Oracle Eyes Database Takeoff

Larry Ellison, the jet-flying, boat-racing chairman and CEO of Oracle, likes clustering these days. A lot. And he's betting the company's future on it.

At the Oracle OpenWorld conference earlier this month, Ellison once again extolled the virtues of Oracle9i's Real Application Clusters (RAC) technology, which is designed to improve scalability, reliability and performance by enabling a single database to be split among a cluster of servers. But industry analysts and solution providers say RAC remains unproven in the marketplace as a technology and as a selling point.

Ellison says the vendor's Real Application Clusters technology has wings, but some partners and analysts wonder if it will fly.

Ellison half-jokingly said he has no contingency plan if RAC fizzles. "My backup plan is to spend a lot more time sailing," he quipped.

Though Oracle's RAC play is far from a sure thing, the Redwood Shores, Calif.-based vendor has good reason to run with the technology, analysts say.

For one thing, Oracle's core database business has tapered off. Year over year, new license and update revenue for its database technology shrank 11 percent in the second quarter and 1 percent in the first quarter of fiscal 2002, the company reported. In fiscal 2001, that revenue grew 16 percent in the second quarter, 22 percent in the first quarter and 9 percent for the year overall. Oracle bet heavily on the dot-com boom by marketing its databases as the engines of the Web, so it took a harder hit than database rivals IBM and Microsoft when the dot-com balloon popped, analysts say.

What's more, IBM and Microsoft gained market share in the Unix/Windows NT database arena last year, according to research firm Gartner Dataquest. IBM's market share rose to 15.3 percent in 2000 from 11.4 percent in 1999. During that same time period, Microsoft's share climbed to 15.6 percent from 13.1 percent and Oracle's share grew to 50.6 percent from 49.8 percent. Informix, whose database business was acquired by IBM in April, dipped to 4.6 percent market share in 2000 from 8.3 percent in 1999.

Amid the rising competition in the database market, Oracle's foray into e-business applications has been rocky. The Oracle 11i application suite, unveiled in September 1999, is only now recovering from a spate of customer complaints about bugginess and high support fees, according to Morgan Stanley analyst Chuck Phillips. And the fact that Oracle took more than two years to solidify the 11i offering may give end users pause, analysts say. Oracle also irritated channel partners by not letting them sell the e-business suite.

	'I think RAC is the most important thing ever in our history. We can make a group of machines look like one machine and make existing applications fault-tolerant. It's a little like black magic, but then again we've worked on it for a dozen years.' --Larry Ellison

"The RAC message is about Oracle trying to re-establish its focus on the database as its core business, and this is a good thing," Burton said. "For a while, Oracle was off on Internet appliances and then on applications. But databases are what it should be concentrating on."

While the big news at OpenWorld was the release of a new version of Oracle9i Application Server, Ellison and other Oracle brass continued to tout RAC even though the Oracle9i database has been available with RAC for months. Ellison asserts that RAC does just what its name implies: run "real" applications unchanged.

The RAC architecture accommodates legacy applications without code changes, plus speeds data access time since data can be split among the clustered servers, according to Oracle. The company also says that with RAC, if one server in a cluster fails, the others reconfigure themselves and pick up the workload without affecting data availability. And with redundant databases on multiple servers, databases can be enlarged as needed, according to Oracle.

The "shared-nothing" clustering architecture now offered by IBM and NCR's Teradata division,as well as Oracle's older Oracle Parallel Server (OPS),divides data into sectors accessible only from predetermined nodes. If one disk goes down, the data becomes unreachable and the application fails. For months, Ellison has intoned that "shared-nothing does nothing."

George Roberts, executive vice president of North American sales at Oracle, said the technology's big selling point is that it can turn a bevy of cheap PCs running commodity operating systems into a high-availability, high-reliability monster server. "This whole effort around RAC is so key," Roberts said. "RAC is all about lowering the overall cost of developing, deploying and managing architecture. If you have a project, you have a choice: buy a big HP box or start with a small Intel platform,at a whole lot lower cost for your pilot,and then add another Intel box as you add divisions. It significantly improves reliability and service and lowers overall capital costs at the same time."

Roberts also discounted questions about RAC's viability. "It does work, and it doesn't require any programmatic changes," he said. "That's what makes it so valuable."

