Aggressive Moves

IBM slipped a bit from last year, yet the company has moved aggressively to shore up its database-management business. "A couple of years ago, IBM was strong only in the mainframe database-management system space," says Colleen Graham, an industry analyst at Gartner Dataquest. "Today, the company is a key player in the Unix and Windows NT markets."

Furthering its push into those venues, the company purchased Informix for $1 billion in July. "Currently, it is difficult for database-management vendors to attract new customers," says Mark Shainman, a senior research analyst at Meta Group, a Stamford, Conn.-based market research firm. "Through the Informix acquisition, IBM gained a few points in market share as well as access to a customer base that should eventually move over to the DB2 platform."

The vendor is also courting systems integrators. "We have found IBM to be much more interested in our business than other database management system suppliers," says Mani Chandy, chief scientist and co-founder of iSpheres, an Oakland, Calif.-based solution provider.

IBM is emphasizing its differences from competitors. "Unlike Oracle, we leave the application sales to our partners," says Mark Hanny, vice president of the Software Group's worldwide channel marketing.

IBM also has been hammering Oracle hard on prices, saying DB2 costs one-fifth as much as Oracle. In response, Oracle dumped its Power Unit pricing plan, which charged customers based on system capacity, and began charging by the processor. "Our products were selling well, but we thought if we cut our pricing, we could sell even more," says George Demarest, director of database marketing at Oracle.

Still, IBM continues to claim a pricing difference. "Oracle's changes were part of an elaborate shell game: Rather than costing five times as much as DB2, Oracle now comes in at twice as much as our product," says Paul Rivot, director of database servers and transaction processing at IBM.

Oracle has a different opinion. "IBM has been getting a lot of mileage out of database management system pricing issues, but the company doesn't tell customers that it charges for items, such as XML support, that we bundle in our system," Demarest says.

For its part, Oracle has not sat by idly--after all, its database management business contributed about three-fourths of the company's total fiscal 2000 revenue of $10.1 billion. In June, the vendor delivered Oracle9i. And the vendor still dominates the Unix database management market with a 66.2 percent share, still more than three times IBM's 21.1 percent share, which includes the Informix purchase. "Whenever we have customers that require highly reliable, highly scalable database management software, they pick Oracle," says Johan Czapko, director of emerging channel strategies at Agilera, a Houston-based ASP.

The heavyweight brouhaha has relegated Sybase to also-ran status.The vendor came in second place for presales support and tied IBM for second for postsales support, but was last among database suppliers. "I don't see much interest in Sybase except for a few vertical markets, such as financial services and telecommunications, where the company has been strong," Meta Group's Shainman says.

With its long-term future in doubt, the company has searched for new opportunities, shifting its focus away from core database management and finding success in the mobile marketplace, Gartner's Graham says.

Whether that strategy pans out will be clear in the coming months. While six companies competed in the database management system category last year, the number dwindled to four this year, and could be down to three next time around.

"A few years ago, the database management market was Oracle and a bunch of firms with relatively small market share trying to build viable businesses," Shainman says. "Now, it's essentially become a three-horse race among a group of large, highly successful, intensely competitive suppliers."

Part 1: Microsoft Delivers Knockout Punch