Hello Everyone,
There is a good article in yesterday's Wall Street Journal ... here it is ...
'Open Source' Database Poses Oracle Threat
Wall Street Journal
Print Media Edition: Eastern edition
New York, N.Y.
Jul 9, 2003
Authors: David Bank
Abstract:
Once Cox management was sold on the idea, some executives suggested transferring
the operation to an Oracle system, Mr. [Mark Cotner] says. For Cox's system,
the price for licensing Oracle's system would have totaled about $300,000,
not including a service contract. But even after Cox upgraded to the commercial
version of the MySQL database, the company's licensing costs were under
$1,000. Mr. Cotner also pays $12,000 a year for support services.
Oracle executives will discuss industry trends today at an annual meeting
with financial analysts at the company's headquarters in Redwood Shores,
Calif. Ken Jacobs, Oracle's vice president for product strategy, says MySQL's
offering "is certainly interesting, but I don't see it as competition for
Oracle. Not now and not for some time to come."
MySQL's chief executive, Marten Mickos, makes a virtue of his product's
stripped-down simplicity. "Software shouldn't be glorified," he says. "We
say, 'Let's do this as compactly as possible and then sell it at a price
that blows the competition away.'"
Copyright (c) 2003, Dow Jones & Company, Inc.
Full Text:
FOR DECADES, software makers got rich by selling programs for a steady
flood of ever-cheaper computers. Now the forces of commoditization are
starting to turn against one of the richest makers, Larry Ellison.
Mr. Ellison, chief executive of Oracle Corp., has long led the market for
databases -- software that acts as a kind of universal filing cabinet and
a foundation for writing other programs. That success gave Oracle the resources
to move up market into business applications, and to make its recent $6.3
billion hostile bid for PeopleSoft Inc. to try to accelerate that push.
But now, Oracle and other database suppliers face a growing threat from
below: "open source" databases, which give customers a free or low-cost
alternative to commercial products. While the impact has been small so
far, some analysts expect open-source software to eventually turn databases
into a low-cost commodity, just as the open-source Linux operating system
is posing a threat to Microsoft Corp.'s Windows franchise.
One user of an open-source database is Cox Communications Inc. The Atlanta-based
cable-TV operator is using the software to monitor the performance of more
than 1.5 million cable modems providing customers with high-speed Internet
access. Mark Cotner, manager of network application development, originally
got the system up and running on spare hardware and free software he downloaded
from the Web site of MySQL AB, based in Sweden. The database now has 2.4
billion rows of information, totaling about 600 gigabytes of data.
Once Cox management was sold on the idea, some executives suggested transferring
the operation to an Oracle system, Mr. Cotner says. For Cox's system, the
price for licensing Oracle's system would have totaled about $300,000,
not including a service contract. But even after Cox upgraded to the commercial
version of the MySQL database, the company's licensing costs were under
$1,000. Mr. Cotner also pays $12,000 a year for support services.
"Spending the extra money wasn't really justified," Mr. Cotner says. "You
have to have complaints before you decide to spend more money on Oracle,
and we've been very happy."
Oracle remains the leader in the $13 billion-a-year market for relational
databases, the underlying software needed to run more specialized business
applications, such as those sold by SAP AG, PeopleSoft and Oracle itself.
But the total database market is stagnant, Oracle has been losing market
share to Microsoft and International Business Machines Corp., and prices
are falling.
Of course, the spread of open-source software threatens all of the commercial
database providers. And some analysts expect that Microsoft's SQL Server,
which is generally targeted at smaller businesses, may be most immediately
affected. But the premium prices Oracle traditionally has been able to
command as the market leader have the farthest to fall.
"It's very hard to compete with free," says John Chen, chief executive
of Sybase Inc., Dublin, Calif., the No. 4 database provider. "It lowers
the price point."
Oracle executives will discuss industry trends today at an annual meeting
with financial analysts at the company's headquarters in Redwood Shores,
Calif. Ken Jacobs, Oracle's vice president for product strategy, says MySQL's
offering "is certainly interesting, but I don't see it as competition for
Oracle. Not now and not for some time to come."
He says the open-source offerings are years behind Oracle's products in
terms of features and functionality. And he says Oracle doesn't specifically
target the types of customers that are using MySQL to run simple Web sites,
focusing instead on "mission-critical, transaction- processing applications"
that crunch large amounts of data and require complex statistical analysis.
"For years I've heard people say the database is being commoditized and
I don't believe that," Mr. Jacobs says, though he acknowledges that over
time MySQL and other open-source offerings will compete with Oracle in
some areas.
Several years ago, Microsoft dismissed the threat from Linux, but more
recently it has focused on it as a primary competitor. Kevin Harvey, a
venture capitalist with Benchmark Capital in Menlo Park, Calif., says open-source
databases are at about the same stage of development as Linux was several
years ago. Benchmark last month put up the majority of MySQL's $19.5 million
round of venture financing.
"The software business is being commoditized in a lot of ways," Mr. Harvey
says. Areas that are ripe for change, he argues, have three characteristics,
all of which apply to database systems: They are in widespread use, the
industry has settled on common standards, and new features are less important
than price and performance. Like Linux, he says, MySQL will first be used
in new, Web-based applications and then be pulled by customers into more
traditional corporate-computing functions. "It erodes from the bottom up,"
Mr. Harvey says.
MySQL's chief executive, Marten Mickos, makes a virtue of his product's
stripped-down simplicity. "Software shouldn't be glorified," he says. "We
say, 'Let's do this as compactly as possible and then sell it at a price
that blows the competition away.'"
Unlike some other open-source software companies, MySQL offers both a free
open-source license and a traditional commercial license, for which the
company charges a flat licensing fee of $440 for each server computer running
the software.
MySQL has only about 4,000 paying customers out of approximately four million
active installations, but the Finnish entrepreneur doesn't mind. "With
four million users it can't be bad," Mr. Mickos says. "Big customers know
that hundreds of thousands of clever Indians and Russians and Americans
are using the product. The value of that [in finding bugs and adding features]
is astounding. That's the true power of open source."
Oracle's pricing is based on either the number of users with access to
the software or the number of microprocessors in the computer running the
program. Oracle's "enterprise edition," for example, is priced at $800
a user or $40,000 a processor, plus a 22% annual fee for software updates.
A less powerful "standard edition" is priced at $300 a user or $15,000
a processor, with the same 22% annual maintenance fee.
Pricing made the difference to Westone Laboratories Inc., a closely held
maker of ear inserts for hearing aids and other devices in Colorado Springs,
Colo. When Cal Pearson, Westone's information technology director, needed
to replace the 120-employee company's overloaded customer tracking and
financial database systems, he was quoted a price of more than $160,000
for Oracle's system.
Instead, Mr. Pearson's team downloaded MySQL onto a personal computer and
spent less than $5,000. Even without paying for support, his developers
were able to get answers to questions within minutes by posting messages
on a mailing list of other MySQL users.
Now, Westone is expanding the system to three remote locations and linking
its order entry system with its customer database. Mr. Pearson says he
now is happily paying MySQL's modest licensing fee and several hundred
dollars a year for support. "Even with my employee costs, I've yet to spend
what would have been my initial expenditure on Oracle."
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