IBM Sets Sights On Oracle, Market Share With Informix Buyout

In case there was any doubt there is a full-fledged database war raging, IBM is dropping a cool billion dollars on Informix, a tech-savvy but struggling database company.

"Today's acquisition doubles the size of IBM's distributed database business. We are in this war for winning the information infrastructure play. We will add over 100,000 customers to IBM and gain more than 2,000 skilled people," said Janet Perna, general manager of IBM's Data Management Software group. "At the end of the day, the team that has the most of the best talent in the industry will win this war. We are fighting to win, playing for first place."

Perna said IBM will support and maintain current Informix database customers but will lead with DB2 Universal Server for new database installations.

IBM is clearly squaring off against database rival Oracle. IBM executives on a conference call Tuesday afternoon repeatedly cited numbers showing that IBM's database business grew 36 percent in the first quarter vs. 6 percent growth for Oracle.

"This has less to do with Informix technology and much more to do with IBM's desire to compete head-to-head with Oracle. With this deal they spent $1 billion to acquire market share," said Betsy Burton, vice president of Gartner. The move mimics what Oracle itself did years ago when it acquired Digital Equipment's Rdb, she added.

While Informix has some good object-oriented and other technologies, it also fields a whopping seven code bases ranging from Illustra, Red Brick and CloudScape--all Informix acquisitions--as well as Unidata, XPS, IPS and Foundation 2000, Burton said.

Oracle issued its own response Tuesday, offering Informix customers a 50 percent credit on the cost of their Informix database software if they move to Oracle. Oracle already offered migration tools from Informix and claims some 500 Informix customers have availed themselves of the tools since February, said Bob Shimp, senior director of databases for Oracle.

Oracle Chairman Larry Ellison seemed unimpressed by the IBM-Informix deal. "What can I say? We have a billion in cash and could have bought Informix too. But at last count, Informix had four or five databases--Red Brick, Illustra, something cloud, and a few versions of Informix itself. ... I know IBM said they would force their customers to DB2. I can't imagine why anyone would leave Informix for DB2," Ellison said.

Ellison said no acquiring company--including Oracle--can force customers to upgrade to an in-house piece of software if the customers have other intentions. "Who owns Informix is kind of irrelevant," he said.

In what has become a protracted, sometimes humorous, and sometimes bitter battle of words, IBM and Oracle execs have slammed each other's database offering. IBM claims DB2 is less expensive, but Oracle says IBM's database requires more hardware and human labor to keep up the pace.

Ellison reiterated past pledges that Oracle 9i,which he said would debut May 15,is actually more cost-effective than IBM's offering because it supports true clusters and will run much faster. "We have real application clusters ... that can run real applications. We can have four clusters running SAP, or one, two, three, four clusters running Siebel ... with DB2 you can only have the equivalent of one computer running SAP or PeopleSoft."

Analysts including Gartner's Burton said Oracle, despite its market leadership, is taking hits among customers because of its database pricing. "I tell people before you agree to the Oracle upgrade from Informix, get Oracle's pricing because getting 50 percent off what you paid for Informix won't help you pay that Oracle bill," said Burton.

While IBM executives said the company has made inroads among former Oracle customers irritated by Oracle's high database prices, Ellison said Oracle users get more database bang for their buck.

"You have to buy twice as much hardware for DB2 systems than Oracle systems ... you need twice as much hardware, a network that's twice as fast and to hire twice as many people [to run DB2]," he said in response to questions after an Oracle conference call Tuesday afternoon.

On IBM's conference call, executives were so focused on Oracle they didn't even mention Microsoft, which many analysts said has made credible progress making SQL Server 2000 enterprise-ready. Jeff Jones, senior program manager for IBM's Data Management Solutions group, said that was mainly because Informix itself is Unix-centric and Microsoft does not play in that spot. "When you back up, honestly, it's a three-horse race" between IBM, Microsoft and Oracle.

In response to a question, Perna characterized Microsoft as a "one-trick pony in terms of database technology." Microsoft SQL Server "runs on the Microsoft platform only and customers have environments that contain Windows, Unix, mainframes ... and we are uniquely positioned now to provide customers with information infrastructure that supports that wide variety of hardware platforms," Perna said.

But companies ignore Microsoft at their own peril. "IBM is fighting on two fronts: On one, Microsoft is coming up from the low end and making good progress scaling up SQL Server, and then Oracle is on the high end nipping at IBM's heels," said Judith Hurwitz, president of The Hurwitz Group.

It is unclear how the acquisition will affect channel partners of both companies. Informix posted a letter to its "valued business partners" on its Web site to explain the deal.

Perna said about 41 percent of DB2 sales were "influenced by" channel partners ranging from integrators and VARs to large ISVs such as Siebel Systems and PeopleSoft. Informix sells about a quarter of its U.S. licenses indirectly, said Jim Foy, president of Informix. The mix abroad varies. "As far as partners and the endorsement of partners IBM already has can only help the channel business," Foy added.

Integrators will watch to see how IBM attempts to meld the Informix and home-grown database offerings. "It looks like IBM is buying Informix market share. ... It's not going to change our strategy immediately, but it's something we'll have to look into and be cognizant of. ... In the majority of cases, we are working with Oracle," said Randall Truesdale, senior alliance specialist with Thaumaturgix, a New York solution provider.

Impact on the channel is expected to be minimal, at least until the deal closes, ostensibly in the third quarter. This pact is unlike other blockbuster IBM software buyouts, such as its 1995 acquisition of Lotus Development. "With Lotus there was no overlapping technology, but there sure is here," said Mitch Kramer, senior analyst with The Patricia Seybold Group. "IBM is getting some pretty good technology and people, including developers, as well as some big customers," he added.

Steven Burke contributed to this story.