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What's Cheaper SQL Server or Oracle? Tricky Question, Grasshopper

• By Stephen Swoyer
• September 13, 2004

Much of this information came to light thanks to the U.S. Department of Justice, which sued Oracle to prevent it from proceeding with its PeopleSoft acquisition bid. Many of the examples that have been produced during the trial concern Oracle-the-enterprise-applications-purveyor, but we spoke with several analysts who’ve confirmed that Oracle is also a bare-knuckles competitor in the database space, as well. It bears noting that one suggested explanation for Oracle’s hyper-competitiveness with respect to the pricing of its enterprise application offerings – namely, the presence of at least tripartite competition, with both PeopleSoft and SAP AG thrown into the mix – is mirrored in the database marketplace, where IBM is an increasingly aggressive challenger to Oracle’s traditional RDBMS market dominance, and Microsoft has consistently grown its own share.

The stunning upshot, some analysts say, is that the one-time Cadillac dealer of database vendors -- whose motto might well once have been “If you have to ask, it’s too expensive” -- is in some cases trying to out-cheap its competitors – including SMB and small enterprise kingpin Microsoft.

Sticker Shock

That being said, if you were asked to decide between Microsoft’s SQL Server 2000 and Oracle’s 10g database on the basis of sticker price alone, it’d probably be a no-brainer: SQL Server would win almost hands down.

For a $4,999 per-CPU list price, you get SQL Server 2000 Standard Edition, along with an integrated OLAP engine (Analysis Services), an ETL tool (Data Transformation Services, or DTS), Reporting Services, and manageability tools. For Oracle Standard Edition One at $4,995 per-CPU, on the other hand, you get…Oracle 10g -- along with what Oracle says is a simplified management interface. There are a couple of additional caveats, as well: Oracle’s deep-discounted version of 10g runs on only two processors, while Microsoft’s SQL Server 2000 Standard Edition can be licensed for as many as four processors.

If you want to deploy 10g on anything larger than a two-way system, then, you’ll have to pony up $15,000 for the 10g Standard Edition -- as opposed to Standard Edition One. The $15,000 also includes Oracle’s Real Application Clusters (RAC) functionality. Oracle’s RAC functionality is unlike anything Microsoft itself currently offers, but as Mike Schiff, a principal with data warehousing consultancy MAS Strategies points out, few small enterprise customers actually have a need for RAC in the first place.

Or perhaps you could opt for per-named-user licensing, in which case SQL Server 2000 Standard Edition will set you back $1489 for five seats; $2,249 for ten seats; and $179 for each additional seat. For 100 named users, then, SQL Server Standard Edition costs $18,360 – or about as much as SQL Server Enterprise Edition running on a single CPU.

In this respect, licensing SQL Server Standard Edition on a per-CPU basis – across, say, two CPUs -- is probably your best bet.

Oracle 10g Standard Edition One, on the other hand, costs $149 per named user – or $14,900 for 100 named users – across either one or two CPUs. That’s a better value than SQL Server, to be sure – but it still costs more than a two processor license of SQL Server. Once we get to 10g Standard Edition, however, this value proposition breaks down at an alarming rate: Oracle asks $300 per named user, for a total of $30,000 for 100 named users. In that price range, you could run Oracle 10g Standard Edition across two CPUs and probably support even more users. And if you factor in the value of RAC – for environments that require both transactional performance and application availability, that is – 10g Standard Edition could be the better value. Of course, if you plan to use your RDBMS for anything other than transaction-oriented applications – e.g., for OLAP, ETL, or reporting – SQL Server could easily be your choice.

That’s not even factoring scalability into the mix, either. There’s no consensus concerning which RDBMS is the better performing – analysts say there are cases in which SQL Server 2000 is faster than Oracle 10g, and vice-versa – but assume for the sake of argument that Oracle 10g is more scalable than SQL Server 2000 in any of its forms. Oracle 10g Enterprise Edition is, after all, at the top of both the clustered and unclustered TPC-C benchmarks, for what that's worth. In the unclustered benchmark, for example, an HP Integrity Superdome with 64 processors running Oracle 10g bested another 64-way Integrity Superdome running SQL Server 2000 Enterprise Edition by 221,498 tpmC -- but at a 22 percent higher cost per tpmC. On a per-processor basis, before any potential discounts are applied, the out-of-the-box cost of just Oracle 10g Enterprise Edition running on an Integrity SuperDome system is $2.56 million; the out-of-box cost of just SQL Server Enterprise Edition on the same hardware is $1.22 million.

Deep discounting a go go

fairness, any comparison on the basis of sticker price alone is misleading. After all – as no less of an authority than Seinfeld's Cosmo Kramer once noted -- “Retail is for suckers.” And thanks to the culling effect of a protracted economic downturn, there are few remaining suckers making IT purchasing decisions today. Few organizations are paying sticker price for RDBMSes from Microsoft, Oracle, IBM or Sybase.

