Teradata makes a fresh pricing play

Profile picture for user gonzodaddy By Den Howlett October 15, 2020
Summary:
Consumption pricing reflects modern realties. Teradata responds in kind.

pricing
(via Olivier Le Moal - fotolia)

Last year, ITQlick rated Teradata's pricing model as 'average.' This year? We'll have to wait and see but based on its most recent announcement I wouldn't be surprised to see that rating get a lift. That's because Teradata is making important changes to its existing ...as a Service pricing model. Here's what's happening as outlined in the press release:

In keeping with Teradata’s aim to provide its customers with simplicity and choice, the company now offers two flexible cloud pricing models: Blended and Consumption. Blended Pricing is best suited for high usage and provides the ultimate in billing predictability while delivering the lowest cost at scale. Consumption Pricing is an affordable, pay-as-you-go option best suited for ad hoc queries and workloads with typical or unknown usage that delivers cost transparency for easy departmental chargeback.

Explaining the reasons for the change, Hillary Ashton, Chief Product Officer at Teradata is quoted as saying:

 Different analytic use cases have vastly different utilization patterns at different points in time, which means that having choice in pricing models enables Teradata to offer the best one for each customer scenario ranging from a small ad hoc discovery system to a large production analytics environment....The convenience of a true consumption-based pricing model – determined by actual usage of the Vantage platform for running successful queries, rather than just available capacity – is a win for customers who want to better align their investment with specific analytic outcomes. It also corrects outdated perceptions about the cost required to become a Teradata customer, since there is now a risk-free, zero down option to pay only for what’s used with Vantage, the industry’s best cloud data analytics platform.

In light of Snowflake's spectacular IPO, pundits will no doubt note that Teradata is faced with little choice but to make this kind of change. After all, the company has seen its market cap decline from around $5.5bn in March 2019 to around $2.34bn today and is often characterized as 'old school datawarehouse.' It has to do something to shore up its business model in the face of hot competition both in the public commercial space and from the likes of Google and Amazon. But the fact remains large global organizations rely on Teradata for massive workloads. 

Perceptions aside, let's not diminish Teradata's potential. At the last earnings call in early August, recently minted CEO Steve McMillan talked extensively about new capabilities and use cases that suggest there is plenty of life and room for expansion. He also noted the company putting its flagship Vantage solution on GCP. It is therefore hardly surprising that consumption-based pricing is part of that equation. This is something we believe will become a focus of buyer discussions in other areas. As we said earlier this week:

My best guess is that the model followed by the hyperscalers will force vendors into thinking about price in a different way.

As we also noted, other vendors don't have a burning platform that needs attention. If anything, the pandemic has helped mega-vendors position themselves as safe havens. How long that lasts is anyone's guess. In the meantime, Teradata can only look on as Snowflake, which has revenue a fraction of that enjoyed by Teradata yet is valued at 29x its own market cap. Growth figures into that for sure but the insanity of Wall Street pricing always confounds me.