Frost & Sullivan, in collaboration with LeadLeo, released the '2024 China Financial-grade Distributed Database Market Tracking Report'

In the early stages, due to limited resources and high trial-and-error costs among small and medium-sized banks, securities firms, and insurance institutions, these institutions were relatively lagging behind in adopting distributed database layouts. As vendors continuously accumulated core system cases and applied them in practice, and together with partners, they created industry scenario solutions, the ability of distributed databases to meet the business needs of financial institutions has gradually matured. At the same time, benchmark cases have provided more reference bases for these institutions, enhancing their confidence in applying distributed databases and laying the foundation for the implementation and deployment of technology.

During the promotion of secure and reliable evaluations in the first half of 2024, banks were more cautious when selecting databases, mainly concerned that the chosen products might not meet future regulatory requirements. Institutions in the insurance and securities industries were less affected overall, maintaining their growth momentum and increasing their proportion. These industries' demand for distributed databases is increasing and gradually becoming the main driving force for market demand.

In September 2024, the China Information Security Evaluation Center released a list of secure and reliable distributed databases, including eleven products. The evaluation comprehensively assessed distributed databases in China from six dimensions: core technology, security assurance, supply chain security, sustainable development, compliance with laws and regulations, and technical standards.

This evaluation report is of great significance to the development of the industry, not only helping to promote market standardization but also facilitating higher-quality market competition. Especially for key national industries such as finance, government, and healthcare, the 'security and reliability' of technology is particularly important. This list will provide a distributed database selection guide and reference basis for these industries in their work on information innovation.

Trends in the distributed database industry after the release of the security and reliability assessment list:

Supply Side: The competitive landscape in the industry is narrowing, and ecosystem and product technology routes will become key to development.

• Database vendors need to adhere to the 'product-centric' philosophy to promote ecosystem construction and the healthy development of the industry: The ultimate goal of database autonomy and control is not just to satisfy a limited market in specific domestic industries. As financial-grade distributed database capabilities gradually mature, product capabilities and experience will penetrate into various sub-sectors, including industries with high-performance and security requirements such as government affairs, healthcare, and energy. Enterprises that deviate from the 'product-centric' philosophy are limited to short-term profit competition within specific fields, lacking technical accumulation and team building, which restricts their talent attraction, makes it difficult to ensure product quality and innovation capabilities, and ultimately lose their advantage in increasingly fierce market competition. Vendors need to maintain an active and proactive stance in building the ecosystem with a 'product-centric' approach. Specific measures include collaborating with financial industry ISVs, assisting in writing application white papers and industry standards, etc., while honing their own product capabilities, to enhance market awareness of distributed databases.

   

• Improve the alignment between product technical roadmaps and actual application scenarios: Although the release of the security and reliability assessment list will tend to concentrate market competition due to its guiding role, encouraging more enterprises to choose manufacturers within the list, the ultimate competitive landscape will still depend on the alignment between database products' functions, performance, and actual application scenarios. Manufacturers need to understand the specific needs of different types of financial institutions through practice and ecological cooperation, ensuring that technical roadmaps fit with actual scenarios.

Financial institutions: Accelerate cooperation with peers and database vendors to promote the accumulation of distributed database experience

Overall, large institutions have basically determined a clear direction for their distributed database selection in the previous few years. Small and medium-sized institutions are still in the exploration phase due to an unclear early competitive landscape, limited resources, and high trial-and-error costs.

In the process of implementing distributed databases, financial institutions face complex system engineering challenges. To effectively address these challenges, financial institutions need to establish a comprehensive methodology to prevent unnecessary duplication and "reinventing the wheel" and redundant resource investment. For this purpose, financial institutions should gradually summarize and refine the experiences from three major stages: selection and evaluation, deployment and configuration, and operation and maintenance and iteration during the implementation process. By collaborating with peers and database vendors, establishing a sound process and mechanism for database implementation practices, documenting experience knowledge, and making it reusable, shareable, and optimizeable, financial institutions can enhance their capabilities in this area.

Technology Trends —— Facilitating User Adoption and Supporting Subsequent Iterative Optimization of the SystemIn the early stages of the development of financial-grade distributed databases, users and vendors mainly focused on compatibility with existing financial institution databases such as Oracle and MySQL to promote database replacement. To this day, compatibility remains a key factor, as the replacement of legacy databases, migration to new hosts, and attention to DBA operational habits still occupy an important proportion in the implementation of distributed databases. However, with the in-depth development of financial-grade distributed databases, the convenience of technical implementation is no longer limited to compatibility alone, but also includes the completeness of supporting tools and a high degree of match with users' real-world scenario needs. These factors play an increasingly important role in driving technical iteration and continuous optimization.

Ecological Dynamics — Manufacturers are building deeper connections with developers and usersCompared to traditional centralized databases, distributed database architectures and technologies are relatively new, and different vendors have varying technical routes and characteristics, leading to cognitive gaps between vendors, users, and developers. By establishing closer interactions with developers and users, vendors can not only enhance users' understanding and awareness of products but also better understand user needs and feedback, thereby narrowing the cognitive gap between both parties. This two-way cognitive interaction can stimulate innovative applications by users in real-world scenarios, drive product capability enhancement and application scenario expansion, and accelerate the deep integration of technical and commercial value.

Ecological Dynamics —— The financial solutions partner ecosystem provides comprehensive solutions for financial institutions, promoting the implementation of financial distributed databases.In the practical implementation of distributed databases in financial institutions, it is not only about achieving the theoretical value of distributed databases but also about facing a series of engineering problems, such as system complexity management, application architecture transformation, challenges in maintaining data consistency, difficulties in data migration and integration, and high capabilities required for technical personnel. At the same time, under the pressure of external regulation, internal accountability, and social responsibility, ensuring business continuity is the primary consideration for financial institutions. Therefore, the core need of users lies in how to bridge the gap from 'ideal' to 'reality'.

