General Manager, Enterprise Servers, stated "Oracle continues to show a pattern of anti-customer behavior as they move to shore up their failing Sun server business." Ouch!
OK, so why is this "news" in the legal section of The Database Report? Well, one of Oracle's selling points for many years has been its broad platform support. Oracle and its supporters regularly cite the number of platforms on which the Oracle Database runs, touting this platform neutrality against IBM and Microsoft. It would seem that there should be some anxiety now among users running Oracle software on lower popularity platforms.
At any rate, in early June Hewlett-Packard sent a legal missive to Oracle demanding that it reverse its decision because it is in violation of "legally binding commitments" Oracle made to Hewlett-Packard. It will be interesting to see if there are indeed any contracts that would force Oracle to reverse its decision. I know if I were an Itanium customer I probably would be looking for another software vendor or another hardware vendor right about now.
Late in March, a judge in Delaware ordered that a letter containing allegations of sexual harassment by former Hewlett-Packard CEO Mark Hurd be unsealed. For those who do not recall, Hurd was "forced out" of Hewlett-Packard as a result of this accusation, and he now works at Oracle.
Although the order specifies that Hewlett-Packard had ten days to make the letter public, Hurd's attorney appealed the decision, hoping to keep the letter's contents confidential. So who knows if it will ever be made public or not.
The letter is a sticking point in an ongoing lawsuit – brought by a Hewlett-Packard shareholder – regarding Hurd's exit from the company.
In early May, in yet another of Oracle's ongoing legal actions, the judge sided with Oracle's interpretation of what numerous technical terms are supposed to mean. Essentially, the judge agreed with Oracle's meaning for four of the terms and wrote his own for a fifth.
Recall that in August of 2010, Oracle filed a complaint for patent and copyright infringement against Google, Inc. The litigation centers on Google's Android operating system for mobile phones, and Oracle claims that Google knowingly, directly and repeatedly infringed Oracle's Java-related intellectual property.
Currently, there are 132 claims from seven patents asserted in this action, and there are hundreds of prior art references in play for invalidity defenses. This is too much. The following schedule will ensure that only a triable number of these items — three claims and eight prior art references — are placed before the jury in October, all others to be forsaken. Oracle will surrender all of its present infringement claims against Google based on the 129 asserted claims that will not be tried. Oracle may not renew those infringement claims in a subsequent action except as to new products.
Legal proceedings like this confound me at times. I do not really understand why a judge should be able to enforce such limitations. If Oracle really does have evidence of 132 patent infringements, why should they not be able to bring all of those claims to trial? I think there might be grounds for an appeal if Oracle does not get a judgment they like here. But I'm not a lawyer, so we'll see.
While I am not a big fan of using software patents to garner revenue, it seems to me that Oracle may have a legitimate claim here (I'm no lawyer, don't quote me on this, I could be wrong, etc.). I still think that the logical conclusion of this would be for Google to license the Java technology from Oracle and pay a fee to Oracle for each Android sale. That will likely be cheaper than pay lawyers during a drawn-out legal action.
In the ongoing battle between Oracle and SAP (TomorrowNow), early May saw the approval of SAP's request for a stay on it having to pay out on the $1.3 billion award Oracle won in last year's jury trial. The stay order can be read here http://www.scribd.com/doc/54234009/SAP-Stay-of-Damages-vs-Oracle.
Essentially, SAP is arguing that the payment amount awarded is excessive and they want a retrial. SAP had argued during the trial that the fine should have been in the tens of millions. Oracle would be happy to cash a $1.3 billion check and be done with it, but that is not going to happen right away.
Recall that Oracle sued SAP when it uncovered evidence that TomorrowNow, an SAP subsidiary, had been improperly downloading Oracle support documents for an Oracle customer's support website. SAP did not contest that the downloads had, in fact, occurred and has since shut down the TomorrowNow subsidiary.
So for now, this one is on the backburner until a retrial is granted (or not). Stay tuned.
In late May, New Jersey's Montclair State University filed a complaint in U.S. District Court claiming cost overruns and a failed implementation regarding a project to deploy Oracle PeopleSoft ERP software.
The university claims it will experience $20 million in expenses beyond the planned cost of the project.
There was a disagreement between the two parties in terms of the project's progress, and when Oracle sought to be paid more than the fixed fee agreement to finish the project, the university declined. And the university claims that Oracle would abandon the project if it was not going to be paid.
The university claims that it has already paid Oracle part of the project's cost and will need an additional $10 million to finish it. Under the terms of the deal, the project – which began in 2009 – was supposed to have been completed by Oracle within 25 months.
There sure is a lot of litigation going on in the database world, isn't there? But let's move on and take a look at the financial results of the Big Three DBMS vendors in the second quarter of 2011.
IBM reported better than expected Q1 results, with revenue of $24.6 billion, up 8% from a year ago. First quarter net income was $2.9 billion compared with $2.6 billion in the first quarter of 2010, an increase of 10%. Operating net income was $3.0 billion compared with $2.6 billion in the first quarter of 2010, an increase of 13%. Profits of $2.41 per share came in ahead of expectations.
