Microsoft's Enterprise Software Price Hikes Paying Off As SQL Server Business Hits $5 Billion Mark


Microsoft's SQL Server business has hit the $5 billion mark in terms of annual revenue and is growing like gangbusters, according to CEO Satya Nadella. But licensing experts believe this stunning figure is primarily due to the company raising prices last summer for many of its enterprise products.

Microsoft typically does not break out SQL Server revenue in its earnings reports. In 2007, the company divulged that SQL Server was around a $3 billion business. But in the past couple of years, Microsoft has referred only to "double-digit growth" and how sales of SQL Server -- particularly the "premium" version for enterprises -- are outpacing competitors' offerings.

At a customer event in San Francisco on Tuesday, Nadella dropped the $5 billion revenue figure, noting that SQL Server is "growing at a rapid rate."

[Related: Microsoft Flexes Big Data Muscle With SQL Server Update, Brings Azure Cloud Services Into The Game]

Last August, Microsoft raised SQL Server client access license (CAL) pricing by roughly 25 percent, while also hiking the Windows Server 2012 R2 Data Center Edition by 28 percent, and SharePoint Server by 38 percent.

While Microsoft claims SQL Server is selling like hotcakes, Microsoft licensing experts think the price hike is having just as big -- if not more -- of an impact on revenue figures.

"As someone who works with a large number of enterprises worldwide, I can tell you that every single client we’ve talked to has experienced very large cost increases associated with their SQL footprint," said Scott Braden, a Microsoft licensing expert with NET(net), a global IT consultancy with U.S. headquarters in Holland, Mich.

"Most enterprises have been surprised, in the bad way, about the size of the cost increases," Braden said. "And also, in most cases, the increases are happening despite the customers' serious and substantial efforts to virtualize, consolidate and otherwise reduce their SQL footprints."

Paul DeGroot, principal analyst at Pica Communications, a Camano Island, Wash.-based Microsoft licensing consultancy, also believes the price hike is having more of an impact on SQL Server revenue than actual sales growth.

With SQL Server 2012, Microsoft changed its licensing model and began charging based on the number of server cores customers use, as opposed to the number of processors. This also has driven up costs for some customers, he said.

NEXT: How Much More Are SQL Server Customers Going To Be Paying?