Companies considering a new relational database or upgrading their existing database would be well advised to consider the total cost of ownership (TCO) - and especially to read the fine print of their new licences. This is especially important in a declining market, such as that for relational databases, where vendors will adopt questionable tactics to secure the last few licences up for grabs.
This is the word of caution from Henry Adams, country manager for InterSystems South Africa. He says the cost of acquisition is only the starting point for analysis of TCO, yet vendors drum up new business by persuading clients to adopt their technology by discounting the up-front cost. In so doing, they are creating vendor lock-in and incurring unacceptable costs further down the line.
"It is a characteristic of a dying market that vendors will discount their wares to the bone in an attempt to retain or regain lost market share," says Adams. "This is attractive for clients who are stretched for operational budget today, but by buying only on discounted price tags, they are focusing only on the present and not considering the long-term cost."
The slowdown in the relational database market is reflected in Oracle`s most recent quarterly results, which on the surface look solid, but reflect database licence revenue having declined 5% year-on-year.
"We predicted a year ago that the relational database`s time was nearing an end," says Adams. "The slow decline of new-licence revenue at all relational vendors supports this, most significantly at Oracle, which managed to maintain .3% overall growth by boosting its services revenue."
TCO is made up of a number of easily identifiable factors, of which cost of acquisition is perhaps the lowest, Adams stresses, making up around 10% of total costs. Other factors are:
Reliability - databases which go down frequently, or need to be taken down for maintenance, are a significant burden on a company.
Support, as measured in the number of database administrators needed to keep a system running optimally.
Speed and ease of development of applications - the more developers needed and that longer it takes to develop an application, the more costs escalate.
Hardware costs, including that of disk storage and regular upgrades to keep pace with rapidly growing databases.
Frequent "dot-version" upgrades, often unnecessary from a client`s perspective, but without which maintenance can be compromised. This is a popular way for vendors to make up for revenues deferred at the time of sale.
Vendors which move the goalposts in the way they cost their licences: per-processor, per-user, concurrent users, named users...
"Using these real-world metrics, market intelligence company KLAS Enterprises ran a survey with 110 healthcare executives and reported conclusively that the true measure of a solution is its performance in a live operation. This performance has a calculable value. Based on the data from the report, we estimate there is a $15 million positive payback for InterSystems` Cache, and a -$1.2 million negative return for Oracle over an eight-year period," says Adams. "This really does emphasise the point that TCO is a long and complex issue which needs to be analysed carefully before companies make what is a major technology buying decision. It also supports our contention that a one-off discount at time of acquisition is not conducive to return on investment."
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