The Software Cartel’s Bane:

MySQL and Open Source

Brian Waage

CIS 3.2

3/9/04

Database engines are necessities for almost all software engineers around the world. Database engines are generic data warehouses that are customarily designed by users to save information in an organized and useful way. Databases are the data backbones for most industrial embedded software and web pages. Without robust database engines, e-commerce would not be possible. Traditionally, the database engine market place has been dominated by a small group of software giants. Microsoft (SQL Server), IBM (DB2) and Oracle come to mind. These powerful companies are in trouble however. In recent years, MySQL AB, a small Swedish firm founded by David Axmark, Allan Larsson and Michael "Monty" Widenius, has become a major player in the database engine market. Among other things, MySQL practices “open source:” the movement by some individuals and companies to provide free software with access to the software’s code. Many companies have taken advantage of open source by designing their entire IT systems using free software. Take for instance the REDACLE system:

When the flow of incoming calorimeter parts became higher and the assembly rate could not catch up, we made the decision to develop our own solution, based on open-source components. […] We chose to implement a system based on the LAMP (Linux, Apache, MySQL and Perl/PHP/Python) platform. Each component of LAMP has an important role: Linux and Apache provide the basic infrastucture for services and programming; MySQL is the back end of our WFMS [Work-Flow Management System]; and Perl/PHP manage the interaction operator database. (Organtini 36)

MySQL has great potential for success. Through customer satisfaction and a new clever business model, MySQL has the ability to be the dominant player in the database engine marketplace. Open source software, particularly MySQL, can and will dominate the software market in the near future.

MySQL’s product is more valuable than its competitors’. One obvious advantage that MySQL has is that its software is free, or at the very least extremely cheap. MySQL’s license fee is only $495, which is required only when it is used commercially (selling a program using MySQL) or can be sent as a donation. Despite the price, MySQL is a quality product. "Companies find the quality of mainstream open-source products like Linux to be at least equal to that of commercial alternatives." (Kirkpatrick 92) The developers of REDACLE claim that MySQL and open source has increased efficiency:

The resources needed to run the [new] software are small compared to the ones requested by the former system, hosted on a dual 800MHz Pentium III server. That system saturated the CPU at about 100% and occupied almost all of the 512 MB of RAM. […] When using REDACLE, we discovered, amazingly enough, that CPU load was negligible and the average memory usage was 140-200 MB. (Organtini 40)

MySQL also provides techinical support. It can either be bought at $1500 or is proveded by third parties.

Meta [Group]'s objection, that "no supplier has stepped up to support an open source database", is starting to crumble. Since September, a commercially licensed version of MySQL has shipped with Netware 6.5, and Novell is providing technical support, overcoming another corporate reservation. (Langley 58)

It is inevitable that customers will be drawn to MySQL’s product. MySQL sells a competitive product significantly below market value.

Production of open source software, such as MySQL, can produce profits. Individual sales of open source software are small; however, the expenses involved are in turn minimal. What MySQL’s customers do not realize is that what they do not pay in cash, they pay with free labor. Moreover, the very fact that the software is free automatically eliminates the need to market. The word “free” does all the selling MySQL needs. MySQL’s business model is described by MySQL’s CEO, Marten Mickos:

To Mickos, the freebie approach makes business sense. He calls it a "smarter way to produce and distribute the goods." For one thing, it lets MySQL attract customers while spending close to nothing on marketing. On average, 35,000 users download MySQL each day. What's more, paying or not, the users serve as a sort of gigantic quality-control team. They can peer into the program and tell the company what needs improving. "We get notes from customers saying, 'We believe the bug is on line 3093,'" says Mickos. "That single hint can be so valuable it's worth 1,000 staff developers." (Kirkpatrick 92)

This formula has brought MySQL financial success. Their sales are steadily increasing and have recently made a profit for the first time.

MySQL AB doubled its revenues to $12.6 million (10 million euros) in 2003 for the second year in a row but it still wound up in the red for the year as a whole though things changed in the last few months, according to CEO Marten Mickos, when the company turned profitable.

Mickos thinks the company can double revenues again this year whether or not it stays in the black. "Right now we operate on a profitable basis, but we may naturally make investments," Mickos said. (MySQL)

Open source has made MySQL profits, a rare achievement in the world of e-commerce.

MySQL’s competitors cannot hold on to their market share at this rate. Open source software undersells other commercial software so much that it is inevitable that the sales of these non-open companies will decrease.

For the likes of Microsoft and Oracle, this trend spells trouble. Software is one of IT's few remaining redoubts of profitability now that fierce competition has hammered down the prices of PCs, disk drives, displays, cellphones, and Internet routers. But with open source challenging some of software's most widely used products, outsized profits like Microsoft's astounding 40% operating margins are at risk. (Kirkpatrick 92)

MySQL’s strategy is clear: take away every single potential customer away from the competition, and then nickel and dime the masses that have downloaded MySQL. It would be as if automobiles were given away for free, except when the vehicle is used to make money, which in that case a small fee incurred.

Mickos has a devilish plan--he wants to make his company a powerhouse by blowing up the industry's price structure, or as he has told friends, "turning the $10-billion-a-year database business into a $1 billion one." That would subvert the plans of the big three in databases--Oracle, IBM, and Microsoft. Too bad, says Mickos: "Software has been overglorified for 20 years. You've been able to overcharge for underperforming software." (Kirkpatrick 92)

What also hurts Microsoft, IBM and Oracle is that their products are overpriced. “For maybe 99 percent of the time, you won't need Oracle. If you're not taking advantage of all those features, why pay 20 grand?” (Darrow 61) MySQL is single handedly setting the market price of database engines; IBM, Microsoft and Oracle are not matching. Unless they lower the price of their software, there is no way these companies can make money with their products.

MySQL and other open source software providers will revolutionize and dominate the IT industry in the near future. MySQL and the open source community do have its critics however. One problem is the software is still new. It is also not evident whether MySQL can handle the financial implementations of a major lawsuit that could happen if a bug were the cause of a major disaster. Critics believe MySQL has yet to be proven robust. "For the next few years, open source databases will be a non-factor in the database management system market, relegated to non-critical tasks such as clickstream logging and directories. Open source databases also do not have a history of supporting mission-critical, back-end applications." (Langley 58) Another problem MySQL faces is that companies using SQL Server or Oracle will not have a motive to switch to MySQL. A switch would take too much time, effort, and most importantly, money. “Meta [Group] said switching from an existing database could cost [pounds sterling] 600,000 or more as application code, triggers and stored procedures have to be redone and staff retrained.” (Langley 58) MySQL will not necessarily bankrupt Bill Gates any time soon, but the once invincible database engine cartel has a new and powerful threat. The owners and customers of MySQL will prosper under the practice of open source software.

Works Cited

Darrow, Barbara. “Is MySQL Quietly Lowering the Odds?” Computer Reseller News. 26 May 2003.

Kirkpatrick, David. “How The Open-Source World Plans To Smack Down Microsoft, And Oracle, And...” Fortune. 23 Feb. 2004.

Langley, Nick. “Open source database advantages.” Computer Weekly. 25 Nov. 2003.

“MySQL Doubles Revenues Again; MySQL 5.0 Alpha Debuts.” Linux Gram. 19 Jan. 2004.

Organtini, Giovanni and Luciano M. Barone. “The REDACLE Work-Flow Management System.” Linux Journal. Feb. 2004.