Image via CrunchBase
On December 20th Oracle (ORCL) reported disappointing results that sent its stock down 9% after-hours. After my December 18th interview with Ed Boyajian, president and CEO at EnterpriseDB, I was not surprised.
How so? EnterpriseDB offers an awful lot of information processing software for a fraction of the price that Oracle charges. And with corporate IT being asked to do more with less money, it's becoming harder for Oracle to scare its customers into overpaying.
When it charges millions of dollars for its database software -- while hoping to lock in its customers due to the high cost of switching to another, less-expensive database -- it's easy to see why Oracle is so big.
But thanks to EnterpriseDB's Postgres Plus Advanced Server -- a slightly modified version of an open-source database -- IT departments can port their applications with little friction over to EnterpriseDB's product and pay about 10% of the price that Oracle would charge.
Boyajian brings a long career at RedHat (RHAT) to the challenge of making money providing support for an open source product -- that by definition is available for free to anyone who wants to download it.
Since Boyajian joined EnterpriseDB in 2008, he has boosted its customer base about 70% a year by his estimate -- from 200 customers in mid-2008 to 1,200 by December 2011.
One of the reasons that it's grown so fast is that EnterpriseDB has lowered customer switching costs. How so? Along with its support of the open source database, PostgreSQL, EnterpriseDB has added features that let customers port the applications they've developed for Oracle and other databases over to PostgreSQL.
EnterpriseDB also tests and certifies the product to make sure it will work in "all major IT environments." And, like Red Hat, it provides excellent customer support.
Another reason for the rapid growth is EnterpriseDB's relatively efficient sales process. Instead of sending waves of sales people out to wine and dine big company financial and IT executives, EnterpriseDB makes it easy for companies to download its software and work with it.
And its sales people monitor how these downloading companies are using the software and only call on the companies when it looks like they are getting serious about using it based on their online behavior.
Of course the database market is huge and growing fairly quickly. About $20 billion of the $26 billion database market is in the so-called relational database segment and that's growing 10% a year thanks to the proliferation of devices that access corporate data, the need to analyze all the data, and the increasing movement of corporate IT to the so-called cloud.
But the database market is extremely concentrated. Oracle controls about 50%, IBM (IBM) has about 21% and so does Microsoft (MSFT). This leaves about 5% for companies like EnterpriseDB.
But there seems to be a change happening in the market -- that's because enterprise customers are facing pressure to cut costs. And the biggest line item in their IT budgets is for database software.
Many IT departments are so eager to cut the budgets they allocate to Oracle and the other two, that they are increasingly willing to withstand the fear, uncertainty, and doubt that Oracle sales people try to induce in their customers when they think of switching to a less expensive supplier.
Besides the much lower price, EnterpriseDB also offers customers superior performance, scalability, reliability and security. And thanks to its Postgres Plus Cloud Database --in public beta and is "expected to be generally available in January 2012" -- EnterpriseDB is poised to capture the growth in corporate demand for computing in the cloud.
To tap that demand, EnterpriseDB's new product scales up and down in response to short-term demand fluctuations. Boyajian expects Postgres Plus Cloud Database to bring in many new customers.
Boyajian did not want to discuss how much capital the company has raised -- Crunchbase reports a total of $56.6 million -- but one interesting feature of its capital base he did point out is that some of EnterpriseDB's biggest customers -- IBM, RedHat, NTT, and Korea Telecom -- are also investors. And yes that IBM relationship is an interesting mixture of a customer and a competitor.
Meanwhile EnterpriseDB now has 125 people in offices around the world -- including the U.S., India, Japan, The Hague, and London. And it wants to remain an independent company as it takes advantage of the growth in India and EMEA.
But if EnterpriseDB keeps on growing at 70%, it would not surprise me if one its investor/customers gobbles up the whole company.
