MongoDB’s Mongo Moment

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MongoDB doesn’t think small. Filing for a $100 million IPO that could value MongoDB above $1.6 billion, MongoDB CEO Dev Ittycheria didn’t mince words on his top target: “We believe Oracle is incredibly vulnerable because they’ve lost the developer’s heart and soul.”

Oracle, sovereign ruler of the $40 billion database market, may be vulnerable, but not because it has lost its appeal to developers (it never had any). And probably not because of MongoDB, a company with big dreams but less than 0.1 percent of the database market.

This doesn’t mean that MongoDB doesn’t have a chance to have a successful IPO. Indeed, while it makes good headlines to go after Oracle, Oracle has stiff competition in the modern database market. Think about companies like Facebook, Google, and Twitter: As Dremio CMO (and former MongoDB executive) Kelly Stirman told me, “The world’s biggest users of data don’t use Oracle.”

As such, the opportunity is to enable a new breed of application, not replatform old-school workloads. In this area MongoDB has a great deal of promise, one that should more than carry a successful IPO.

The Mother of All Lock-In

Not that this will be easy. After all, no one likes to take risks with their data (Equifax perhaps excepted). As Stirman says:

“As products go, databases are one of the stickiest products out there. Switching costs are very high. Database replatforming is viewed as one of the riskiest propositions in all of IT. No matter what, for existing workloads, transition will be slow.”

Not surprisingly, despite years of pressure from open source, NoSQL, and cloud database upstarts, Oracle still sits comfortably atop the database popularity rankings. MySQL, which is arguably a model for MongoDB, roared to #2 in overall database popularity and helps to power the world’s most demanding web infrastructure, including Google and Facebook. Yet it hasn’t made a dent in Oracle’s market share.

The reason? Well, MySQL turns out to be a fantastic web database, a market in which Oracle hardly factors, but it’s not a good replacement for heavy transactional workloads that depend on Oracle. Could enterprises run many of these workloads on MySQL? Sure. But the risk, as Stirman points out, doesn’t justify the return. So Oracle continues to collect lots of cash from companies that regularly complain that they have to live on the same planet as their Oracle salesperson.

So long as enterprises continue to do 20th century business, they’ll continue to use a 20th century database. As more companies turn to the cloud, however, with Amazon Web Services and Microsoft Azure, in particular, shifting them there, their application workloads will lose interest in Oracle. This is a big opportunity for the public cloud providers, of course, but it’s also a big opportunity for MongoDB.

The Little Community Database that Could

Yes, MongoDB, a company whose newly released financials show that its revenue hardly counts as a rounding error for Oracle’s database revenue. MongoDB mustered 50.7 percent growth between the first half of 2017 ($67.99 million) compared to the first half of 2016 ($45.12 million). That’s not too shabby, especially as the company has managed to keep its net losses roughly constant over the past year (~$45 million).

As mentioned, however, the real question isn’t about MongoDB’s impact on Oracle, any more than MySQL had a material impact on Oracle. No, the question is how relevant MongoDB is to the growing population of modern applications. Quite simply: this is where the action is. As VMware executive (and former MongoDB executive) Jared Rosoff reasons, “Old workloads grew one database server at a time. New workloads add tens or hundreds of servers at a time.”

Indeed, as MongoDB vice president of cloud products Sahir Azam told me in an interview, “We see a higher percentage of legacy RDBMS moving to MongoDB. Tens of billions of spend that has traditionally gone to Oracle and other SQL vendors is now moving to open source RDBMS and MongoDB with app refreshes and new apps.”

Today, MongoDB monetizes a small fraction of the tens of thousands of companies that use it, though it does count significant users and customers, from Citigroup to Foursquare to Baidu. The big question is how to monetize a greater percentage of its users.

MongoDB has released a product (Atlas) that positions it to start doing so. Prior to Atlas, MongoDB’s hosted database-as-a-service offering, the company could only target the Fortune 1000, Oracle’s sweet spot. With Atlas, MongoDB can not only sell to this market, but can also capture money from the long tail of SMBs.

