NCR's Teradata will store your data—but at a steep price.
Like the penthouse at the Four Seasons or a Gulfstream IV jet, Teradata appeals
to an elite and moneyed clientele. Customers say its data warehouse, which provides
a central repository for analyzing business statistics, is peerless in its ability
to process huge amounts of information—well beyond the capabilities of
systems from IBM or Oracle. With a Teradata warehouse, thousands of people can
simultaneously search through more than a quadrillion pieces of data without
so much as a hiccup.
"You can scale the thing as big as you want it to go," says Mark L. Andrews,
systems specialist with Federated Department Stores, parent of Bloomingdale's
and Macy's, which runs a 14-trillion-byte Teradata system on 20 servers.
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That technical prowess has won Teradata, a division of NCR, a customer list
of about 650 large companies and government agencies, including Albertson's,
FedEx, Ford, the U.S. Postal Service and Wal-Mart.
But such rarefied technology can cost a limb or two. Teradata, which until last
year didn't publicly disclose its pricing, says a standard, two-server data
warehouse able to store 300 billion bytes starts at $486,000. While that includes
Teradata's database software, it's as much as 10 times the price of two fully
loaded, dual-processor PC servers. Teradata's software does run on generic Windows
systems, but most customers opt for the company's own Intel-based Unix servers,
which are specially tuned for large-scale Teradata installations.
Meanwhile, Teradata's rivals are nipping at its heels with lower-cost systems
that are steadily climbing up the performance curve. "The sweet spot for Teradata
is shrinking," says Gartner analyst Kevin Strange. "They're going to have to
bring down pricing, or they will hit the proverbial brick wall."
Teradata insists that the notion its pricing is out of whack is more perception
than reality. "This whole cost thing has to be put into the proper context,"
says chief marketing officer Bob Fair. First, he says, the prices of Teradata's
systems are in line with those of IBM or Oracle systems that provide comparable
performance. Fair says customers also need to weigh such factors as being able
to create "a single version of the truth" by consolidating disparate data sources
into a single warehouse. In other words, Teradata says, you get what you pay
for.
The pricing issue, however, recently came to a head at one of Teradata's formerly
marquee accounts: J.C. Penney, which is in the midst of moving the bulk of its
four-year-old Teradata data warehouse to an IBM DB2 repository. According to
several industry executives, the Plano, Texas-based retailer is making the change
mainly because the Teradata system is more expensive than IBM's. J.C. Penney
declined to comment to Baseline. For its part, Teradata says that J.C. Penney
is still using several of its applications, and that 120 companies have migrated
to its systems from other data warehouses.
All the same, customers continue to press Teradata to bring its pricing down.
"The cost model needs work," says Mary-Jane Jarvis-Haig, senior manager for
data warehousing at Hudson's Bay Company, a Canadian retailer. "The bill from
Teradata is always higher every year."
Not everyone believes Teradata is overpriced, of course. Nationwide Insurance,
based in Columbus, Ohio, has been a Teradata shop since 1998. "We still actively
pursue other vendors, but they can't compare on price-performance," says Tobi
Zappe, one of the firm's data-warehouse architects. In 2002, Nationwide solicited
a bid from IBM for a DB2 data warehouse running on p690 servers. But Big Blue's
proposal was actually $1 million more than the approximately $18 million the
company had already invested in its Teradata infrastructure at the time, Zappe
says.
Customers also say that the cost of owning and operating a Teradata system often
is lower than that of other database systems, requiring fewer staffers to run
because it handles many tasks automatically. At Continental Airlines, for example,
one database administrator spends half his time managing a three-trillion-byte
Teradata data warehouse that contains 80% of the company's data assets. The
airline says its transaction-oriented Oracle infrastructure, by comparison,
needs around three times as much staff time to maintain.
But in some cases, pricing is still Teradata's Achilles heel. BISYS, which provides
information-processing services to 250 community banks, switched to IBM's DB2
in 1999 after Teradata wanted roughly $750,000 for an additional two servers,
according to Bill Johnson, the company's executive vice president of operations
and technology. "DB2 does require more care and feeding than Teradata, but that's
a small price versus what we were paying in both maintenance and upgrade fees,"
he says.
The Company
Headquarters: 1700 S. Patterson Blvd., Dayton, OH 45479
Phone: (937) 445-5000
Ticker: Unit of NCR (NYSE: NCR)
URL: www.teradata.com
Employees: 4,200
Business: Data-warehousing software, servers and analysis tools, as well
as related consulting services
Founded: 1979; acquired by NCR in 1991 top executives: Mike Koehler,
senior vice president; Stephen Brobst, chief technology officer; Mark Hurd,
who ran Teradata from 1999 to 2002, is now NCR's chief executive officer
Financials: Sales of $1.21B, operating income of $145M for 2003
Products: Database and data-processing software, which run on proprietary
Unix servers as well as Windows servers. Other software products include tools
for data mining, customer-relationship management and database querying.
Market Share: 6% of the $3.6 billion data warehouse management software
market in 2002, according to IDC.
Competitors: IBM; Netezza; Oracle
The Technology
Any database can crunch numbers. What sets Teradata's apart is its ability to
break complex problems into small parts and deliver answers fast.
The Teradata system takes a query and works on different parts of each answer
in parallel. By breaking the request into smaller components and working on each
of them at the same time, Teradata software can probe extremely large data sets
with unrivaled speed and agility. Within each chunk of work (known as a "step"),
the Teradata database also processes multiple operations simultaneously, using
a technique known as pipelining. This way, Teradata's software can begin a new
task before the preceding one has been completed.
In practice, this parallel execution—which was the primary design point when
the database was developed 20 years ago—can dramatically reduce the time
it takes to process queries on very large databases. Teradata cites the results
of a 2003 benchmark test created by the Transaction Processing Performance Council
on a 10-trillion-byte database showing its system running 31% faster than a similarly
configured IBM DB2 system.
Moreover, Teradata's parallel architecture allows it to handle huge, complex queries
that can cause competing systems to seize up. "You can ask any question of the
Teradata database," says Alicia Acebo, director of data warehousing at Continental
Airlines. "With other databases, you can run a query—but you're not necessarily
going to get an answer."
Reference Checks
U.S. Postal Service
John Edgar
Mgr., Enterprise Architecture and Standards
john.t.edgar@usps.gov
Project: Linked previously separate sources of data in departments using
a 62-server Teradata warehouse. Goal: To better manage costs.
Continental Airlines
Alicia Acebo
Dir., Data Warehousing
aacebo@coair.com
Project: Allows 1,400 employees to use 40 applications for querying and
cross- referencing three trillion pieces of data stored in a 12-server Teradata
warehouse.
Hudson's Bay co.
Mary-Jane Jarvis-Haig
Senior Manager, Data Warehouse
mary-jane.jarvis-haig@hbc.com
Project: Retailer consolidated inventory and sales information across four
stores onto an eight-server Teradata system.
Nationwide Mutual Insurance
Tobi Zappe
Data Warehouse Architect
zappet@nationwide.com
Project: Keeps property and casualty insurance policy information on a
20-server system that processes 25,000 queries a day.
Cole National
John Broerman
Senior Dir., I.T.
johnbroerman@colenational.com
Project: Optical retailer implemented two-server data warehouse as part
of a demand-forecasting application that affects inventory at 1,700 locations.
Iowa Dept. of Revenue
Rhonda Kirkpatrick
Executive Officer
rhonda.kirkpatrick@idrf.state.ia.us
Project: Agency spent $11.5 million on Teradata warehouse and software,
which it used to identify and collect $32 million in back taxes over three years.
Projects: Enterprise Planning 
