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Teradata Unleashed?

An independent Teradata will be a nimble competitor, Teradata officials argue -- nimble enough to give appliance competitors a run for the limelight.

• By Stephen Swoyer
• March 28, 2007

To listen to many of Teradata’s competitors tell it, the data warehousing giant—and soon to be ex-division of NCR Corp.—has already enjoyed its time in the limelight. Now, say these competitors, it’s time for Teradata to step aside—or be elbowed aside—by The Next Big Thing: the data warehousing appliance.

Teradata officials, not surprisingly, don’t pay much heed to this claim. At the same time, however, they concede that the data warehousing appliance has unleashed a transformative effect on the DW industry.

"The appliances have made pricing more transparent," acknowledges Ed White, director of product marketing for Teradata. "When [the appliance vendors] post their pricing schedules on a tiered basis on the Web, it puts pressure on everyone else [to be more transparent] on pricing."

That’s about as much slack as White and Teradata are willing to cut the DW appliance players, however. In at least one respect, White argues, the appliance is ascendant—in the technology hype cycle.

"I think the media and the press and the analysts have given appliances an extended honeymoon. For example, how many of them are even profitable? What kinds of sales do they have?" White asks. "Is their strategy ever to become profitable and maintain an ongoing business—or is it to be acquired? If they were public companies they wouldn’t be getting a free ride, because they’d be reporting [their financials]."

Nevertheless, White concedes, DW appliance vendors have put pricing pressure on Teradata and other players in the high-end data warehousing segment. Teradata’s pricing, in particular, is a contentious issue with its existing (and even some of its prospective) users. As a result, appliance vendors allege that Teradata’s technology stack is priced beyond the means of many would-be users.

White acknowledges that Teradata is a pricier option than DW appliances from Netezza Inc. and DATAllegro Corp. At the same time, he argues, pricing comparisons of this kind are an apples to oranges proposition: Teradata isn’t exactly an appliance, for one thing, and Teradata delivers more in terms of performance, scalability, and manageability than comparable DW solutions. For these reasons, he says, Teradata’s pricing scheme isn’t really comparable to those of its appliance competitors.

"If you look at the typical [appliance customer] profile, Gartner will tell you that they average one application per appliance; just one per appliance. No one buys Teradata to support just one application. They buy because they want Teradata for their enterprise data warehouse," White comments.

He also takes issue with the "pricing transparency" that, he concedes, appliance vendors have helped bring about. "Everybody talks about price-per-terabyte, but a more meaningful way to look at it is price-per-user, or price-per-application," White contends. "So if you take a 10 TB application that has thousands of users—that’s an enormous value. The industry is letting the simplified price-per-TB metric kind of be the end of the discussion."

In the past, White says, Teradata was content to charge a premium, relative to its high-end competitors, for its data warehousing stack.

In the future, he indicates, the company plans to stake out a different strategy—one that’s more consistent with its independence from parent company NCR. In this regard, Teradata plans to deemphasize the NCR Unix operating environment (which powers many of its Teradata Warehouse installations) and, similarly, diversify its hardware platform.

"You’re going to see a de-emphasis on NCR Unix over time. The primary reason isn’t because that operating system is deficient; it’s about 32-bit vs. 64-bit. A new customer starting today probably wouldn’t start with the 32-bit limitations [of NCR Unix]," White comments. "And how much more commodity can you get than Windows or Linux running on Intel? It’s [less than $50,000] for Teradata on an Intel box. These things are getting faster and faster; we just need to market more effectively."

Even here, White maintains, Teradata’s strategy isn’t to price its stack relative to the cost of its DW appliance competitors.

"Our strategy is to be a price parity for hardware, storage, database, and software subscription [costs] with our competitors," he comments. "We’ve got a strong value proposition, and people in the past paid a premium for Teradata, but now we’ve got to be at parity with Oracle to grow the product."

In fact, he says, Teradata will still be priced at a premium relative to pure-play appliances. "The customers that are looking at [Teradata], some of them are willing to pay a premium for Teradata because we offer more value than [the appliances] do. So we’re going to … be [priced] at a premium from the appliances, which we think is justifiable when you factor in the intangibles like consulting and all of the other value we bring to the product."

As for nuts-and-bolts pricing, White says, Teradata starts at under $300K for its SMP systems and under $500K for its massively parallel processing (MPP) systems. "We’re not going to ever be the low-price leader, but we can be competitive on price with regard to our own value proposition," he indicates. "Most people perceive that Teradata has held [pricing] up higher and hasn’t come down over time, [but] if you look at the value proposition in 1998 that could justify spending $5 million [on Teradata], in 2000 they were paying $750,000 for the same performance, the same value."

In the final analysis, price perception has long been a problem for Teradata. "When I took over the product marketing group, my biggest issue coming from the field is [that] our price perception problem was killing us. It was keeping us out of the mid-market in places where we don’t even get to be on the shortlist," he indicates.

But an independent Teradata will be a more nimble competitor, White argues. It will still be priced at a premium relative to commodity to solutions, he allows, but it’ll be priced at a premium that Teradata believes it can justify, via its performance, scalability, BI tools, and services network (it claims to have nearly 2,500 Teradata consultants in the field) value-adds. "In this industry, what’s published are list prices, [but] if you talk to our customers that have gone through a negotiation cycle, they’ll tell you that we’re flexible, we’re creative," he concludes. "There’s a [price] perception versus the reality of the deals we win. Teradata wins approximately 100 new customers every year; many of these are smaller customers, and some of those are footprints of four nodes or less."