When setting up the Management Server you have the option of using the default embedded database, or an external SQL server.
For small environments, (such as 500 or less) the embedded database should be fine. The embedded database has a limit of 10GB. As logs build up from clients, you may need to perform cleanups more often.
For larger environments, you will want to use an external SQL Server. SQL Server is only limited by the size of the hard disk.