The company reported 10% revenue growth in software, with 19% growth in hardware. Services were up 6% and outsourcing was up 7%. Revenues from IBM's key middleware products, which include WebSphere, Information Management (the category for DB2), Tivoli, Lotus and Rational products, were $3.3 billion, an increase of 16% versus the first quarter of 2010.
Based on the strength of its first quarter performance, IBM raised its full year 2011 operating earnings per share expectations to at least $13.15.
Oracle also announced better than expected financial results for its fiscal 2011 Q3. Total revenues were up 37% to $8.8 billion. New software license revenues were up 29% to $2.2 billion, while software license updates and product support revenues were up 13% to $3.7 billion. Hardware systems products revenues were $1 billion. And earnings per share were $0.41, up 75% compared to last year.
Oracle also announced a quarterly cash dividend of $0.06 per share of outstanding common stock, reflecting a 20% increase over the previous quarter's dividend.
Breaking down the software numbers, Oracle's Database and Middleware sector reported earnings of $4.1 billion, a 19% growth year over year. Oracle's Application business did well, too, growing 17% year over year to $1.9 billion.
This brings us to Microsoft, which reported record results for its fiscal 2011 Q3. Third quarter revenue of $16.43 billion represented a 13% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $5.71 billion, $5.23 billion, and $0.61 per share, which represented increases of 10%, 31%, and 36% respectively, year over year.
Microsoft Business Division revenue grew 21% year over year, buoyed by Office 2010, which since its release last springhas become the fastest-selling version of Office in company history. Revenue for the Server and Tools division (which houses SQL Server) grew 11% year over year, the fourth consecutive quarter of double-digit growth. Microsoft credited strong business adoption of Windows Server 2008 R2, SQL Server 2008 R2, and System Center as driving revenue expansion. Windows 7 remains the fastest-selling operating system in history, with 350 million licenses sold. Revenue for the segment was down 4% in the third quarter, in line with the PC trends, excluding prior year launch impact.
So, each of the Big Three DBMS vendors registered a healthy quarter.
There were not a lot of acquisitions during the third quarter, but one really stands out. And this time it is not Oracle!
On May 10th, Microsoft announced its intentions to acquire Skype, the leading Internet communications company, for $8.5 billion in cash. The agreement has been approved by the boards of directors of both Microsoft and Skype.
With 170 million connected users and over 207 billion minutes of voice and video conversations in 2010, Skype has been a pioneer in creating rich, meaningful connections among friends, families and business colleagues globally. Microsoft will use Skype to add value to its real-time communications software and platforms, including Lync (which saw 30% revenue growth in Q3), Outlook, Messenger, Hotmail and Xbox LIVE.
Microsoft indicated that Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices. The company also asserted that it will continue to invest in and support Skype clients on non-Microsoft platforms.
Even though there appears to be several areas of synergy, you have to be amazed that Microsoft is paying $8.5 billion for Skype, especially considering that Skype was sold about two years ago for $2.5 billion. That is a heck of a growth curve!
It makes me wonder how Microsoft ever expects to get a return on that huge investment. It is unlikely that Skype will become a big enterprise play – these companies have their phone systems and Skype communication may be viewed as a security risk. And even if Microsoft integrates Skype into all of the technology it plans, how will the company monetize these efforts to the tune of $8.5 billion?
At any rate, you have to give Microsoft credit for thinking big.
In other acquisition-related news, Oracle agreed to acquire Datanomic in early April. Datanomic is a provider of customer data quality software and related applications for risk and compliance screening. Datanomic's flagship product is called dn:Director. It enables companies to rapidly discover data integrity issues across all data sources, and take action to correct them from one easy-to-use, centralized console. The dn:Director product also enables companies to support data governance best practices by monitoring data quality through a dashboard.
Datanomic's data quality software is expected to become a part of Oracle's solution for comprehensive data integration. Oracle Data Integration is a part of Oracle's middleware platform, and with the inclusion of data quality it is expected to ensure information integrity across the enterprise. The combination makes sense and should deliver a complete solution for data profiling, quality and integration for Oracle customers.
The acquisition was announced and finalized during the third quarter.
Another interesting acquisition this quarter was announced in late April: Infor announced its intention to acquire Lawson Software. Infor, headquartered in Alpharetta, Georgia, is a provider of business software and services. With 70,000 customers across 125 countries, its focus has been on smaller organizations than are serviced by behemoths like Oracle and SAP. Lawson, headquartered in St. Paul, Minnesota, also offers enterprise resource planning software, services and support.
"Infor and Lawson will create a rich, integrated enterprise application suite. After the transaction closes, we plan to integrate many of the applications as soon after closing as possible, facilitated by a standards-based approach and the fact that both companies' applications are already service-enabled. We also plan to innovate and change how customers deploy, use, and upgrade enterprise applications. We have a long list of ideas to improve the customer experience and deliver value through a singular focus on enterprise applications, accelerated investment, and a strong incentive to challenge convention," said Charles Phillips, CEO of Infor. Regular readers may recognize Mr. Phillips as a former Oracle executive.