Want proof? In testimony in the Justice Department’s effort to forestall Oracle’s acquisition of PeopleSoft, University of Virginia economics profession and antitrust luminary Dr. Kenneth Elzinga disclosed that Oracle, along with some of its competitors in the enterprise applications space, aren’t averse to offering customers -- particularly large accounts -- staggering discounts.

In one example – which involved a head-to-head clash between Oracle and PeopleSoft in the same account – Dr. Elzinga said an Oracle sales representative asked for an 83 percent discount, citing similar desperation from PeopleSoft to contest the same account. All told, he pored through thousands of discount requests from Oracle salespeople, selecting 222 of them (mostly involving software deals of more than $500,000) to make his case.

“There's so much price discrimination in this market” Dr. Elzinga told the court. “Discounts range from more than 20 percent to as much as 90 percent….[B]ased on the inverse elasticity rule, customers not price-sensitive will pay higher prices facing only two alternatives, rather than three.”

To be fair, Dr. Elzinga was talking about Oracle’s behavior in the enterprise applications space. But there’s no reason to believe things must be fundamentally different in the RDBMS market. Indeed, the three-way competition in the RDBMS market highlights another aspect of the SQL Server versus Oracle pricing match-up that buyers must also factor into the mix: Healthy competition = (often) staggering discounts.

In this case, Microsoft and Oracle – perhaps even more than IBM and Oracle – are symmetrical combatants, to the extent that the database giant will go to great lengths to compete against Microsoft in accounts that – on the basis of sticker price alone – it hasn’t a prayer of winning. By the same token, Microsoft officials say that they will do anything within reason to avoid being underbid in head-to-head customer encounters with Oracle. The upshot, industry veterans say, is that if the two vendors are bumping heads over the same customer, you can bet that Oracle – in spite of its reputation as an implacable negotiator – is going to be extremely flexible on pricing, while Microsoft will typically stress the all-in-one value of SQL Server 2000.

“I was a product manager at Sybase in 1998, and when we competed against Oracle, there was deep discounting, as much as 75 to 80 percent oftentimes,” says Eric Rogge, an analyst with business intelligence consultancy Ventana Research. “At the time, Oracle’s strategy was to kill Sybase, and if you were an Oracle salesperson, and you lost a deal to Sybase, the recriminations were harsh.” Oracle has a reputation as a relentless, almost Darwinian competitor, and Rogge says that this is especially true on the sales front: “The bottom 15 percent of the sales guys were usually washed out on a quarterly basis.”

Even Microsoft officials acknowledge as much. “Discounting is a fact of life in the software industry, and one of the things that we’ve heard from the customers in our field is that Oracle does discount, especially when they see Microsoft around,” says Corey Thomas, a SQL Server product manager with Microsoft.

The same can of course be said for Microsoft, says Thomas, who claims that his company has grown the share of its SQL Server 2000 database at the expense of Oracle and other vendors over the last three years. Microsoft’s weapon? The ever-nebulous practice of “volume discounting,” says Thomas: “At its simplest level, customers qualify for different levels of volume discounts depending on how many server products they bought at a certain category. The more products they buy, the deeper the discounts they get.”

Even if volume discounting doesn’t factor into the mix, Thomas says, Microsoft is able to compete against an aggressively deep discounting Oracle. “Even when [Oracle] discount[s] their prices, we still come up with significant value advantages,” says Thomas. “That’s normally because customers look at all of what they’re getting. One of the common scenarios is that Oracle discounts their database, but the customer looks at all of the add-ons Microsoft is offering, which they’re not getting with Oracle.”

Take Microsoft’s SQL Server 2000 Enterprise Edition database, which lists for a cool $19,999 per CPU (or $179 per named user, with a 25 seat minimum). That’s a lot of cake, to be sure, but it’s a fraction of the $40,000 per CPU (or $800 per named user) that Oracle charges for its 10g Enterprise Edition data store. SQL Server 2000 Enterprise Edition ships with integrated OLAP, ETL, Reporting Services, data mining, and clustering functionality; Oracle charges as much as $20,000 per CPU for OLAP, data mining, and RAC. On a standard eight-way Intel-based system, that comes out to $159,992 for SQL Server and $800,000 for Oracle. That’s a stunning, almost unbridgeable disparity, right?

Not so fast. First of all, no CIO in his or her right mind is going to pay that much. Oracle has demonstrated a willingness to deep discount itself out of just about any chasm – especially if it’s competing against Microsoft. A 75 percent discount off of that $800,000 asking price comes out to $200,000, while an 80 percent discount equates to… $160,000 – in other words, the cost of SQL Server 2000 Enterprise Edition. As former Sybase product manager Rogge has noted, deep discounts of this type were common when Oracle was competing against his company and – he asserts – focusing like a laser beam on putting it out of business. As if that’s not enough, MAS Strategies’ Schiff – an Oracle veteran who left that company in 1997 -- says that in many cases, the database giant could be willing to deep discount the database and throw in some or all of that stuff – OLAP, data mining, and RAC, for example – free of charge.

