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September 14, 1998

Microsoft And OLAP: Sudden Impact

With the release of SQL Server 7.0, Microsoft will enter the OLAP and data warehouse markets with a splash-and competitors are already responding to the challenge

By Jacques Surveyer

hen IBM was the dominant monopoly in the market, one of its most effective strategies was to wait for a market to blossom, declare a standard, and pocket a huge piece of the business for itself. Microsoft, with the same role now, uses the same strategy. By year's end, Microsoft will roll out tools for pinching a share of the data warehousing and online analytical processing markets when it releases SQL Server 7.0 and its free OLAP Server, code-named Plato.

Microsoft is counting on the economics of the PC (ease of use, commodity pricing, and bundled freebies) to overcome any customer doubts about its ability to deliver availability, scalability, reliability, and functionality. Microsoft's entry has already had a major effect on the industry's standards and marketing, including merger moves. Data warehousing and OLAP will never be the same.

These markets have been constantly changing over the last 25 years; they've been variously known as Executive Information Systems, Decision Support Systems, Business Intelligence, Knowledge Discovery Systems, and most recently as Analytics. The field changes identity and direction every three to five years as new enabling technologies appear in the market. A new label, Planning and Decision Support Services, encompasses the data warehousing, data cleansing and transfer, data mining, and OLAP markets.

P&DSS systems' payback doesn't occur until the feedback from them gets into planning and operational systems. This means OLAP and data-mining data marts with supporting data warehousing are only successful when they map onto and assist existing planning, budgeting and decision-making processes within an organization.

Just five years ago, fewer than 10% of Fortune 500 companies would admit to having a data warehouse. However, rapidly declining CPU and data-storage costs and OLAP software innovations have made creation of data warehouses and data marts economically practical. Further, some early adopters, such as Wal-Mart and Federal Express, are using data mining and OLAP technology to gain competitive advantage, compelling competitors and others to follow their lead. Dataquest predicts that data warehousing budgets will increase worldwide by 27% to $1.9 billion. And that's not just a handful of companies: In 1996, 32% of organizations had no budget for data warehousing; this year, that number has fallen to 9%. A Conference Board/Price Waterhouse study last December saw 78% of organizations using an OLAP modeling tool, 75% using a front-end query tool, 32% using data-extraction and transformation tools, and 66% using or planning to use a data mining tool.

While proliferation is high, success has not been. Fully one-third of Conference Board respondents gave the overall success of their projects only a "poor" or "fair" assessment.

Microsoft's Offering
Microsoft has a good reason to target the P&DSS market. The database portion of the decision-support market is growing at about 25% to 30% according to PricewaterhouseCoopers--in contrast to a 6% to 9% rate for the online transaction processing database market.

SQL Server 7 still isn't a match for its OLTP database competitors, even after adding improvements such as row-level locking, multiterabyte capacity, and a revamping of its basic code. SQL Server 7 will likely not match IBM, Informix, Oracle, and Sybase for their enterprise-level functions and performance, even in the economy end of the market: the Windows NT environment. However, Microsoft's price/performance may be another matter, especially given the number of P&DSS freebies it's distributing with SQL Server 7.

The five free P&DSS add-ons to SQL Server 7, called Microsoft SQL Server OLAP Services (MS/SSOS) make it a more appealing product in the data mart and data warehousing space (see charts for this story as PDF files). Two of the add-ons are close to best-of-breed offerings: MS/SSOS itself and Microsoft Repository. The remaining three are "just good enough," which has worked like a charm for Microsoft in the past.

By being free, these five add-ons to SQL Server 7 become the benchmark by which all other P&DSS products are measured. Microsoft is, in effect, setting the basic feature and performance standards for P&DSS tools. For example, all Windows NT data migration and cleansing software will have to add significant value to justify a price greater than Microsoft's free Data Transmission Services (DTS).