Database economics in cloud and virtualization

Many of the most interesting big economic landmarks in IT have happened around what might be called "re-platforming," as users take existing applications and redeploy them on new platforms, such as we see when applications move from corporate data centers to the Amazon Web Services EC2 or the Rackspace Cloud.

We see this trend every few years, for example when the IT masses switched from the mainframe to the client server world, and then again when we went from big iron Unix to Intel-driven X86 commodity platforms. Today, cloud and virtualization represent the next major re-platforming trend as IT infrastructure looks more and more like a utility.

I discussed this shift with Ed Boyajian, CEO of EnterpriseDB, and a former Red Hat executive, to get some perspective on what the change means for the vendors that dominate the enterprise application infrastructure.

According to Boyajian, Red Hat benefited from the mass move to the x86 platform as Linux came to the forefront, but the major winner was Intel, as it became the default processor. Hardware vendors such as Dell and HP found themselves benefiting from the x86 shift, but this time around they may not be so lucky, because hardware is not a factor in a company's decision to move to cloud services.

And just as the infrastructure change is driving hardware and operating costs (heating, cooling, rent) out of the data center, it will also eventually subsume the underlying software stack, with the potential to eat into cash cows such as the hugely profitable $26 billion database market, which garners massive licensing revenue in addition to consistently high maintenance fees.

And though you can never count out Oracle, IBM, or Microsoft, they will continue to serve their moneymaking businesses first, rather than push into areas with lower profit margins. The three megacompanies account for nearly 95 percent of the total licensing and maintenance fees spent on database software, according to Forrester Research.

The shift in systems architecture is driven as much by lowering total software cost as it is by more efficient use of hardware. The cloud model of "pay only for what you use" flies directly in the face of the current server and user-based pricing models of Oracle, Microsoft, and others who get paid fully regardless of how much of their database software is actually used.

As organizations begin to think about deploying existing applications into a virtualized or cloud infrastructure, they have to think about the reworking, re-architecting, and rewriting of those applications--the theoretically perfect time to introduce database change and savings.

Open-source projects with strong community bases, along with new vendors who are unencumbered by legacy pricing schemes, should be able take leadership positions in this transformation. Executives need to put those licensing and maintenance dollars to work in higher value IT investments where returns are quantifiable.

Updated at 8:50 a.m. PT February 11 with a reference to an interview with Ed Boyajian.