But RAC also faces some roadblocks, say analysts and solution providers. For one, many Oracle customers are not yet on Oracle9i, let alone deploying RAC. The New York office of a large Northeast bank, for example, had planned to deploy a new Oracle database this year but saw the project derailed by the Sept. 11 terrorist attacks, said an IT executive at the institution. The bank still plans to upgrade its Oracle database, but to 8i, not 9i, he said.

Some industry observers also remain unconvinced that current clustering technology is as inefficient as Oracle claims. "Shared-nothing runs nothing? Tell that to the hundreds of people running Teradata," said Terilyn Palanca, an analyst at research firm Giga Information Group. "Why mischaracterize stuff? Why not just come out and say, 'We think our approach is better.' "

In addition, RAC implementations remain few in number and aren't time-tested. One notable customer,CERN, a particle physics lab in Geneva,has run the technology for only about six weeks. And the lab's primary nine-node cluster has been running for just 10 days, said Jamie Shiers, head of CERN's database IT group.

Systems integrator Acxiom also is testing RAC, both internally and with Compaq Computer, but doesn't expect to see customer deployments until early next year, said Tim Donar, chief systems architect at the Little Rock, Ark.-based firm.

Even if RAC works as Oracle expects, Gartner Dataquest projects that less than 10 percent of the vendor's customers will be using the technology by 2006. "While it has been cautiously optimistic about spring 2002, if the economic downturn continues longer than projected, Oracle will find the ground it has lost to IBM,even without the Informix merger,and Microsoft to be very difficult to recover," said Gartner Dataquest analyst Colleen Graham.

RAC, however, has generated plenty of interest among solution providers. "Clustering is one of the hot topics in the world I live in. The question is one of applications availability, and we're giving [RAC] a hard look," said Hank Johnson, vice president of enterprise partner services at Stonebridge, a Dallas-based integrator. "If RAC is even 50 percent of what Oracle says, we'll be happy."

And Sid Poondla, vice president of BiJTek Solutions, a Plano, Texas-based IT consulting firm, said RAC shows promise. "It keeps your systems up and running," he said. "Even if [a component] goes down, your app is still up and running. You no longer have a single point of failure."

Avnet/Hall-Mark is gearing up reseller training on RAC and the new Oracle app server, said George Brookler, senior vice president of software and services at the Tempe, Ariz.-based distributor.

Still, others are less than enthusiastic about Oracle's RAC claims, given Ellison's history of hyperbole. "I'm sure there are some valid claims in there somewhere, taken within narrow circumstances," said one mid-Atlantic Oracle integrator who requested anonymity. "Larry is Larry. He can't help himself when it comes to making promises."

Indeed, Oracle's challenge has been to expand its footprint beyond databases in the enterprise market while fending off database incursions by IBM's DB2 and Microsoft's SQL Server. In the company's second-quarter 2002 report, Ellison said more than 25 percent of new 9i customers in the "general business" space were replacing DB2 or SQL Server.

Yet some solution providers say Oracle's rivals are making inroads. While Oracle's database remains dominant, "SQL Server is coming on strong because of its lower cost of entry, and it has come a long way in functionality," said Andrei Fedun, vice president of sales at Full Tilt Solutions, King of Prussia, Pa.

On the pricing front, Oracle has shifted from its unpopular Power Unit pricing to the standard per-processor pricing model. But those expecting a price cut were likely disappointed, said Gartner Dataquest's Graham.

"It appears that what Oracle has done leave the price unchanged," she said. "The software used to appear very expensive, but then Oracle discounted it 60 percent. Now it looks less costly up front, but they're discounting less. The fact remains they are still the most expensive database on the market."

Despite lingering channel issues and new product paths, Oracle remains focused on databases, Ellison said. "We are in two businesses: applications with ERP and CRM, and databases, which includes both our database and application server," he said.

And Ellison said Oracle aims to make its database offering more robust by adding capabilities such as business intelligence, OLAP, ETL and J2EE-compliant application servers,a move that would put the company head-to-head with Business Objects, Informatica and BEA Systems.

"Business Objects and BEA are living on the Oracle database installed base and are living on borrowed time," he said. "I greatly admire what Microsoft did in terms of rolling up Lotus and WordPerfect inside the Windows marketplace. The Microsoft strategy,build better software, charge less and make it up on volume,we think we can do that and do it very, very effectively."

STEVEN BURKE & MARIO MOREJON contributed to this story.

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