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Microsoft's Coup D'Etat

Published
  • March 01 1998, 1:00am EST

It's been said, "It ain't over until the fat lady sings." Well, today, a portly woman in Redmond, Washington, is belting out a showstopper. The tune? How Microsoft has wrapped up the data warehouse market.

How can this be? The data warehouse market is approximately five years old (at least in its second incarnation), and Microsoft has yet to ship a serious data warehousing product! This will change in the second half of 1998 when Microsoft finally delivers SQL Server 7.0, code-named "Sphinx."

Let's be clear. Sphinx is no ordinary database or data warehouse product. It is a new breed of tool for a new breed of data warehouse customer. SQL Server 7.0 consists of a low cost, scalable, Windows NT-based relational database that also bundles in components that handle key data warehousing functions, such as data extraction, transformation, replication and OLAP analysis. What's unique about this turnkey data mart package is that it's based on de facto data warehouse standards (i.e., data access, meta data, analysis) promulgated and controlled by Microsoft. Most importantly, dozens of independent software vendors have pledged to build applications on these COM-based interfaces, fueling momentum for Microsoft's data warehouse products and architecture.

For end users, Microsoft's strategy reduces the risk and expense of data warehousing. Thus, the day Microsoft ships SQL Server 7.0 is the day that data warehousing is declared "safe" for mainstream users.

Microsoft's timing couldn't be better. A recent survey of Fortune 1000 firms by International Data Corp. shows that only 20 percent of firms have deployed data warehouses, while a third are evaluating or implementing a data warehouse, and the rest (40+ percent) have no plans. These figures suggest that leading-edge companies have already embraced data warehousing, but the majority of companies--the proverbial conservative mainstream--are waiting for an inexpensive, risk-free solution.

Microsoft has designed and packaged SQL Server 7.0 to appeal to this majority. It's clear that Microsoft's formal entry into data warehousing will push the market across the "chasm" from early adopters to mainstream users. This fits with Microsoft's strategy for entering and dominating new markets.

Microsoft's model is to first use its clout to help the industry define the critical interfaces required to create a "complete" or integrated solution. Then it ships a product that conforms to these interfaces. Microsoft typically enters a market with an easy-to-use, low-cost product that it can sell in high volumes through its vast channels. It then gradually moves the product upstream by adding functionality but without increasing prices. This forces competitors to either 1) spend lots of money on research and development to stay ahead of Microsoft at the high end; 2) cut prices at the low end, squeezing profit margins; 3) find a secure application niche where Microsoft and others don't play; or 4) exit the business altogether.

Microsoft is following the above strategy to enter (and eventually) dominate the market for Windows NT databases and data warehouses. For example, Microsoft has already galvanized the Windows NT database market with SQL Server 6.5, which has reshaped the pricing and distribution strategies of Oracle, IBM, Informix and Sybase. The advent of SQL Server 7.0 will apply even more price/performance pressure on competitors.

On the application front, SQL Server 7.0's extraction and transformation services will force data mart vendors (such as Informatica, Prism Solutions, Sagent and others) to provide higher-level transformation functionality. Also, Microsoft's new hybrid OLAP engine, which is scheduled to release with SQL Server 7.0, will require dozens of small OLAP server players to move up-market or change their business focus. The only likely survivors are Arbor Software and Oracle (with its Oracle Express Server), and even they aren't immune since SQL Server 7.0 will offer hybrid OLAP capabilities.

Part of Microsoft's inevitable success in OLAP will come because it has defined an interface based on OLE DB for accessing OLAP engines. This interface, called OLE DB for OLAP, has gained widespread support from client- side OLAP tools, such as Business Objects and Brio, as well as a few server OLAP players.

In the area of meta data management, Microsoft has stepped forward with its fledgling Microsoft Repository to fill a gaping hole in the market. Microsoft is currently seeking industry input for a metamodel to handle data warehousing-related objects. When complete, Microsoft will control the specification that will serve as the traffic cop and management hub for all data warehousing activities.

The upshot is that Microsoft now controls the key data warehousing interfaces and will soon offer an aggressively priced data warehouse solution based on two eminently popular mainstream products, SQL Server and Windows NT.

So, the future is clear. By the new millennium, as many as 75 percent of all data marts will be built on top of Microsoft products and Microsoft's COM architecture. And since data marts often grow up to be data warehouses, it won't be long before Microsoft owns most data warehouses, too.

It's no wonder they're singing in Redmond.

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