Relational Database Market Due for a Shakeup

For years, the world market for relational database management systems (RDBMS) has been one of the most important in the software industry, both in terms of revenue and growth. In 2005, the market grew by 9.4 percent to $14.6 billion, according to IDC. What’s more, according to Gartner, the worldwide RDBMS market is poised for continued growth through 2010 as data management and integration become strategically important to an increasing number of organizations, especially in the areas of data warehousing and business intelligence.

As with other software markets, growth has come from a combination of new geographies opening up and new functionality being offered. In the case of RDBMS, the new growth has been in the Asia/Pacific region. In the United States, where RDBMS is a mature market, demand for extra RDBMS functionality is growing in response to additional functionality requirements, such as increased government demand for compliance with regulation mandated by the Sarbanes-Oxley Act.

For years, the database market has been relatively stable in terms of market share, and 2005 was no exception. According to Gartner, the three largest vendors in terms of revenue market share in 2005 were Oracle (48.6 percent), IBM (22 percent), and Microsoft (15 percent). In 2004, the figures were Oracle (48.9 percent), IBM (22.4 percent), and Microsoft (13.9 percent). In other words, there’s been little year-to-year change, other than Microsoft gaining a small amount of share, mostly at the expense of the small-fry vendors like Teradata.

This is not to say that Microsoft’s gradual rise in importance is not without consequence. IDC believes that as Microsoft works its way up the food chain, Oracle and IBM will move to redirect database entry-level users by offering aggressively priced developer and small business packages. In other words, we can expect to see more flexibility throughout the market when it comes to pricing, especially outside of the large enterprise space.

That trend is likely to be accelerated by free alternatives to traditional RDBMS products, such as the open source MySQL. These products are attracting a good deal of attention and loyalty from a new generation of database developers, leading IDC to believe the open source movement could ultimately spur a fundamental change in the way that RDBMS products are priced and licensed. As evidence of the potential for open source RDBMS, it’s interesting to note that, according to Gartner, Linux grew the fastest of all the RDBMS platforms (84 percent). This growth confirms that IT managers are perfectly willing to consider an open source operating system for a database application, which suggests that they’d be just as willing to accept an open source RDBMS platform.

The net result of a shift of RDBMS buying from traditional products to open source products would be a sharp downtick in the profitability of the sector. Because it does not generate much, if any, license revenue, the open software business model is loaded toward support and maintenance, both of which have lower net margins (on average) than software licenses. If the open source movement, combined with Microsoft’s entry into the market, simultaneously reduces licensing revenue and pushes purchasing towards support and maintenance, the RDBMS market, as a whole, will start generating much lower margins.

While that may cause some problems for the RDBMS vendors, the reduction in license cost will open opportunities for applications vendors whose products layer atop databases. The cheaper the database, the more the user has to spend on application software, of course. Ideally, the combination of Linux and something like MySQL could radically lower start-up costs by reducing the impact of license purchases. Any shift of revenue away from “infrastructure” software, like the OS and DB stands to benefit other applications.