On the same day that Microsoft announced a newly enhanced SQL Server database -- with the clear intention of challenging Oracle and IBM in the high-end of the market -- Computer Associates announced it was spinning off majority ownership of its Ingres open source database line to a private-equity firm. And with those two announcement, the database market became the official proxy for the next battle royale in the enterprise software market.
Here is what's happening with databases... Oracle is the market leader in databases, and is angling to be the market leader in enterprise applications, as well. Hence, the companies that sell databases -- IBM and Microsoft -- want to outsell Oracle in the database market, while the companies that sell enterprise software -- such as SAP and Microsoft -- want to knock Oracle out of the applications market.
The problem is that Oracle is a little two well-ensconced in both markets to be taken out by a frontal assault. That's where the database-as-proxy comes in.
If Microsoft and SAP could get applications customers to eschew Oracle in favor of SQL Server (the Microsoft alternative) or anything-but-Oracle (the SAP alternative), the result would be pretty dramatic, as long as the Oracle replacement database was less expensive and equally robust. Such a shift would dramatically lower the total cost of ownership for non-Oracle applications and isolate Oracle as the high-cost, low-choice vendor. With Oracle's applications locked into running on a significantly more expensive database platform than the competition, SAP and others could potentially blunt Oracle's market dominance plans.
This makes the timing of Microsoft's new SQL Server extremely propitious: with Steve Ballmer claiming that SQL Server is ready for the high-end of the market, database proxy number 1 is now in the field.
The Computer Associates announcement gives a hint of what proxy number 2 will look like: an open source database. While this doesn't mean that Ingres will be SAP's Oracle killer, it sets the stage for what to watch for, not only at SAP but at every other enterprise software vendor that counts Oracle as a database of choice for its customers. The key fact is that open source databases, combined with low-cost server hardware, can give Oracle a run for its money in many, if not most, enterprise applications implementations.
So where does all this leave IBM?
Sitting in the cat-bird's seat, no matter how the battle turns out. Remember, IBM Global Services makes more money in implementing and servicing enterprise software than IBM Software makes in databases. So if an open source or SQL Server database become the market leader in enterprise software one day and blunts Oracle's plans for dominance, IBM will still be chortling all the way to the bank.
And if Oracle remains dominant, so what? Oracle is IBM Global Services' largest ISV partner, and there still will be no particular threat to IBM's overall bottom line.
What's important to bear in mind is that the cost and complexity of the database side of enterprise applications is highly vulnerable to a paradigm shift. It's vulnerable because of the ''get-Oracle'' mentality in both the applications and database side of the market, and it's vulnerable because technological and market advances are commoditizing much of Oracle's traditional database advantage in favor of lower-cost alternatives.
The database proxy war is only just heating up, and there certainly will be more proxies to follow. Disconnecting applications customers from the Oracle database is something a lot of vendors are very hot to see happen in the next couple of years.
It will be interesting to see Oracle's response. Applications may be interesting to Oracle, but the database is literally its lifeblood. Don't expect Oracle to give up without waging a proxy war of its own.