A well-Informixed populace

IBM is laying down $1 billion in cash for the database business of one-time market leader Informix Software. Analysts say Big Blue is laying down the gauntlet in a challenge to Oracle's commanding lead in the distributed database business and setting the stage to become a major player in digital-content delivery.

The acquisition is expected to close in the third quarter, pending regulatory and shareholder approvals.

Peter Gyenes, chairman and CEO of Informix, said the vast majority of Informix Software employees would be asked to continue with IBM in their present jobs or similar roles.

In addition to talent and storage algorithms, IBM absorbs Informix' 100,000 customers, including some of the company's recent wins at SBC Communications, France Telecom, Siemens and Nortel Networks. One of the company's first messages concerning the acquisition was to reassure those customers.

“Our Informix Software customers' and partners' present investment is preserved and protected while they gain the benefit and security of a substantial long-term partnership,” Gyenes said.

IBM will integrate Informix's operations and personnel into its software data management division.

“IBM is committed to supporting and enhancing existing Informix products and extending the investment made by Informix customers,” said Janet Perna, general manager of IBM's software data management division.

Although the integration could take a couple of years, the deal sends a message to the market.

“IBM has made no bones about it. They want to be in the database business big-time. They stayed away while the mainframe world was IBM, but they are making a bold statement here,” said Karl Whitelock, program director of OSS competitive strategies for Stratecast Partners.

Oracle made its own statement by circulating a press release citing a recent Morgan Stanley survey, which said more than 50% of 225 responding chief information officers prefer its database product (see figure).

However, the survey was completed prior to IBM's acquisition of Informix. Though it is too early to evaluate the synergies of the software and make comparisons to Oracle on a performance level, the deal boosts IBM's market share by doubling the size of its distributed database business, according to Perna.

However, certain technical advantages are apparent, analysts said.

“Informix has some interesting technology [for] data warehousing and video storage. IBM is going to incorporate those technologies right away into their DB2 architecture… to make DB2 more robust for electronic digital content storage systems,” said Scott Donahue, program manager of OSS competitive strategies for Stratecast Partners.

The eventual integration also may let IBM offer customers a hardware and software platform, which could be a competitive advantage.

“If you have a proven and reliable hardware/software combination from one vendor, you are removing some risk,” Whitelock said. “How much better would it be to have an IBM server with an IBM database?”

But its not just about databases, said Robert Chen, a manager in Portal Software's wireless market development team.

“IBM is a one-stop shop where it offers an end-to-end solution complete with integration services, and that's a compelling value proposition for customers looking for pre-integrated solutions,” Chen said.

Portal recently entered a global strategic alliance with IBM to develop integrated solutions for the delivery of digital media over broadband and wireless networks. Portal, IBM and Reciprocal — a provider of e-commerce clearing services and digital rights management — recently joined forces to provide a secure digital media solution demonstrated at CTIA in March.

“Service providers are putting the infrastructure in place now, even though they may not be able to deliver the high-end services for some time,” said David Juran, senior alliance manager for Portal. The network is going in now, so its important to have your offering defined and available, which is why we struck the partnership we have and why we are building it when we're building it.”

Which is a good strategy, Whitelock said.

“Wherever 3G happens first, these guys have to be there for the early launches. If they're not, they'll be left eating dust.”