Case Dynamics - Large banks have gradually implemented the system, showing a trend towards stability. The market penetration rate of small and medium-sized banks has increased.Large banks have a strong urgency in carrying out information innovation work, as they face significant compliance requirements and technological updates. They started deploying and exploring the application of financial-grade distributed databases earlier. In contrast, small and medium-sized banks face relatively lower regulatory pressure and urgency for technological transformation. However, with changes in the market environment and continuous business demand, these banks have also shown strong momentum for technological updates, driving an increase in the demand for financial-grade distributed databases. Through deep cooperation with manufacturers, state-owned large banks and joint-stock banks, as well as city commercial banks and rural credit cooperatives, have begun actively promoting the implementation and application of financial-grade distributed databases, forming benchmark cases with demonstrative effects.

Case Dynamics - The number of benchmark cases in insurance and securities has increased significantly.As financial-grade distributed database technologies and ecosystems from various vendors improve, the stability and reliability of products have been significantly enhanced. At the same time, improved ecosystem compatibility has made technology implementation smoother. These advancements provide stronger support for insurance and securities institutions, reducing application changes during database technology replacements, making migrations easier, and mitigating risks during the technology implementation process. Therefore, the willingness of insurance and securities institutions to replace their database technologies has significantly increased to meet growing performance requirements and business development needs.

The market scale of financial-grade distributed databases in China is expected to grow from 1.729 billion yuan in 2023 to 5.41 billion yuan in 2028, with an annual compound growth rate of nearly 26%. The core driving forces behind this market growth include the following aspects:

• Distributed database practices and cases are continuously enriching: Cases are the foundation for financial institutions to evaluate project investment and feasibility. Financial institutions usually reduce decision-making risks by learning from successful cases of peers. With the implementation of benchmark cases for core and non-core systems in the financial industry, distributed databases are gradually being applied in financial institutions of different scales. The number of cases has significantly increased, and users' trust and recognition of distributed databases are gradually rising, providing strong momentum for market development.

   

• Supply Side —— Optimization of Domestic Database Product Capabilities and Ecosystem: After years of refinement, the capabilities of domestic database products have significantly improved in terms of functionality, performance, usability, and security. At the same time, the ecosystem upstream and downstream of the industrial chain has gradually improved, such as the compatibility and applicability between database vendors and ISVs, providing support for users to more conveniently apply distributed databases in practical scenarios.

   

• On the demand side - the shift from IT innovation-driven adoption to demand-driven adoption is gradually taking place. The promotion of IT innovation technologies follows a cautious development path of 'pilot projects first, then full implementation; from peripheral to core', which is conducive to the accumulation and dissemination of experience. After years of accumulation, financial institutions now make more proactive decisions based on actual business needs when selecting distributed databases, rather than passively choosing them to complete IT innovation tasks. With the maturity of distributed database technology and application scenarios, financial institutions are paying more attention to the fit between database technology and specific needs, promoting healthy market demand growth.

In the first half of 2024, the overall scale growth rate of China's financial-grade distributed database market was relatively low. This was mainly due to the advancement of database security and reliability assessment work, which led financial institutions to adopt a cautious attitude in their procurement decisions. This was particularly evident in the banking sector, where both the overall scale proportion and the proportion of local deployment scaled back compared to the full year of 2023.

Driven by major manufacturers' active cooperation with ISVs in the financial sector, the insurance and securities industries have been able to more smoothly implement financial-grade distributed database solutions across various systems, making the application process more convenient and boosting industry confidence. At the same time, as these industry benchmark cases are accelerating their implementation, the market continues to maintain growth momentum.

With the release of the database security and reliability assessment results in September, the Chinese financial-grade distributed database market will receive further impetus and move towards higher-quality development. The market will rapidly return to a high-speed development track in the second half of 2024.

According to a Frost & Sullivan survey, the financial-grade distributed database industry shows the following trends:

• Non-core systems' demand for public cloud increasesTechnologies such as AI and real-time data processing have become key for financial institutions to enhance user experience and loyalty. The demand for computing resources elasticity and usage has significantly increased, and distributed databases and public clouds will provide strong support for this demand.

   

• The proportion of databases deployed in private clouds has increased.In local deployment, financial institutions are building cloud architectures based on private clouds that can better handle business scale expansion and improve operational efficiency. With the maturity of cloud-native technologies and their concept's popularization, distributed databases combined with container and observability tools will more efficiently support technicians in performing operations and management in private cloud environments.

   

• The number of successful core system cases continues to increase, promoting the penetration rate of distributed databases.The successful implementation of cases has accelerated effective communication among peers, with more and more banking, insurance, and securities users starting to refer to existing experiences to explore the construction of core systems that integrate distributed databases suitable for their own needs.

• Distributed databases improve compatibility and adaptability for financial applications, facilitating the use of distributed databases in core systems of small and medium-sized financial institutionsDue to the limited investment and technical team size of small and medium-sized financial institutions, it is necessary to minimize complexity as much as possible when constructing new core system architectures and introducing distributed databases. With the continuous improvement of the vendor ecosystem, domestic distributed databases have significantly enhanced compatibility and adaptability in financial applications, reducing the complexity brought about by architecture updates and database transformations. This enables small and medium-sized financial institutions to more conveniently apply distributed databases to core systems, achieving high performance and high availability.