Gartner Says Database Market Continued Its Recovery in 2004

by Timothy Prickett Morgan

The server market has yet to fully recovery from the Y2K and dot-com bubbles, but according to the box counters at IT market researcher Gartner, the market for relational database management systems has finally recovered and sales actually crested well above the bubble peak in 2001. For 2004, Gartner reckons that all vendors raked in $7.8 billion in sales, an increase of 10.3 percent. While the continued expansion of database sales is good news, sales levels are nonetheless far below the levels that Gartner was forecasting back in 2000.

Every May, Gartner counts up the new license sales for relational database management systems, and this annual report card is what the database makers use to gauge their market share gains and losses. There are a lot of bonuses riding on these numbers, and equally importantly, these database sales push a lot of server and middleware platform sales.

Colleen Graham, the principal analyst at Gartner who did this year's database report, said in a statement accompanying the sales and market share stats that there was only $30 million in sales separating IBM and Oracle, who have been jockeying for the top spot in the relational database market since 2001. So it is a statistical dead heat in 2004 in terms of who is number one. Back at the tail end of the dot-com boom in 2001, Oracle was just shy of 40 percent of a $7.1 billion database market. IBM had just 34 percent of the market, with most of its sales being for DB2 and SQL-DS on the mainframe and DB2/400 on the iSeries, but it did have a growing market share on Windows and Unix machines with a DB2 variant for those platforms. In 2002, after buying Informix for $1 billion in April 2001, IBM was able to boost its market share even as the dot-com bubble burst and Oracle saw sales decline by nearly 21 percent from $2.8 billion to $2.25 billion. IBM's growth in 2003 kept pace with the overall relational database market, thanks to traction in Unix and Windows and steady sales on the mainframe, but IBM did not keep pace with the market in 2004, growing only by 5.8 percent to $2.7 billion in sales. After growing only by 2.4 percent in 2003, Oracle's growth rate has shot up to nearly 15 percent in 2004, thanks to the adoption of Oracle 10g on new Windows and Linux platforms and upgrades within Oracle's vast installed base on Unix servers. Oracle had $2.64 billion in relational database sales in 2004 according to Gartner, and if its growth rates hold, it will once again take the lead in the market and, more important, peak above its high-water mark set in 2001. That's a big "if" of course. All of the database makers have seen choppy sales in the past five years.

"Much of IBM's growth was generated by its DB2 on the zSeries platform, and IBM's DB2 sales on the Unix platform performed well with nearly 9 percent growth," said Graham. "Oracle saw strong growth of nearly 15 percent, much of it coming from its performance on the Linux platform."

Graham said relational database sales on the Windows platform increased by 10 percent in 2004, about the same as the market at large, to reach $3.1 billion. That gives the Windows platform a 40 percent share of relational database sales, and Microsoft, with $1.56 billion in sales, managed to hit 50 percent penetration on the Windows platform, up from 47 percent of the Windows-related RDBMS sales in 2003. Microsoft accomplished this feat by growing at 18 percent, nearly twice the rate of the Windows database market and the market at large. Industry analysts--not from Gartner, but at OLAP Report--have said in recent reports that about a third of Microsoft's SQL Server sales are for the OLAP features that come bundled in SQL Server.

Sales of relational databases on Unix platforms decreased by 0.7 percent to $2.32 billion, but after a sales decrease of 5.9 percent in 2003, that tiny decrease must come as a relief to Oracle, Sybase, NCR, and yes, IBM, which all have substantial Unix-related database sales. IBM's Informix purchase did not help much in 2004, with sales dropping 17.6 percent to $110.9 million. IBM may just barely get its bait back on that $1 billion it paid for Informix in early 2001 in another few years, if sales don't stop altogether. In 2000, Informix had $290 million in relational database sales, and that dropped to $264 million in 2001. Being generous in counting all of 2001's Informix database sales in IBM's basket, Informix has brought Big Blue $700 million in sales. The number is closer to $555 million because you can only count the second half of 2001's sales as IBM's. At the current sales for Informix--and if they hold--it will take IBM another four years to recoup its investments. Now, IBM has been trying to convert Informix customers to DB2, and some of the DB2 growth probably came from this, so maybe Informix has paid for itself. But many Informix customers went to other platforms, too, so IBM's acquisition helped its competitors as well. It would be interesting to see how much of the growth in the database market since 2001 was actually caused by disgruntled customers moving away from Informix.

Oracle held most of its market share in the Unix database market, with 55.9 percent share, down from 57.4 percent of the market last year. Notable in the Gartner numbers is the fact that NCR's Teradata data warehousing unit saw sales climb by 17.2 percent in 2004, giving the company $230 million in sales. Also, Sybase, which used to be a strong partner with Microsoft and which gave Microsoft the technical platform on which to launch its SQL Server platform, was able to keep sales on an even keel at $178 million, up 0.5 percent from 2003. Both of these vendors are strong players in the Unix market--NCR among retailers and financial institutions, and Sybase among financial and telecommunications institutions.

On the Linux front, Gartner said that relational database sales hit $654.8 million, growing by 118.4 percent from 2003's sales levels of $299.8 million. While IBM was initially the big winner in a very small Linux database market two years ago with DB2, Oracle is now the big winner, with 80.5 percent of the Linux database market, with its sales in this segment up 154.8 percent in 2004. Oracle's Linux sales quadrupled in 2003, giving it a 69.1 percent share that year. While growth has dropped a lot, Oracle is the one to beat when it comes to money-making databases on Linux. (The various open source databases utterly dwarf Oracle's piddling share of footprints on Linux, however.)

Just to be clear: Gartner says that a relational database management system "incorporates the relational data model, normally including a Structured Query Language (SQL) application programming interface. It is a DBMS in which the database is organized and accessed according to the relationships between data items. In a relational database, relationships between data items are expressed by means of tables. Interdependencies among these tables are expressed by data values rather than by pointers. This allows a high degree of data independence." So various flat-file databases and alternative database types are not included in this market analysis. Gartner's numbers do not include adjunct software and services, either.

What Gartner's numbers also do not include is a guarantee that the future will look better than the past. In May 2000, when discussing the 1999 database market well before the bursting of the dot-com bubble, Gartner analysts were projecting database sales to hit $12.7 billion in 2004. In 2000, Gartner's data mixed all kinds of databases--relational and otherwise--but Gartner said that relational database sales accounted for more than three-quarters of all sales in 1999. Assuming that the prevalence of relational technologies was expected to increase over time, assume that about 85 percent of those projected 2004 sales were going to be for relational databases. That's nearly $11 billion in sales for 2004. That's quite a bit more than the $7.8 billion that 2004 actually turned out. Back in 1999, Gartner was also saying that in 2004, sales of databases on Windows platforms would be just under sales on Unix platforms. That actually happened several years ago, not in 2004, because of the acceleration of the Windows platform and the advent of commercialized Linux, both of which were driven by the IT recession of the past few years. Predicting the IT market is a tough business, and it sure is not an exact science.