Post of the Day
February 18, 1998
From our AOL
Subject: Re: Oracle Database Vs. Microsoft
[[but when consumers are faced with a choice of cheap and less functional vs. more expensive and better functionality, cheap often wins out...]]
Agreed, but if that reasoning applied to industrial-strength enterprise database management software of the sort Oracle sells, low-cost clone providers like XDB or Watcom SQL would be the companies we'd care about. Instead, they're nowhere on our competitive landscape. Oracle's franchise is closer to the sweet spot, where the value proposition isn't as fragile. To stay there, Oracle's business model relies upon a skilled outside salesforce to establish clear differentiation for its products. Without them, buyers -- like journalists and stock manipulators -- are tempted to lump all database software into a common hat and assume that products are interchangeable because they speak Structured Query Language and can be accessed via Open Database Connectivity (ODBC) drivers. This is the fallacy being promoted every time some wag refers to "commoditization" in Oracle's markets (a disingenuous chorus that started over ten years ago, when Oracle's marketcap was a fraction of what it is now). Fortunately, the company's customers have been taught to understand that similarity at the DDL/DML/DCL level is superficial (much like the hood ornaments on cars), and that there are very important differences in performance, scalability, and reliability between, say, Microsoft's freeware Jet database engine and a "merchantable" product like Oracle 8 or IBM's DB2 or Sybase or Informix.
But let's consider for a moment what Microsoft will have to overcome to displace Oracle's marketshare lead using its more robust data engine, SQL/Server. Most of us will agree that the marketplace for enterprise database engines isn't driven from the desktop but from server and network considerations. This makes Microsoft's task a formidable one. First, they have to engineer substantially more reliability into SQL/Server while achieving competitive scale-up (i.e. the ability to accommodate ever-larger numbers of simultaneous database activities without degrading performance). Unlike the monopoly market in desktop operating systems and applications suites, database purchasers actually do have a choice, and their recommendations must be won against known benchmarks of robust technical merit. Microsoft enters this fray at a recognized disadvantage (a clue to their pricing position: you get what you pay for). Then, Mr. Bill -- the least trusted man in industry today -- has to convince corporate information management executives (remember, journalists and desktop PC users don't buy this stuff!) that he'll provide the same kind of field service that makes companies like IBM and Oracle trusted suppliers with boardroom access, a somewhat novel business model for Mr. Softee, no? Finally, assuming his engineers and service personnel can field and maintain a credible product, Microsoft must attack Oracle's own competitive position by taking away installed base and winning new customers with a more compelling cost/performance proposition. That is, they'll have to come out of Fortress Seattle and whup Oracle's formidable salesforce on the ground. IMHO, this will take a significant advantage in new functionality, since Oracle has demonstrated its ability to win marketshare even in the Windows NT server market where Softee is assumed to make his best stand.
Now, don't get me wrong: I love our chances mano-a-mano on Bill's chosen ground. But whomever suggests this is the whole battle doesn't grasp the essential value proposition of enterprise database software. Just as Softee's desktop products must be valued and competed against in the aggregate, where they receive extra points for operating ensemble, an enterprise database standard gains value by neutralizing some of the costs of multi-vendor server environments, the model you'll find at practically every company with more than a few hundred employees. Oracle's ability to provide a unified data management framework across widely disparate hardware architectures has always been the first key to its success. To hold the high ground, Oracle will remain committed to harmonizing choice as surely as Microsoft aims to fetter it. Ironically though, Mr. Softee's pugnacious compulsion to dominate presents his greatest dilemma in competition with an "open platform" adversary. Because, to do more than annoy Oracle as a niche player � and bear in mind that Windows NT has far to go before it significantly displaces other server technologies � Microsoft would have to forego any temptation to bind SQL/Server so closely with its desktop ensemble that it compromises database portability. That impulse, of course, is tattooed on the fannies of new Redmond product managers, so SQL/Server won't represent an equivalent value to Oracle's database products until NT or its successors become de facto the standard among high performance enterprise server platforms. IMHO, under the rosiest scenarios, you won't see that this year or next, and probably not before Ms. French's daughter runs the place.
But for those of you advanced thinkers who still believe you can hear the End Game in Mr. Bill's jackboots, consider one further obstacle:
What are the chances that Mr. Softee will ever be granted an unobstructed rein to deploy his considerable siege train against a competitive database industry? His cheerleaders like to taunt us that -- like "Iron Mike" Tyson, the competitor he most approximately emulates -- What Billy Gates Wants, Billy Gates Gets. Now, I'll be the last guy to suggest that government intervention has any proper role in free markets, but investors ought to weigh political realities just as they do technical or economic ones. And the political reality right now, in 1998, is that Microsoft Corporation is a public policy experiment waiting to happen. Regardless of any outcome in the Netscape imbroglio, a national debate has broken out over limits to Microsoft's hegemony and made Mr. Bill a convenient target for political opportunists. Few doubt that the DOJ are a bunch of putzes, but when this is over, Bill's leash will be a little shorter. Sure, the free enterprise Determinists among us will discount the clucking apparatus of government, but I suspect that I'm not alone in sensing that something has changed for Microsoft, that the cozy aura of self-admiration and invulnerability has been besmirched. At moments like this, I wonder if there is an ethical Rubicon beyond which corporate IT executives themselves will quietly scrutinize Bill's competitive practices, perhaps more than they do those of their other technology suppliers. Some will start to ask of a budget request, How do we win if Microsoft takes it all? What can we do to keep 'em honest? I submit that that bloody rivulet runs smack down Route 101 and rims the Emerald City.
All things considered, if the world needed to run on SQL/Server, it wouldn't.