Why? Three words: Annual maintenance fees. IBM, Oracle, and other vendors command yearly maintenance fees – which can range from 20 to 50 percent (in the case of one prominent BI vendor) of licensing costs – for the use of their software. In many cases, maintenance fees generate reliable income even when vendors are selling comparatively few new licenses of a particular database product. Take IBM, for example, whose database business is bolstered each year by revenue derived from its huge installed base of mainframe (S/390, zSeries) and midrange customers (AS/400/iSeries/i5), which typically renew their database software licenses on an annual basis.

Oracle did not respond to repeated attempts to be interviewed for this article, but analysts speculate that the database giant typically rakes in 20 to 25 percent of licensing costs on annual maintenance – or support – charges. To be sure, users can purchase Oracle databases without also purchasing maintenance – if they want to forego Oracle technical support, software fixes, and (in some cases) security patches. Depending on how anxious Oracle is to gain a foothold in, or retain, an account, maintenance charges can be determined either before or after (deep) discounts are applied.

At least one prominent industry-watcher, Anthony Bradley, a META Group veteran who now heads up the Oracle practice at consultancy Appergy Inc., has claimed that Oracle reaps an effective windfall from its customers in the form of support premiums priced at between 20 and 25 percent of licensing costs. “With flat or declining license revenues over the past few years, support is now the company’s largest revenue source and its only growth sector,” writes Bradley, in a contentious whitepaper entitled “How Oracle Is Putting the Support Screws to Customers.” Among other concerns, Bradley identifies Oracle’s practice of charging 150 percent of support fees if a support contract lapses for any reason, even as a result of unresolved contract negotiations; refusal to terminate support on a subset of licenses without also canceling those licenses; and re-pricing of remaining licenses – in accordance with current list prices – for customers who do decide to terminate licenses.

Microsoft’s Thomas, for his part, claims that the software giant doesn’t charge annual maintenance fees for the use of SQL Server 2000. “If a user just wants to get updates in terms of security hotfixes, software patches, anything else, they can just buy a [SQL Server] license,” he says. On the other hand, users can opt for Microsoft’s Software Assurance program – which is 25 percent of the price they paid for their SQL Server license – to gain access to upgrades and additional support. Thomas declined to say how many SQL Server 2000 customers are also taking advantage of Software Assurance.

To what extent, then, can or will Oracle discount on maintenance? Oracle veteran Schiff says that based on his experience, anything goes. At the same time, he notes, customers may have better luck if they time their purchasing intensions appropriately. “If you wait until the end of the fiscal year, you can basically get whatever you want from the store. If you think about the way Oracle used to be structured, you have a territory, you make most of your money when you reach your quota, and you start getting substantial [bonuses] when you’re over quota,” he explains. “If you combine that with a good chance that there’s going to be some kind of a reorg -- because there’s almost always some kind of a reorg -- you have no incentive to hold sales back. It’s the kind of game that everybody knows. It used to be that if you waited until the end of the quarter or the fiscal year, you could almost name your price.”

One area in which Oracle is hard-pressed to touch Microsoft price-wise is in the small- and medium-sized business (SMB) space. The software giant markets a premium edition of its Small Business Server specifically for this market, and bundles Windows Server, Exchange Server, SQL Server 2000, Biz Talk Server, and ISA Server – all for $1,500, including five client access licenses (CAL). Additional CALs are available for $99 each, says Thomas.

Elsewhere, Microsoft offers a free version of its MSDE version of SQL Server for developers and for application-specific requirements. Oracle offers a similar product – Oracle Database Lite – for $100 per named user plus perpetual licensing, plus an Oracle Database Standard Edition, $400 per named user plus perpetual licensing, designed for application developers.

As far as administration is concerned, it’s not exactly an apples-to-apples comparison. Microsoft offers administrative tools as part of the SQL Server 2000 database, but customers can also purchase add-on components – such as Microsoft’s Operations Manager console. Oracle, for its part, includes an administrative console with all versions of its 10g database, but – like Microsoft – charges for the icing on the cake. In this respect, Oracle has a lot more to crow about: The database giant made waves by incorporating tuning capabilities and other advanced automation capabilities into the 10g kernel. Initially, Oracle gave every indication that these features would be available for free. Earlier this year, however, it reversed course – to the chagrin of 10g shops everywhere. Turns out, Oracle DBAs must pony up $3,000 per processor for Oracle’s 10g Tuning Pack and an additional $3,000 per processor for the 10g Diagnostic Pack, an add-on offering that supports both Automatic Workload Repository and Automatic Database Diagnostic Monitor features. Oracle also sells two additional add-on packs, one for Configuration Management ($60 per named user plus perpetual), and another for Change Management ($3,000 per processor).

Once again, all prices as given are before discounts.