Top Three Database Vendors Go After SMBs

During the past few years, the Big Three database suppliers, Oracle, IBM and Microsoft, have waged war among themselves on two fronts: the high-value, or enterprise, market, and the high-volume, or SMB, space. But as growth in the high-value market shrinks and opportunities in the high-volume market expand, all three companies are firing more of their technology and marketing ammunition at the lower end--namely, at the high-value market, or end-user companies with fewer than 1,000 employees.

The good news for VARs is that all three vendors realize they must make the channel the focal point of their respective low-end strategies as they go after SMBs more aggressively. Already, the major suppliers appear willing and able to spend whatever it takes to win the allegiance of the channel through new approaches to products and partner programs.

But selling to either market--high-volume or high-value--has become a more complex game in recent years. End users both large and small are no longer bowled over by the speeds and feeds of core databases themselves. Now it's all about the products and services that sit on top of the database and work together to create customized solutions for specific application needs. This, again, is potentially good news for resellers that have done their homework and are ready to pounce on such opportunities.

"The business model around databases has shifted pretty dramatically the last couple of years and will continue to shift," says Dana Gardner, principal analyst at Interarbor Solutions in Gilford, N.H. "With the commoditization of databases, people even at the low end no longer shop for databases per se. They shop for vertical solutions that will be of value both strategically and tactically at an infrastructure and application level."

Vendor By Vendor

Of the Big Three, IBM may have the toughest time fighting the low end of the two-front war. With the longest history of the three in dealing with the high end, IBM has yet to establish a meaningful presence for its databases among end users with fewer than 100 employees.

But IBM seems reinvigorated. The company is on track to deliver its high-end DB2 Viper database sometime this summer, while attempting to expand its share of the high-volume market with DB2 Express C and the recently released free version of DB2.

"We want to go both high-value and high-volume with DB2, which is what led to us delivering Express C," says Ambuj Goyal, general manager of Information Management at IBM. "But we have some training to do of partners and their sales forces if we hope to go after the SMBs. Oracle and Microsoft will be tough competitors there."

Ultimately, IBM believes it can compete successfully at the low end while protecting its fortunes at the high end. Company executives say they are happy with the market performance of Express C, Content Manager and the number of free downloads of DB2 thus far, thanks to what company officials believe is a low barrier to entry for partners.

"We have lowered the barrier to entry on key value building blocks like DB2 and Content Manager, and integration components so they can build low-cost solutions," says Bob Picciano, vice president of Data Servers at IBM's software group. "But these pieces also give partners the ability to have a value-level discussion about helping users build a more sophisticated solution on top of the underlying infrastructure they have already enabled."

NEXT: Oracle's and Microsoft's prospects.

Meanwhile, Oracle says it's a few years ahead of IBM in pursuing opportunities in the SMB market. The company's execs say its database products were reengineered to be more easily installed, configured and maintained, and that Oracle introduced key technologies, including XML, and redid pricing on key offerings to the low end long before IBM did. Several months ago, Oracle signed deals with Ingram Micro, Tech Data and Dell Computer as a way to better penetrate the SMB market.

"Like IBM, we grew up in the high-value space," says Judson Althoff, vice president of Worldwide Distribution and Platform Alliances at Oracle. "But over the past four or five years, we have made deep investments on the technology side in the SMB space, as well as having signed on some high-volume providers, which has helped us recruit 250 new partners."

Oracle isn't going after just midsize companies. It's also pursuing opportunities at small shops with 10 people or fewer and with no in-house IT staffs. The company feels it has a major advantage over IBM in the latter market.

"There is a market made up of small shops like plumbers and dentists who are not IT pros or hobbyists but still want a sweet development environment with a relational database behind it," says Mark Townsend, director of database product management at Oracle. "This is the space where we expect to see the next generation of partners and ISVs. I think we have a huge advantage over IBM here."

Some partners that work with both IBM and Oracle say there is little difference between the two vendors' core database technologies--not in the XML capabilities of those respective products, in their free databases or in the technical industry standards to which they both adhere.

"They are going down the same path in terms of their approach to SMBs. The only difference I can see is that Oracle limits the number of CPUs you can have and the size of a database," says Nathan Krishnan, CTO and founder of Nextance Intelligent Solutions, a solution provider in Redwood City, Calif. "IBM just puts a limit on the number of CPUs you can use, but you can grow the database as large as you want. That could be what helps us determine whether to go with Oracle or [IBM's] Viper."

There is, however, one important difference between the two rivals, as Nextance and other solution providers point out. IBM, unlike Oracle, does not push both a database and applications stack. With its set of applications, some feel Oracle will compete against its own ISVs.

Microsoft has focused most of its technical and marketing resources for SQL Server on the SMB market, and has depended primarily on partners to establish a foothold there.

"There is an ecosystem of partners out there specifically geared to support the SMB market," says Don Petersen, senior product manager in charge of Microsoft SQL Server. "It's not a direct-sales-force sell. It's all about leveraging the VARs and resellers."

Last November, when Microsoft introduced SQL Server 2005, along with Visual Studio and BizTalk Server, the company purposely designed all three to work together as if they were one product. All three shared the same programming model and tools suite, and each had a built-in Common Language Runtime (CLRT) engine. The shared technology in all three products makes it easier for partners to customize solutions, company execs claim.

"It represented a new and broader approach to delivering these products with partners," Petersen says.

Besides worrying about competing with each other on the low end, all three powerhouses will also have to contend with another force: open-source database vendors, particularly MySQL.

"The low end of the market is getting eaten up by open-source databases. This is why Oracle, IBM and Microsoft added XML to stay ahead," says Nextance's Krishnan. "They will force the [Big Three] to keep innovating infrastructure so new- age applications can be built."