Microsoft move may spark database price war

Microsoft introduced a lower cost version of its database software on Wednesday, a move that could lead to further price cuts in the database market.

The company plans to introduce SQL Server 2000 Workgroup, a version for small businesses priced at $3,899 per processor, in the first half of this year. It will also add several features to the upcoming SQL Server 2005 update, which is due in the summer, and extend a reselling relationship with Dell, which will allow its customers to get support from the PC maker.

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With the revamped product suite, Microsoft intends to offer alternatives to a range of rival software, including open-source products and databases from heavyweights Oracle and IBM.

"We want to make sure that we continue to beat the competition, no matter where they are," said Tom Rizzo, director of product management in Microsoft's SQL Server unit. "We believe the packaging and licensing is a feature of the product."

Microsoft, Oracle and IBM are the top three database suppliers. Combined, they garner the majority of money spent on relational databases, according to market research. Last year, Oracle and IBM each introduced lower-cost editions of their database in an effort to spur sales to medium-size customers, where Microsoft sells strongly.

The past year has also seen a rise in interest in open-source databases, although spending on such products makes up only a fraction of the multibillion-dollar database market. The open-source software is generally available for free; corporate customers typically pay a provider for support services.

The rise of open source in an already extremely competitive field points to growing price pressure in the database market, said Noel Yuhanna, an analyst at Forrester Research.

"We are predicting there will be a price war," Yuhanna said. "Suddenly, we're seeing most of the traction in entry-level databases (among established providers), to compete against open source."

Microsoft's strategy of transferring advanced features to cheaper products and having a range of pricing options reflects those market dynamics, he said.

The introduction of the Workgroup edition, which will be available for SQL Server 2000 and for SQL Server 2005, is meant to offer a better alternative to price-sensitive customers, particularly smaller organizations, Rizzo said. The Workgroup software is limited to machines with two processors (dual-core chips are counted as a single CPU) and 3 gigabytes of RAM.

Workgroup comes with a management tool, called Management Studio, which can be used with any SQL Server 2000 or SQL Server 2005 database. It also has some failover capabilities, which allow a back-up database server to start up in the case of a failure.

As for the other versions in the SQL Server 2005 update, the Standard edition will have built-in reporting tools and no limitations on memory. It will cost $5,999 per processor. The Enterprise edition, priced at

[CoachWT]

Thanks MS for reducing cost of software and creating competition

Maybe now Oracle will cut prices.