It looks like Infor may be trying to position itself as a third power player in the commercial, off-the-shelf packages software business. Of course, that ambition is probably beyond their capability right now, but they could grow into it.
The combination and integration of Lawson's software with Infor could prove to be beneficial in opening up new markets for Infor. Lawson has a strong healthcare offering, whereas Infor does not. But Infor's asset management software could be integrated with Lawson's healthcare software to produce software for hospitals needing to manage and track their medical equipment and devices.
Of course, there will be technology issues that must be overcome because Infor is Microsoft-based, whereas Lawson is Java-based.
In late May, IBM announced a $100 million investment for research on technologies and services that will enable clients to manage and exploit data as it continues to grow in diversity, speed and volume. The initiative will focus on research to drive the future of massive scale analytics, through advancing software, systems and services capabilities.
New, patented software capabilities to analyze massive volumes of streaming data with sub-millisecond response times and Hadoop-based analytics software to offer scalable storage to handle tens-of-petabytes level data. These capabilities complement and leverage existing IT infrastructure to support a variety of both structured and unstructured data types.
20 new services offerings, featuring patented analytical tools for business and IT professionals to infuse predictive analytics throughout their IT operations. The services enable IT organizations to assess, design and configure their operations to address and take advantage of petabytes of data.
In the announcement, IBM referenced its 2011 IBM Global CIO Study (http://www-03.ibm.com/press/us/en/pressrelease/34530.wss). Evidently, 83% of the 3,000 CIOs surveyed said applying analytics and business intelligence to their IT operations is the most important element of their strategic growth plans over the next three to five years. Coupled with the predictions of IT industry analysts who claim that enterprise data growth over the next five years will increase by more than 650% (with 80% of this data being unstructured) IBM's investment in analytics and smarter computing initiatives seems to be a sound one. Although I am not a big fan of the term "big data," IBM's investment will likely pay dividends for years down the road. Not many corporations are capable of that type of forward thinking, nor of putting their money where their mouths are.
In mid-May, at its Sapphire Now conference, SAP announced its plans to enable its ERP software to run using Sybase Adaptive Server Enterprise (ASE). SAP acquired Sybase last year and has been working on a port for the DBMS since the acquisition closed.
The move makes sense, and has been anticipated, given the growing competition (and animosity?) between SAP and Oracle. The Oracle Database is used as the underlying DBMS for most SAP ERP implementations.
SAP ERP releases will be certified out of the box with the latest Sybase ASE in-market releases. The life cycle of Sybase ASE will be fully synchronized with SAP maintenance policies to simplify release and deployment planning for customers. By tightly integrating SAP ERP and Sybase, SAP is hoping that customers will engage with a single vendor instead of relying on DBMS software from other sources – Oracle, namely, though SAP did not mention Oracle in its press release.
The move is a sound one, but the market share for Sybase has eroded over the years, and it is very small when compared to the Big Three. Sybase remains entrenched on Wall Street, though, and if it can gain traction by being aligned with SAP, its market share could climb.
In early April, Oracle released a beta version of Oracle 11g Express Edition (XE), the free-of-charge version of Oracle Database. Keep in mind that Oracle Database 11g was officially released in 2007, but only now is the free version in beta.
Early in May there was a reorganization within Microsoft's Server and Tools division. Microsoft Corporate Vice President Scott Guthrie was moved from the .NET group to head up the newly created Azure Application Platform team. Among various other personnel shifts, Microsoft also consolidated its developer tools and developer evangelism groups under Developer Division Senior Vice President Soma Somasegar.
In late May, Oracle and Amazon jointly announced that Oracle Database is available on Amazon Web Services. Only Oracle Standard Edition One, a feature-limited version of the database, is available under the license-included model. Customers can choose their preferred pricing model between "license included" (starting at 16 cents per hour) and "bring your own license" (starting at 11 cents per hour).
Later in May, Greenlight Capital President David Einhorn publicly called for Microsoft CEO Steve Ballmer to be replaced. At the time, Greenlight held 9 million shares of Microsoft stock worth about $220 million. Ballmer owns 333 million shares, which constitutes nearly 11% of the company. So Ballmer is not going anywhere any time soon… but it does make you wonder who the "CEO in waiting" might be at Microsoft. During the past six months several high visibility candidates have exited the company, including Bob Muglia and Ray Ozzie.
And so we come to the end of another edition of The Database Report. The data and database system market sector continues to be interesting to follow with legal maneuvering, acquisitions, and big dollar investments. And the Big Three DBMS vendors continue to perform well financially. So what might we expect to see during the remainder of 2011? Well, if you want to track what happens, be sure to check in with The Database Report on a quarterly basis… see you next quarter!


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