CASE: MySQL Open Source Database in 2004

(GROUP 4)

CHETNA SHARATH

MADHUKAR VARUN

PRASOON RAHUL

BHASKAR VIKRAM

SUDHISH SATYAJIT

GESU

MySQL - TIMELINE
Rise of www (1994-95) as a business tool Need to DBMS suited to web - MySQL was born 1996, first version released (1000s of downloads) 1997, first commercial license sold 1999, supporting infrastructure emerged 2001, real management structure emerged, CEO Marten Mickos 2001, Oracle had to introduce MySQL migration kit 2002, speculation of Oracle, IBM losing business 2003, investor invested $19.5 million 2004, break even for MySQL, new investments and doubling of revenue

How successful is MySQL? Why?

Success Factors
Something people really need Essentially the only choice in the market Lack of features of a proper database did not matter Market Reader Revenue Model Developer Community / Ecosystem / Support System Virtual Organisation

Identify different segments of the DBMS market. What differences exist between these segments e.g. in customer needs and expectations?

The major segment

Enterprise wide segment
Databases mainly on dedicated servers
MySQL ran on all common server OS Microsoft limited its SQL server to Windows platform

Customers expectation
DBMS as a strategic platform DB should be shared by many applications DBMS selection criteria long term availability, reliability, future compatibility

Other niche segments

Web sites segment
Databases used on application servers to store and/or cache data 2nd tier Database Customers expectations
DBMS used for less strategic intent The data to be shared by many applications to avoid redundancy Data should be secure and transactions to be easier and faster

Other niche segments

Stand-alone software segment Stand alone database to support the stand-alone software Embedded & Integrated systems segment Databases needed to store and buffer data Customer expectations Flexible database Because OS used is not standardized

Personal tax manager package where personal financial data was stored on a local disk

Customers expectations Longevity low license fee Robustness to avoid service costs

Segmentation as per Size

Total DBMS market revenue split by size of userbase

Large enterprise SME, workgroup within a large enterprise Medium sized enterprise

Annual revenues generated 10.5 billion 90 % of the revenue came from the enterprise wide use 10 % of the revenue from other niche markets like websites, stand-alone software and embedded systems

DBMS market niches by size in 2003

DBMS MARKET NICHE 2nd tier databases (cache database for websites) Stand alone databases (desktop/mobile) Specialty databases Embedded databases Total ESTIMATED SIZE ~ $ 100 million ~ $ 150 million ~ $ 400 million ~ $ 400 million $1.05 billion

Analyse the DBMS industry in which MySQL operates. How attractive is it? Consider the different market segments you have identified in your analysis.

Industry Analysis

Competitors

Technology Customers

Complementors

Technology
Advent of Internet enabled MySQL to have very low cost sales and distribution channel Internet provided tremendous marketing for MySQL which was being appreciated by the developers community Very large changes in complementary and competitive technologies have affected the DBMS layer The steady growth in networking has expanded opportunity for DBMS applications The internet-based technologies have meant new applications for DBMS, temporarily weakening incumbents lock in

Customers
Customer is the true winner Has tremendous bargaining power Large enterprises : Increased bargaining power even though benefits may not be evident from OSS Small/medium enterprises: Low cost and faster solutions

Open Source and DBMS

MySQL
Flexible Dual licensing policy Large and advantageous performance-to-price ratio Compete against non consumption Selling to commoditized market Speedy, easy to use Pre-relational DBMS mainly used in embedded systems Bundled with most OSS products Moved from BSD free licensing to Dual licensing with a GPL derivative Large deal sizes as compared to MySQLs

Sleepycat (Berkeley DB)

PostgreSQL

Distributed its product under BSD license Free-for-any-purpose unit price Reliable, specification compliant, good performance and easy to use

Attractiveness
Industrial-strength database management systems are used in company-wide or divisional computing. Applications built with these systems are at the heart of doing business, managing business, and serving customers. (1) Doing business is more and more the task of transactions processing systems, which use DBMS (2) A wide variety of analytical applications are increasingly at the heart of managing large complex organizations. Reports based on the information in DBMS are growing ever more complex, as such new technologies as OLAP, data warehousing, and data marts increase the managerial value of raw data. (3) Customer service can be enhanced with the use of DBMS-based systems

Highly Attractive

What are the competitive advantages of MySQL and how sustainable are they? Quantify these advantages to the extent possible in the identified market segments

Competitive Advantages
Low Cost
Virtual team no office expenses Testing by web community (35000 people) Able to give low price points Basic features which customer really required

Dual Licensing Model

Created barriers to entry Open source no motivation to enter with better product Commercial players found difficult to match price points

Competitive Advantages
Open Source Model Cheap Customer Acquisition (major cost for software company) R & D Cost was reduced More than development model it was distribution strategy Able to create viral Compete against non consumption Supporting Ecosystem Member of LAMP ( Linux Apache MySQL Perl) Stack Cult following of developer and user Able to react faster to changes in market place compared to closed source vendor Branded in same league as oracle Microsoft IBM

Sustainability
Low Cost Provide low price point to costumers No service provider had such low cost model Can be replicated in long run Low priced products Dual Licensing Model Open Source Model Supporting Ecosystem Complement Knowledge sharing No other DBMS had such following Very difficult to create cult following Able to work in collaborative partnership

