Question

Will the performance of a SQL server drastically degrade if the database is bigger than the RAM? Or does only the index have to fit in the memory? I know this is complex, but as a rule of thumb?

Answer 1

Yes, when indexes cant fit in the memory or when doing full table scans. Doing aggregate functions over data not in memory will also require many (and maybe random) disc reads.

For some benchmarks:

Query time will depend significantly
on whether the affected data currently
resides in memory or disk access is
required. For disk intensive
operations, the characteristics of the
disk sequential and random I/O
performance are also important.

http://www.sql-server-performance.com/articles/per/large_data_operations_p7.aspx

There for, don’t expect the same performance if your db size > ram size.

Edit:
http://highscalability.com/ is full of examples like:

Once the database doesn’t fit in RAM you hit a wall.

http://highscalability.com/blog/2010/5/3/mocospace-architecture-3-billion-mobile-page-views-a-month.html

Or here:

Even if the DB size is just 10% bigger than RAM size this test shows a 2.6 times drop in performance.
http://www.mysqlperformanceblog.com/2010/04/08/fast-ssd-or-more-memory/

Although, remember that this is for hot data, data that you want to query over and don’t can cache. If you can, you can easily live with significant less memory.