IBM Jettisons U2 Database Division - Beginning of the End?

Sep 21, 2009

As an IT professional, how do you know when it is time to not only consider migrating off a legacy technology but to quickly make plans to jump ship? How long before development and ultimately support come to an ignoble end? Nothing is certain in this industry as I have come to learn over the years, but the announcement last week by IBM of the sale of the U2 division offers some illustrative clues. The first is the remarkably short press release. I guess there really wasn't much to say since U2 is not well known – even within IBM itself.

Perhaps a little context first. The U2 product line consists primarily of the Universe and UniData multi-value nested relational databases and related development tools. They can trace their heritage back into the 1960's as an offshoot of the Pick architecture. In short, there's a long history with numerous established commercial applications using it. Perhaps the best known is the DataStage ETL tool. IBM purchased the conglomeration of products in 2001 after a turbulent period of buyouts and mergers. At the time there was a large worldwide license base generating healthy recurring revenues coupled with a strong development and partner community. Those invested in the technology were relieved to be under the umbrella of a large, stable, recognized brand. It seemed credibility, new investments, and a future were assured. But that was before Microsoft entered the application database world with force and the shift toward low cost PC servers. You can see where this train is going.

Back to the writing on the wall. Whenever a large, established player in the software world like IBM sells assets to a global company that nobody has heard of, I see that as a red flag. Rocket Software? Let's do a poll. That's what I thought. Though, there are other companies like them specializing in niche markets like mainframe software. Ever heard of ASG? These companies don't need marketing and name recognition because they aren't trying to compete head to head with the current technologies of the day. They're making a business selling into and supporting the products people invested in years ago.

Yet, one has to conclude the license growth and maintenance renewals hit a concrete ceiling and have come crashing down in recent years, especially as many of U2's largest application VARs have provided alternative so-called "industry standard" database options like SQL Server for their applications. These have proved far more popular with new customers and existing customers alike. The U2 product line just can't generate the numbers being demanded by a company like IBM. So out it goes. However, a company like Rocket with a very different corporate strategy and cost structure, probably can make a go of it for awhile. But, I wouldn't expect to see much in new innovation. In the Higher Education ERP market this will have the greatest impact on Datatel customers and to lesser extent Jenzabar clients who will now need to accelerate their plans to move to alternate database platforms.

It seems U2 has been put into palliative care. No one can be certain if there will be significant changes in the near or medium term, but the ultimate prognosis is still the same. Technologies are moving forward and fast leaving U2 behind. The IBM press release trumpeting Rocket's ability to "stimulate growth" is a veiled marketeering attempt to put life in a terminally ill product line.