By Maria Trombly | Securities Industry News | June 20, 2005

This month, Silicon Valley database empire Oracle acquired TimesTen, a young, nimble company that makes super-fast, memory-resident databases. Last month, rival Sybase, the leading maker of databases for Wall Street applications, released its own real-time risk analytics platform.

It's no accident, but a symptom of the fact that real-time processing has come of age on Wall Street, experts say.

"Oracle and Sybase are validating this space," says Rebecca Wettemann, an analyst with Wellesley, Mass.-based Nucleus Research. "There can be some real benefit to real-time valuation of information, because the environment [on Wall Street] is continuously changing, and they have a high volume of transaction."

Oracle's New Toy

According to Andrea Klein, Oracle's vice president for financial services strategy and marketing, Wall Street firms will be able to improve customer service and get rid of batch processing procedures that are almost as old as pioneering main frame computer Eniac by moving to a real-time, in-memory database. "I personally have had calls from a number of customers who are very excited about this capability," Klein says. "Now that TimesTen has the breadth of Oracle, the securities industry is going to start to see a lot of change."

Because of its small size, TimesTen has been shut out of some highly sensitive markets in the past, says TimesTen Marketing Vice President Tim Shetler. But no longer. "Now that Oracle is behind us and our product, there's no question that we're going to be around, and there will be increased investment," Shetler says.

TimesTen's flagship solution for Wall Street, the TimesTen Cache, works by copying the complete relational database into resident memory, instead of fetching data from disk storage as needed. This speeds up a database enormously, making it perfect for high-speed transaction processing, although it limits the size of the database that can be worked with, depending on how much memory can be attached to a given server. Once a transaction or session is completed, the data can then be pushed to an Oracle or other disk-based database for permanent storage.

And the Cache system can run on all the standard Unix and Linux configurations, boasts Shetler.

"The question is, is Oracle willing to support other databases on the back end?" asks Shetler. "They said they would be willing to support that if the business case is strong enough."

Most TimesTen customers on Wall Street use the technology in databases ranging in size from half a gigabyte to six gigabytes. For many applications, that's all that's required. The entire equities ticker for all U.S. publicly traded stocks requires only 200 megabytes of random access memory (RAM), for instance, notes Shetler. By comparison, some of TimesTen's telecom customers run databases that require in the neighborhood of 30 gigabytes of RAM.

Back to the Base

Even that vast amount of data is a mere drop in the bucket for Sybase, however, which can handle terabytes of data, says Sinan Baskan, product manager for Sybase's Risk Analytics Platform.

Sybase's risk analysis system keeps its database on a disk in the traditional manner, but streamlines processing by reshaping its architecture. The Sybase approach makes the databases particularly suitable for risk analytics, which require time-series analysis, but isn't as suitable for high-speed transactions.

The platform is based on the Sybase IQ database product, already in use by eSpeed, Millennium Partners, Citigroup and the Investment Technology Group.

IQ uses a vector-space approach to organizing and manipulating data, as opposed to the standard relational structure, whose mathematical foundation is much simpler and more computation-intensive. The vector approach means that certain calculations can be done very quickly and efficiently, says Baskan. "Because of its organization, it is very fast, and its performance sometimes approaches memory-based relational databases," he says, adding, "These are complementary products, not directly competing ones."

Clash of the Titans

Gracious words, considering Sybase pretty much has a lock on front-office and middle-office databases on Wall Street. Oracle's TimesTen acquisition, however, gives it a foot in the door with a product that no other major vendor has. And as for TimesTen, it now has Oracle's entire suite of services to connect to.

"There are some other areas where a [standard] Oracle database may make more sense, and this way they can have a common platform," says Nucleus Research's Wettemann, "both for those very rapid data analysis needs as well as the broader benefits that a solution like Oracle provides."

The data market is in a period of transition, if not outright revolution, notes Bob Iati, an analyst with the Tabb Group. "The needs of institutions have changed dramatically just over the last couple of years," he said. The demand for advanced electronic execution and algorithmic trading has had a lot to do with it. "The data has to be acquired from the best source and gotten to the programs that execute trading decisions in subsecond speed," Iati says. "Without that, you lose any advantage you might have in trading."

But as trades speed up, so do the associated risks. Companies now need high-speed surveillance systems to keep track of the high-speed trades, Iati notes. This, he says, is where the Sybase product and the TimesTen product can be seen as mutually beneficial: TimesTen to process the transactions, Sybase to handle risk and compliance.

In fact, some Sybase customers already do use TimesTen for fast transaction processing, says Gartner analyst Donald Feinberg. An in-memory database like TimesTen usually needs a traditional disk-based database behind it. Otherwise, when power goes out, all the data is lost.

With the exception of bleeding-edge trading shops, however, the industry has mostly been taken by surprise by this new technology, Iati says. "I don't think that in the past, a year and a half or so ago, we anticipated such a rapid growth in electronic execution and the reliance that trading institutions would have on it," he says. "It became evident in the past year."

Force Multiplier

As a result, niche players such as TimesTen--the largest company in the in-memory space, even though it has fewer than 100 employees--have been able to make major in-roads in very little time. Tiny TimesTen, for example, counts Deutsche Bank, Bear Stearns, JP Morgan, the Philadelphia Stock Exchange and Nasdaq as customers along with many of the world's biggest telecom companies.

Larger vendors, on the other hand, need time to get themselves moving in a new direction, which is why we're only seeing these announcements from Oracle and Sybase now, Iati says.

Before the TimesTen acquisition, Oracle was better known for robust, wide-ranging, reliable back-office databases, Iati says. Sybase and IBM have stronger footprints in the capital markets, Iati observes. "Oracle never had a message to address front-office databases," he says. "They do now."

And unlike Sybase's Baskan, Iati sees Sybase's risk analytics profile engine as competing in the same segment of the market, even if it is complementary in some sense. "The top players all recognize that there's an opportunity here and a need," Iati says. "They are positioning themselves as providers who tackle these particular sensitive areas right now."

Sybase has a slight advantage, however, because of their stronger market position, Iati reasons. "It doesn't necessarily mean that their product is better," he says. "But the incumbent always has a stronger position."

However, Sybase could be hurt in the long term, according to Gartner's Feinberg. In the short term, customers aren't likely to switch to Oracle just because of TimesTen. "It's not cost effective but it does get Oracle's foot in the door," he says.

In addition, Sybase is perceived as a smaller company than Oracle in the U.S. and Europe. Over the long term, those two factors combined could give Oracle an edge, says Feinberg.

Of course, Sybase isn't going to cede the market easily. "Sybase has been one of the foremost leaders in high transaction processing," says Tom Traubitz, a senior marketing manager at Sybase. "We have technological directions that you'll see coming out over the next few months."

Traubitz would not say, however, whether that includes plans to build its own memory-resident database or buy one of the smaller vendors in the space.