Why MongoDB is worth $1.2 billion

Oracle's surprising role in elevating a NoSQL startup to the big league

While you were sleeping, 10Gen -- the company behind the MongoDB document database -- changed its name to MongoDB, Inc., raised $231 million, and became the first billion-dollar open source startup. That's right, an open source NoSQL database startup has a $1.2 billion valuation.

Founded in 2007, MongoDB got to this point in only six years, a feat that took Red Hat (founded 1993) nearly two decades. By contrast, the last open source startup I was involved in raised less than $20 million and sold for less than $400 million. At the time, this was considered pretty good.

To what does MongoDB owe its success? Oracle! That's right, Oracle is the best thing that ever happened to MongoDB. Oracle has the lion's share of the $30 billion database market. In 2011, the last year for which I can find database revenue numbers, RDBMS licensing revenue hit $16.75 billion. According to the analyst firm Gartner, Oracle owns 48.3 percent of the RDBMS market. It's the biggest, fattest gorilla imaginable.

Big red legacy

Oracle has many great advantages, beginning with an entrenched installed base. Many internal IT applications are written in Oracle's stored procedure language PLSQL.

But Oracle is not fundamentally different from the database I learned to love and hate in the mid-'90s on HP/UX PA-RISC boxes. In fact, it hasn't fundamentally changed since the '80s. Legacy is great and terrible at the same time. Oracle requires a lot of hardware and a good amount of support staff to keep running. It also does not affordably scale to the tens or hundreds of terabytes required by some -- or the millions of users required by others.

To scale in that way, Oracle would need underlying software architecture changes. Oracle is trying to address this by bolting other technologies onto its RDBMS, but as I've said before, this is a little like stapling a goose to a Mack truck and calling it an airplane. Moreover, that sort of scaling requires a fundamentally different license model. This is difficult to do without cannibalizing your existing market.

Meanwhile, Oracle has been a great consolidator of the database market. It gobbled up parts of MySQL (including its InnoDB storage engine), then Sun, which had in turn gobbled up MySQL. That was one move at the end of a long line of consolidations, which have been great for Oracle in its battles with familiar competitors like IBM and Microsoft. But that approach is also a great weakness when confronted with a new technology.

The disruptive force of NoSQL

The history of the tech industry is a history of disruption. Microsoft did it to Novell in the '90s, and Apple continues to disrupt Microsoft. You need an entrenched, immovable dinosaur that is well-adapted to its environment, but also unable to adapt its technology or cost structure quickly enough to new market conditions. It's like the Aztecs: very adaptable to their environment but helpless versus Spanish guns and smallpox. The successful insurgent uses the entrenched player's weaknesses against it while living naturally in a new technical environment. The insurgent is an agent of change, rather than a force to keep the technical and business climate in check.

MongoDB is that technology. Not only is MongoDB considerably lower in cost than Oracle, but adding nodes to a MongoDB cluster is an exercise in simplicity. This plays well as the industry moves to virtual network, storage, and cloud technologies. Scaling Oracle requires combining, configuring, and integrating several complicated technologies (RAC, DataGaurd, GoldenGate, and so on) and a larger amount of hardware with a much larger license and professional service outlay. Meanwhile, Oracle's very consolidation of the market makes it a perfect target for MongoDB. Instead of having to chase the features of several differentiated competitors, MongoDB can shoot at one very big target.

Building for the future

We've been using MongoDB at my company for a few years now. We've been impressed with not only its simplicity and adaptability, but how easily we've been able to scale it to many tasks that we didn't think were possible before. We've also been able to implement these systems for pennies on the dollar compared to what we'd have had to spend for Oracle.

Our biggest concern has been whether MongoDB was a fly-by-night startup that would get snapped up by Oracle or Computer Associates -- and in the process become either unusably complex or unfeasibly expensive, killing much of the competitive advantage our clients love.

A billion-dollar valuation and a $231 million war chest virtually eliminates that concern. If MongoDB gets bought, it will be by someone who truly values the company. More likely, MongoDB is aiming for an IPO.

MongoDB now has the staying power to disrupt the industry. It's virtually impossible to imagine Oracle being able to buy MongoDB for the kind of asking price required, unless Oracle thought it could kill the idea of document databases. If it did, the water would simply move out of one bucket and into another. MongoDB's investors would then dump their stock and reinvest it in a MongoDB fork or a close competitor.

This happened with MySQL, but not as fast. MySQL is simpler to use, maintain, and install than Oracle, but it isn't more capable. Popular wisdom is that it takes a 10-fold improvement to disrupt an entrenched competitor. MySQL is a simpler and cheaper relational database, but it has less capability overall. MongoDB is another animal and for many situations it yields an improvement greater than a factor of 10. It isn't always the best choice, but when it is, it's the best choice by a long shot.

The $231 million investment and the overall movement toward virtualization, big data, and cloud technologies give MongoDB both the resources and the position to redefine the database market. Oracle is now forced to react and play defense. We see this same sort of reaction playing out at Microsoft, but it has so far been largely disastrous and its management is in a panic. Perhaps Ballmer won't be the last bombastic CEO to get the boot?

This article, "Why MongoDB is worth $1.2 billion," was originally published at InfoWorld.com. Keep up on the latest developments in application development, and read more of Andrew Oliver's Strategic Developer blog at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

This story, "Why MongoDB is worth $1.2 billion" was originally published by InfoWorld.

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