A Look At Oracle’s Database Division: SAP HANA Remains Threat

by Trefis Team
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Oracle (NASDAQ:ORCL) is the global leader in developing database management software products, with a market share of over 48% in relational databases. The company generates approximately $13 billion in revenues from its database products, with the divisional top line growing at an annualized growth rate of 11.4% between 2008 and 2012. One of the major factors supporting this strong growth in database revenues for the company is the rapid expansion in machine generated data.

While expanding data should drive sales for database management systems (DBMS), the ongoing cloud migration along with rapid adoption of SAP’s HANA database could pose challenges to Oracle’s future growth. To keep pace with the ongoing cloud adoption, Oracle launched its latest database version, 12c, that provides an option to plug to cloud. The 12c database is Oracle’s first attempt to grab the cloud opportunity and provide leaner database versions that are agile and resourceful.

In this note, we look at various global factors shaping the database industry along with the intensifying competition from competitors such as SAP (NYSE:SAP) and Microsoft (NASDAQ:MSFT).

Check out our complete analysis for Oracle

Big Data and Analytics Lead To Exponential Data Expansion

Technology research firm IDC predicts that unstructured data being generated globally should grow at an annualized rate between 40% – 50% through 2020. [1] This hyper-growth in data is driven by increasing automation of various business as well as day-to-day processes across the globe. However, this increase in automation tools resulted in a steep expansion in unstructured data, which is hard to process and analyse automatically through existing database technologies. This difficulty in automatically processing large chunks of unsorted, unstructured data have been resolved through new analytical architectures and frameworks such as Hadoop.

Looking ahead, we believe that unstructured data would continue to outpace the growth in structured data as global technological advancement continues. This growth in unstructured data leads to the development of faster and agile data processing tools. In addition to the prospects of innovation in big data tools, we could see an amalgamation of databases and processing tools such as the SAP HANA going forward.

Competitors Pose Challenges To Oracle’s Database Leadership

Oracle is the leader of the relational database market, accounting for almost half of global database sales. [2] In the past, competitors such as IBM, Microsoft and SAP posed little threat to the company’s market leadership. However, continued weakness in corporate IT budgets, and an increasing need for agility and resourcefulness is driving innovation within the global IT industry. In addition to the weakness in the IT industry, cloud adoption from small and large enterprises alike are forcing on-premise software developers to adapt to the cloud wave.

German software giant SAP grabbed the first mover advantage by launching a hybrid database offering called the HANA in 2010. The in-memory HANA database offered the agility of an on-demand offering and the security of an on-premise offering, by utilizing the server’s main memory instead of the hard-drive to store queried information and eliminating seek times. The product has seen tremendous traction since its launch, and we believe that the product could challenge Oracle’s leadership position in the database market. Additionally, Oracle’s databases are costlier than other databases in the market and require specialized technical staff for implementation. Given that IT industry spending is weak, corporates would migrate towards less expensive offerings such as Microsoft or SAP solutions that can be implemented and maintained at lower expenses.

However, on the flipside, demand for Oracle’s databases should not fade away quickly as these databases are renowned for their complexity and security, attracting large enterprises with rich IT budgets. Additionally, a switch in databases from one provider to another could pose the risk of data loss or corruption. We believe that Oracle would face stiff competition from providers such as SAP. However, the company’s newest in-memory offering could bolster growth prospects going forward. The multitenant option of the 12c database offers rapid provisioning for plugable databases, from a single physical container database such as the Oracle Enterprise Manager for businesses demanding agility. We forecast Oracle to marginally expand its database market share going forward supported by greater sales of its in-memory 12c database.

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Notes:
  1. THE DIGITAL UNIVERSE IN 2020: Big Data, Bigger Digital Shadows, and Biggest Growth in the Far East, idc.com, December 2012 []
  2. Oracle is #1 in the RDBMS Market Share Worldwide for 2012, oracle.com []
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  • commented 3 months ago
  • tags: SAP IBM MSFT ORCL
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  • commented 3 months ago
  • tags: SAP IBM MSFT ORCL
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  • tags: SAP IBM MSFT ORCL
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  • commented 3 months ago
  • tags: SAP IBM MSFT ORCL
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  • tags: SAP IBM MSFT ORCL
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