So, too, can AWS and Microsoft Azure. What they can’t do, however, is offer maximum developer flexibility, as Stirman points out:

“New apps are crafted on laptops, and born in the cloud. That’s why MongoDB’s cloud strategy is so solid. Amazon can’t offer the same local experience or portability. Instead they have to keep inventing more and more services that lock you into their world.”

Stirman admits that “many will be OK with this,” but regardless of their comfort level with being more locked into AWS than they ever could be to Oracle, the flexibility MongoDB’s Atlas service affords will be a game-changer for many.

MongoDB’s other big opportunity is with Stitch. For any business the easiest sale is to an existing customer, and that’s why every software company develops large portfolios of products, Oracle chief among them, but AWS also plays this game. As Stirman suggests, “If you believe MongoDB understands developers and what they want, then databases are just one of the products each of the 20 million developers out there need, and there are ample opportunities for MongoDB to create other products for this market. This makes them more directly competitive with AWS.”

Don’t think developers have the coin to prop up MongoDB’s business? Take a look at AWS, Atlassian, and a new breed of businesses that are proving that not only do developers have cash to spend, they have lots of it. As Andreessen Horowitz venture capitalist Peter Levine remarked in 2016, “One of the most notable transformations over the past 5 years has been the pauper-to-prince of the developer as a buying center within a company.” MongoDB is well-positioned to capitalize on this shift.

Thieves! Thieves and Liars!

Of course, there are skeptics, both technical and financial.

First, there’s the camp that believes that MongoDB is “the triumph of laziness and marketing over proper software engineering,” as developer Stephen Diehl ‏ has commented. It’s hard to give credence to the view that tens of thousands of companies run MongoDB in production and were somehow duped into doing so, and keep using the database. Many of these developers have gone retro with Postgres. Bless them.

Others, like Adam Kent, persist in believing MongoDB loses data. Years ago MongoDB CTO Eliot Horowitz debunked this myth, but it still manages to demotivate some developers from using MongoDB for mission-critical applications.

And then there are the financial concerns, which strike me as more grounded in fact. For example, while MongoDB can’t be credited with hoodwinking the entire planet with its stellar marketing (much as I’d like to claim credit for it, as I spent time running MongoDB’s marketing efforts), MongoDB has spent gobs of cash on marketing. As Crunchbase editor Alex Wilhelm spotlights, “MongoDB spent $303.5 million to create a company that currently does less than $150 million ARR over 10 years.“ Or think about it this way: MongoDB spent 76 percent of last quarter’s revenue on sales and marketing.

That’s not so stellar, and may give pause to would-be investors, especially given the company lost $26.1 million (a record) to earn $35.6 million (also a record) in the last quarter. As both Cloudera and Hortonworks have discovered, as much as the market likes big data vendors, profits still matter, which is why Cloudera’s stock has tended to outperform Hortonworks’: Cloudera has been narrowing its losses over time.

MongoDB’s Big Chance

As MongoDB emulates Cloudera with swelling revenues and shrinking losses, the company has a chance to up-end the database market. Already we’re nearing a tipping point where more data sits in AWS S3 and Hadoop than in Oracle and other legacy RDBMSes. In this new world of big data, MongoDB has a chance, not to topple Oracle, which already has challenges in the world of modern applications.

No, MongoDB’s real enemy is AWS, which is a far more formidable competitor going forward. Perhaps MongoDB’s angle on developer flexibility will be enough to box out AWS, but it’s a stiff challenge. MongoDB is still a rounding error compared to Oracle, but Oracle isn’t the threat. No, the threat is not sufficiently monetizing the profound shift in how enterprises build and deploy applications. MongoDB seems to be doing the right things to catch this wave, but only time will tell if it can execute well enough to capitalize.

Matt Asay is Head of Developer Ecosystem at Adobe