Value

Customization by Serve customers different segments need Free licensing Prevalent in Open Source OS In a way as code development was in-house

Rare

Inimitable Organizatio nal set up

Replicable but Commercial requires change players did imitate in Business Model Provided Responsive to differentially community priced products demand

Price advantage across market segments

Customer Segments Small Oracle Price per user $195 Microsoft Price per user $171 IBM Price per user $461 MySQL Price per user 0

Medium

$1199

$80

$311

$5

Large Enterprise

$800

$63

$663

$10

Difficult to quantify Ecosystem advantage

Customer Segments Small Benefit from Ecosystem Free manual available Community Gurus for help Annual saving say 1DBMS expert salary $80K Plug ins and add on from community Commercial quality product Annual Saving DBMS development Team of 4-5 members $500K Rapid development & Tested product Testing cost saving s 40-50 % of development cost

Medium

Large Enterprise

What is the stated strategy of MySQL? What strategy is implied by the companys actions? How consistent are the strategic actions with the stated strategy?

Stated strategy
Customer intimacy

Open source
Downloaded easily from the internet Easily modified and customized for use

We are lowest in cost

Free of charge for basic version GPL License

Pay only for what you want

Upgrade to the BSD License Great support system

Blue ocean strategy We compete against non-consumption by selling to the commoditized markets - Zack Urlocker, VP-Marketing, MySQL

Implied strategy
Make users addicted
Free GPL License Extremely easy to install High emphasis on marketing

Proprietary software
All code exclusively written by the company employees only

User testing
Any change downloaded and tested by thousands of users No testing costs Fast reaction

There is an extremely high barrier to entry open-source and zero price - Burgelman, Author

Stated and Implied Strategies

Product
Existing New Product Development Diversification

Market

Existing New

Market Penetration Market Development

Stated strategy

Implied strategy

How consistent are the strategic actions with the stated strategy?
Consistent
All changes uploaded free of cost on the Web Catering mostly to the middle and lowenterprises

But a few aberrations

Why the tie-up with SAP is most critical? Why are they now setting up physical offices?

What are MySQLs strategic options beyond 2004? What option should MySQL choose?

Total DBMS Market Revenue Split by the size of the User base - 2003

18

Large Enterprise Datacenters 54 Medium Sized Enterprise or a division within a L.E SME / workgroup within a L.E

28

Worldwide Total RDBMS Market Share (2004)

12.2 34.1 20 IBM $2,664.9 Mn Oracle $2,636 Mn Microsoft $1561.1 Mn Others $925.1 Mn 33.7

SWOT Analysis
Free / Low license fee Open source Quick Installation Brand Visibility Low Product development cost Low cost sales & distribution channel - Download from website Low customer acquisition cost Lucrative market of large organizations Other emerging market like SaaS vendors

Strengths

Lack of functionality for large enterprise Lack of vendor support and relationship Lack of physical presence Low service support Not suitable for mission critical & enterprise apps Competition from big players like Oracle, IBM & Microsoft Other open source database providers Easy to imitate

Weaknesses

Opportunities

Threats

Current Market Scenario

Small 20 % Enterprise Wide Data 90 % Microsoft Medium 30 % Large 50 % Oracle, IBM Reliability Scalability Support Longevity

Web Sites 10 %

My SQL Cost

How should MySQL grow in order to meet its stated goal of getting to $ 100 Million in revenue ?

Growth Strategy Option 1

Small 20 % Enterprise Wide Data 90 % Microsoft Medium 30 % Large 50 % Oracle, IBM Reliability Scalability Support Longevity

Web Sites 10 %

My SQL Cost

Lack of brand identity in this segment Dilute the brand image MySQL lacks the organization to offer support Difficult to replicate the service standards & reliability Large organizations have high switching costs

Growth Strategy Option 2

Small 20 % Enterprise Wide Data 90 % Microsoft Medium 30 % Large 50 % Oracle, IBM Reliability Scalability Support Longevity

Web Sites 10 %

My SQL Cost

Stay Put

Not a big enough market to reach stated $ 100 million goal

Growth Strategy Option 3

Small 20 % Enterprise Wide Data 90 % Microsoft Medium 30 % Large 50 % Oracle, IBM Reliability Scalability Support Longevity

Web Sites 10 %

My SQL Cost

May be ?

+ Builds on existing brand & strength - Market not so big

Growth Strategy Option 4

Small 20 % Enterprise Wide Data 90 % Microsoft Medium 30 % Large 50 % Oracle, IBM Reliability Scalability Support Longevity

Web Sites 10 %

My SQL Cost

+ Many of these customers already using My SQL with websites + Less emphasis on global organization + Leverage SAP alliance - Up against Microsoft

The Way Forward

Continue focusing on its current market Design open source enterprise class DBMS (enables MySQL to become a player enterprise class database market) Form more alliances in future (SAP) to provide high end solutions Build support & service infrastructure with aroundthe- clock service requirements in different languages

The Way Forward

Complexities in expansion
Communicating with employees as business expanded Managing employees scattered across vast virtual network

Open a headquarter unit

Main programming and development center Collaborative development with virtual org.

In house testing team

Preliminary testing to be done in house Beta version(s) released to developer community

THANK YOU