diff --git a/application/pom.xml b/application/pom.xml
index 89a6377bea..b379b59bf7 100644
--- a/application/pom.xml
+++ b/application/pom.xml
@@ -260,7 +260,6 @@
         <dependency>
             <groupId>org.hsqldb</groupId>
             <artifactId>hsqldb</artifactId>
-            <scope>test</scope>
         </dependency>
     </dependencies>
 
diff --git a/application/src/main/conf/thingsboard.conf b/application/src/main/conf/thingsboard.conf
index ef977eea46..5ca6f26c33 100644
--- a/application/src/main/conf/thingsboard.conf
+++ b/application/src/main/conf/thingsboard.conf
@@ -17,3 +17,4 @@
 export JAVA_OPTS="$JAVA_OPTS -Dplatform=@pkg.platform@"
 export LOG_FILENAME=${pkg.name}.out
 export LOADER_PATH=${pkg.installFolder}/conf,${pkg.installFolder}/extensions
+export SQL_DATA_FOLDER=${pkg.installFolder}/data/sql
diff --git a/application/src/main/resources/thingsboard.yml b/application/src/main/resources/thingsboard.yml
index 5d5dac1717..c749cb2a50 100644
--- a/application/src/main/resources/thingsboard.yml
+++ b/application/src/main/resources/thingsboard.yml
@@ -223,21 +223,36 @@ spring.mvc.cors:
          allowed-headers: "*"
          max-age: "1800"
          allow-credentials: "true"
-         
-# SQL DAO Configuration
 
+# HSQLDB DAO Configuration
 spring:
   data:
     jpa:
       repositories:
         enabled: "true"
   jpa:
-    show-sql: "false"
-    database-platform: "org.hibernate.dialect.PostgreSQLDialect"
     hibernate:
       ddl-auto: "validate"
+    database-platform: "org.hibernate.dialect.HSQLDialect"
   datasource:
-    driverClassName: "${SPRING_DRIVER_CLASS_NAME:org.postgresql.Driver}"
-    url: "${SPRING_DATASOURCE_URL:jdbc:postgresql://localhost:5432/thingsboard}"
-    username: "${SPRING_DATASOURCE_USERNAME:postgres}"
-    password: "${SPRING_DATASOURCE_PASSWORD:postgres}"
\ No newline at end of file
+    driverClassName: "${SPRING_DRIVER_CLASS_NAME:org.hsqldb.jdbc.JDBCDriver}"
+    url: "${SPRING_DATASOURCE_URL:jdbc:hsqldb:file:${SQL_DATA_FOLDER:/tmp}/thingsboardDb;sql.enforce_size=false}"
+    username: "${SPRING_DATASOURCE_USERNAME:sa}"
+    password: "${SPRING_DATASOURCE_PASSWORD:}"
+
+
+# Postgres DAO Configuration
+#spring:
+#  data:
+#    jpa:
+#      repositories:
+#        enabled: "true"
+#  jpa:
+#    hibernate:
+#      ddl-auto: "validate"
+#    database-platform: "org.hibernate.dialect.PostgreSQLDialect"
+#  datasource:
+#    driverClassName: "${SPRING_DRIVER_CLASS_NAME:org.postgresql.Driver}"
+#    url: "${SPRING_DATASOURCE_URL:jdbc:postgresql://localhost:5432/thingsboard}"
+#    username: "${SPRING_DATASOURCE_USERNAME:postgres}"
+#    password: "${SPRING_DATASOURCE_PASSWORD:postgres}"
diff --git a/application/src/main/scripts/windows/install.bat b/application/src/main/scripts/windows/install.bat
index c160367486..b49ca84628 100644
--- a/application/src/main/scripts/windows/install.bat
+++ b/application/src/main/scripts/windows/install.bat
@@ -78,6 +78,7 @@ if "%1" == "--loadDemo" (
 
 SET BASE=%~dp0
 SET LOADER_PATH=%BASE%\conf,%BASE%\extensions
+SET SQL_DATA_FOLDER=%BASE%\data\sql
 SET jarfile=%BASE%\lib\${pkg.name}.jar
 SET installDir=%BASE%\data
 
diff --git a/application/src/main/scripts/windows/service.xml b/application/src/main/scripts/windows/service.xml
index becbcdc9bd..17165905bc 100644
--- a/application/src/main/scripts/windows/service.xml
+++ b/application/src/main/scripts/windows/service.xml
@@ -6,6 +6,7 @@
     <logpath>${pkg.winWrapperLogFolder}</logpath>
     <logmode>rotate</logmode>
     <env name="LOADER_PATH" value="%BASE%\conf,%BASE%\extensions" />
+    <env name="SQL_DATA_FOLDER" value="%BASE%\data\sql" />
     <executable>java</executable>
     <startargument>-Dplatform=windows</startargument>
     <startargument>-jar</startargument>
diff --git a/application/src/main/scripts/windows/upgrade.bat b/application/src/main/scripts/windows/upgrade.bat
index 3e6aed34f0..9039d50a6c 100644
--- a/application/src/main/scripts/windows/upgrade.bat
+++ b/application/src/main/scripts/windows/upgrade.bat
@@ -22,6 +22,7 @@ if not defined fromVersion (
 )
 
 SET LOADER_PATH=%BASE%\conf,%BASE%\extensions
+SET SQL_DATA_FOLDER=%BASE%\data\sql
 SET jarfile=%BASE%\lib\${pkg.name}.jar
 SET installDir=%BASE%\data
 
diff --git a/pom.xml b/pom.xml
index 171dc609b8..ce8f1e1ae2 100755
--- a/pom.xml
+++ b/pom.xml
@@ -763,7 +763,6 @@
                 <groupId>org.hsqldb</groupId>
                 <artifactId>hsqldb</artifactId>
                 <version>${hsqldb.version}</version>
-                <scope>test</scope>
             </dependency>
             <dependency>
                 <groupId>ru.yandex.qatools.embed</groupId>