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IBM and Hyperion Call It Quits

DB2 OLAP Server licenses will transfer over to Hyperion Essbase, and Hyperion has pledged to offer maintenance, too

• By Stephen Swoyer
• August 3, 2005

Last week IBM Corp. announced that it would no longer offer new sales of DB2 OLAP Server—a rebranded version of Hyperion Solutions Corp.’s Essbase—to customers.

It’s the end of an era—in this case, literally: Big Blue has resold Essbase as DB2 OLAP Server for the better part of a decade, and five years ago (in April 2000), it started offering a free DB2 OLAP Server starter kit with version 7 of its DB2 Universal Database (UDB).

As a result, many DB2 customers have built custom analytic solutions on top of DB2 OLAP Server. It’s tempting to read doom and gloom into the dissolution of IBM’s OEM agreement with Hyperion, but officials from both companies stress that users themselves shouldn’t be affected. Existing DB2 OLAP Server licenses will transfer over to Hyperion Essbase; furthermore, IBM officials say Hyperion has pledged to offer equitable maintenance terms. That being said, IBM’s move isn’t exactly a reassuring development for users, either.

The Backstory

In a certain sense, IBM’s move—which was jointly announced by both companies—is a further refinement of its middleware-centric BI strategy.

Over the last 24 months, Big Blue has focused on augmenting its data-integration and data-access middleware portfolio. Big Blue positions DB2 UDB as middleware, and the company has cobbled together (by dint of acquisition and in-house development) what is arguably the most complete data integration portfolio available today.

In this respect, some industry watchers say, the existence of an IBM-branded OLAP solution—even one that’s effectively licensed from a best-of-breed provider such as Hyperion—has come to seem anomalous. Add to that the fact that Hyperion itself has incorporated many of IBM’s own DB2 OLAP Server-specific enhancements into the Essbase OLAP engine—and take into account Big Blue’s lag time in repackaging new releases of Essbase as DB2 OLAP Server (e.g., changing splash screens, trade marks, and so on)—and you have what IBM claims is a fairly good case for making its OEM-ed version of Essbase go away.

At the same time, however, IBM officials can’t say enough good things about the company’s long-time OEM relationship with Hyperion.

“We’ve been in this relationship for nine years, which is pretty amazing for an OEM software arrangement. In my experience, that’s a pretty good run for any OEM relationship,” says Richard Wozniak, program director for business intelligence strategy and marketing with IBM. “Hyperion itself has grown by leaps and bounds over that period. Their capabilities as a company are just much greater than they were when we entered that period.”

The Post-DB2 OLAP Server Era

So why eighty-six a relationship that both companies say has been mutually productive? IBM’s Wozniak says it’s mostly an issue of diminishing value-add.

“When we really looked at it, there was not a lot of value-add there. Certainly, our support organization [offered a] lot of added value to our customers, but in terms of the product itself, it really looked like probably most customers would be better serviced by taking [Essbase] directly from Hyperion,” he argues.

Wozniak notes that IBM will have a “co-selling” arrangement with Hyperion whereby the latter company’s products will still be included in Big Blue’s large data warehouse and analytic application bids. He expects many existing DB2 OLAP Server customers will also opt to transition to Essbase, given the consubstantiality of the two platforms. “Their licenses will move straight across, so that’s very equitable [for customers]. Every customer’s maintenance is a little different based on different factors, [but] in general it’s pretty comparable. Most customers won’t see a major change in cost.”

For users who don’t want to make a move, Wozniak says IBM will continue to support DB2 OLAP Server through January 2007. “We’re not forcing customers to go. We’re still here, we’ll still do everything we’ve done for the last nine years for customers who were on the product, but they have an opportunity to basically move right over [to Essbase], which we think many of them will ultimately do.”

In the Cards

To a large extent, the seeds for DB2 OLAP Server’s inevitable demise were first sown two years ago, when IBM introduced its partner-friendly DB2 Cube Views.

“[DB2 Cube Views] allowed organizations to define OLAP-centric metadata, including hierarchies, dimensions, attributes, and business rules or formulas, and store it as a transparent extension to the DB2 Catalog,” explains Mike Schiff, a senior analyst with consultancy Current Analysis Inc., who notes that Hyperion, “went out of its way to endorse DB2 Cube Views and vigorously proclaim that its partnership with IBM was stronger than ever.” Nevertheless, Schiff says, Cube Views effectively opened up DB2 to any and all third-party BI products, which “probably had a detrimental impact on overall sales of DB2 OLAP Server.”

Then, last year, IBM acquired analytic applications specialist AlphaBlox Corp. At the time, IBM spoke obliquely about disseminating AlphaBlox’s J2EE-based technology assets across the breadth of its middleware offerings (with a particular emphasis on its WebSphere Business Integration stack). As it now stands, however, the combination of DB2 CubeViews and AlphaBlox gives customers a complete (if limited) analytic application development environment.

“With CubeViews and Alphablox [which is a part of DB2 Data Warehouse Edition], IBM customers can develop basic analytical applications, potentially making IBM a more serious, direct BI competitor,” write Gartner analysts Howard Dresner, Kurt Schlegel, and Frank Buytendijk in a research note. “By ending this OEM agreement, IBM has helped level the playing field for all third-party BI vendors to work with DB2 as a back-end data infrastructure provider.”

IBM very clearly does not position the combination of DB2 Cube Views and the incorporated AlphaBlox technologies as an alternative to a traditional OLAP engine such as Essbase—much less relational database-cum-OLAP servers such as Oracle and Microsoft Corp.’s SQL Server. Nevertheless, Wozniak concedes, there are scenarios in which customers can exploit Cube Views and the AlphaBlox technologies to build simple analytic applications.

“Yes, some customers will be able to meet their business needs very well with that combination, but I think even in companies that will choose to widely deploy AlphaBlox, there will be probably some other part of the company, whether it’s finance or marketing or sales, where you’ll find a more traditional OLAP tool installed for power users and analysts who need to have some of those sophisticated capabilities,” he says.

Bittersweet Coda?

The end of the Essbase era isn’t all sweetness and light for IBM, however. As Gartner’s analyst trio notes, Big Blue is now at a competitive disadvantage vis-à-vis archrivals Oracle Corp. and Microsoft Corp.

“IBM’s BI portfolio now lacks a MOLAP option to provide immediate responses and multidimensional data types to model complex calculations,” they write. “By contrast, competitors Microsoft and Oracle both offer full-function MOLAP offerings, putting IBM at something of a competitive disadvantage.”Wozniak acknowledges that this is a concern. At the same time, he argues, few large enterprise customers purchase a relational database solely on the basis of its strengths as an OLAP platform.

In these accounts, he claims, third-party BI suites from best-of-breed vendors—which by definition incorporate OLAP functionality—abound.

“It might put us at a disadvantage in the [small and mid-size business] BI market, but we don’t have a lot of presence there. We haven’t spent a whole bunch of time targeting it for BI, although clearly it’s an important growth area for the Software Group, and for DB2,” he concludes. “We may have to adjust our strategy to figure out how to have an attractive offering for that space.”