But since then, IBM and Oracle have found ways to tie their core systems more deeply into the infrastructure of the Web, handling a variety of unstructured data for Web applications as if it were structured data and implementing high-speed text searching. They've also added Java handling and eXtensible Markup Language conversion to their database systems. XML provides a common framework for exchanging information over the Net.
Both IBM and Oracle now claim their database engines are more than data handlers. Both say their databases are the cornerstones of their respective Web portal packages. And each is going after the other aggressively. While there are other database companies -- Informix, Microsoft and Sybase -- IBM and Oracle often compete against each other in most of the hot market segments.
Contrary to all practices of a mature market, the two companies are engaged in a bit of a pricing war, with IBM claiming it is the low-priced spread. But which company offers the best product at the best price? It depends on whom you ask.
"IBM is working very hard to tip the balance in its favor, but Oracle is a moving target," says Norma Schroder, senior database analyst at GartnerGroup Dataquest. As for which will emerge the leader, she says, "I expect they will remain neck and neck for the foreseeable future."
Both IBM and Oracle now give away developer's versions of their products. IBM says its workgroup system of DB2 Universal Database is priced at $999, with higher-level versions costing $20,000. DB2 comes in a wide range of versions, from DB2 Satellite mobile version to mainframe Enterprise Edition Symmetrical Multi-Processing.
"We are about one-third the cost of a comparable Oracle system," says Jim Kelly, vice president of marketing at IBM data management solutions.
"IBM is claiming very low prices. The reality is, we know better," counters Oracle's Bob Shimp, senior director of platform marketing. Customers who want a high-end database system don't base their decisions on pricing. They seek reliability, security and support from their vendors. Oracle is the only system that meets the government's Federal Information Processing Standard 140, Level 2 on security, he says.
"Garage-sale pricing is a tricky game to play," Shimp says. IBM's stated database pricing doesn't reflect its true pricing after it charges for the system's hardware, operating system and other software. Part of the cost of the database is disguised in the bundle, he says.
Schroder says she has sought feedback from GartnerGroup contract analysts and says they report "for serious deals, IBM is significantly less expensive." Some contracts illustrate IBM's claim of being one-third the price of Oracle, she says. "They are willing to use price" as a means of pursing market share. Oracle, however, is still the gold standard of database software, Schroder says.
When Dataquest showed IBM and Oracle in a dead heat for leadership in the database market -- Oracle with 31.1 percent, compared with IBM's 29.9 percent -- IBM pointed out that it was growing fastest in Oracle's traditional areas of strength: Unix and Windows NT/2000. Schroder says IBM was more likely to bend on price in those competitive realms than in its traditional strength of mainframe database systems.
Oracle's Shimp responds that IBM's greatest strength is mainframes, and it is questionable whether IBM can grow fast enough in other markets to offset the declining mainframe market.
Schroder challenges that analysis, saying IBM is far behind Oracle in the Windows NT and Unix markets, but it has staged surprisingly rapid growth in its nontraditional markets. IBM shot up 70 percent in the Unix market and 125 percent in the NT market. In addition, it grew its seemingly static mainframe market by 10 percent in 1999. Mainframes are slowly declining in numbers, but each remaining machine represents more processing, memory and data handling, Schroder says.
Meanwhile, in the hot Windows NT/2000 market, Oracle had 40 percent, Microsoft 35 percent and IBM 15 percent in 1999. The year before, Oracle had 48 percent, Microsoft 30 percent and IBM 10 percent. If that shift continues, Schroder says, Microsoft "is definitely within striking distance of Oracle's leadership position" in this segment of the database market.
The Windows database server market used to be insignificant amidst the Unix and IBM mainframe shares, but now represents $1.7 billion of an $8 billion total, Schroder says. Unix remains the largest slice at $2.6 billion.
Barry Goffe, Microsoft group manager for Windows Distribute Internet Architecture, says SQL Server for the first time is competing with better established relational systems on an equal footing. Oracle leads in the Windows NT/2000 market only in revenue. Microsoft is actually shipping about 70 percent of the database system units used there, he says. The Microsoft count of units shipped includes versions of SQL Server that go out the door as part of the BackOffice family of servers, and some copies of SQL Server are limited in their use to BackOffice functions, rather than general purpose database uses, Goffe says.
A banner year
In the contest for revenue, Goffe says, the Windows NT/2000 market "is a two-horse race, Microsoft and Oracle. I don't think IBM is relevant," he says. Until SQL Server 7 debuted in January, it remained basically a workgroup product, he concedes. It now has the scalability to serve as a much larger, general-purpose system, he says.
Schroder says the beta releases of SQL Server 7 arrested Microsoft's decline in its favored Windows NT market and is responsible for Microsoft gaining back 5 percent market share last year. An upgrade, SQL Server 2000, is due in the second half of this year, which will lead to "a huge year for us," Goffe predicts.
Both IBM and Microsoft spokesmen say they had Oracle's own aggressive tactics to thank in part for their growing fortunes in the Windows NT market. Oracle's launch of Enterprise Resource Planning and customer relationship management software has alarmed the ERP vendors, such as Baan, PeopleSoft, SAP and Siebel Systems, which are cooperating more closely with IBM and Microsoft, according to both Kelly and Goffe.
Oracle's Shimp acknowledges that Oracle competes head to head with other ERP vendors, but he says they realize that Oracle databases frequently underlie their customers' ERP applications. "It's a classic case of 'co-opetition.' We work with them day to day on engineering issues," and compete with them on applications, Shimp says.
Most businesses are trying to limit the variety of database systems they manage and won't swap out an Oracle system just because their ERP vendors prefer someone else, Shimp adds.
Both Oracle and IBM are rapidly expanding how their systems can be used as part of the Web's e-business infrastructure. Last November, IBM offered its Enterprise Information Portal, undergirded by DB2, which can be used to build a corporate portal site.
A portal can present a variety of information to employees, partners and suppliers when equipped with other supplementary products, such as IBM Business Intelligence Suite, for analyzing data in data marts or data warehouses, and IBM Content Manager, which indexes and handles a variety of content on Web sites.
Oracle is aggressively playing in the same space. Its Oracle8 system, with an updated Java virtual machine in the database engine, is linked to the Oracle Application Server 4.0.8 and an E-Business Suite of applications.
The intensity of the competition between IBM, Microsoft and Oracle leaves slender pickings for the remaining database vendors. The former contenders, Informix and Sybase, are left back in the dust of the 1999 marketplace leaders with 4.3 percent and 3.3 percent, respectively.
Informix spokespeople say the firm is moving strongly into business intelligence and data warehousing, with a vertical market among the telecommunications companies.
Sybase has a traditional strength among financial service providers, and appears to be tailoring its products more closely to the needs in that vertical market, Schroder says.
Informix and Sybase are carving out niches for themselves while the larger database vendors battle for market share. And no resolution is in sight among the Big Three contenders.