For well-understood reasons, Microsoft Corp is the industry’s ultimate profit engine. But the company that is its closest rival in terms of profit per employee generates its wealth from a source most people in the industry barely know exists. Over a decade and a half, BMC Software Inc has built the world’s second most lucrative software business by making [mainframe] DB2 industrial strength, according to its VP of data management R&D Betty Otter-Nickerson. Even though IBM Corp supplies a set of free database administration tools with the DB2 mainframe database, BMC and its arch rival Platinum Technology Inc have consistently come up with utilities and tools that make DB2 easier to manage. In some cases, without these tools for tasks such as loading and unloading the data, businesses simply could not exploit the IBM database for their purposes. The market for DB2 tools has grown to be almost as big as the market for DB2 itself, says John Campbell, principal consultant with UK database consultancy CITL. Aside from BMC and Platinum, both of which cornered the market in the mid-1990s by vacuuming up many of the smaller DB2 tools vendors, there are several other notable players. CDB Software Inc, though much smaller, covers some but not all of the same ground as the DB2 units at Platinum and BMC, while Compuware Corp has a set of DB2 tools that automate DB2 administration and help set up database test environments. In its specialist market, Candle Corp also provides the de facto standard software for DB2 performance monitoring. In the early 1990s, both Platinum and BMC used their rock solid DB2 financial base to diversify beyond what they foresaw as a weakening mainframe market. They bought and developed products that took them into open systems database administration as well as other areas of systems and applications management. But DB2 has remained the cornerstone business. BMC, with annual revenues of $563.2m and a net margin of 29% in its 1997 fiscal year, says its DB2 business grew by 23% during the fiscal year. Platinum’s DB2 operation, meanwhile, is expanding at 16% to 17%, says VP of marketing for database management Craig Mullins. Of course, there is always the fear that IBM may narrow the opportunity these companies have by producing better tools itself. But although it has recently been making vast improvements in its utilities offerings, it has not come close enough to third-party territory to sour the symbiotic relationship between itself and the tools companies. We helped it get DB2 accepted in the market place, and allowed it to handle the largest volumes of data, says Otter-Nickerson. IBM is not seeking to undermine that.
Computer Business Review.
