Microsoft’s Virtual License Shift

Microsoft is changing its licensing model for customers that virtualize their software on enterprise servers.

Customers opting for the new licensing scheme, which goes into effect Dec. 1, will be able to run up to four virtual instances of Microsoft Server 2003 R2 on one physical server at no additional cost, the company said today.

Instead of paying for a license for each instance created on a server, customers will be able to run four for the price of one.

The license has also been modified for the upcoming data center version of Windows Server, still code named Longhorn, so that customers can create an unlimited number of instances on one physical server.

The license for Windows Server System products that are charged per-processor has been changed as well. For example, customers that used BizTalk Server on a four-processor server, but only used two for virtual processing, would have to pay for a four-processor licensing. Under the new model, they will only need to pay for the two processors used.

Customers will be able to create and store as many instances as they want and only pay for the maximum number of virtual servers that are actually running. This, Microsoft said, lets customers create backup and recovery instances without having to pay a fee for its creation.

The new licensing model also allows customers to migrate active server instances from one machine to the other without limits under the new licensing model.

Microsoft officials wanted to move to a more cost-effective, flexible and simplified licensing model as part of its Dynamic Systems Initiative to get companies on board its virtualization efforts.

“Customers are on a treadmill of complexity and cost that limits the value IT delivers to the business,” said Andrew Lees, Microsoft Server and Tools Business corporate vice president, in a statement. “Virtualization is a key technology to help liberate IT but must be implemented as part of a broad approach of enabling self-managing dynamic systems.”

Virtualization allows customers to put several “instances” of server software one one physical machine, cutting down on the number of machines needed in the data center.

Dan Kusnetzky, an analyst at research firm IDC, said that while the new licensing scheme doesn’t offer everything he had hoped for in the new program, he believes it is a step in the right direction.

“It’s my impression that Microsoft has been involved with an involved exploration of software licensing policies,” he said. “That exploration has involved speaking with Microsoft’s customers, analysts, and reviewing competitor’s licensing and pricing strategies.”

At one time the enterprise virtualization industry was dominated by companies like VMware, a subsidiary of EMC after the company bought it in December 2003, and open source counterparts like XenSource.

Microsoft has put more emphasis on virtualization as part of its overall strategy on self-managing dynamic systems. Earlier this year Steve Ballmer, Microsoft CEO, said the company’s Virtual Server 2005 would support the virtualization of more than just Windows machines to include its nemesis Linux.

Virtual Server 2005, which was initially launched in September 2004, is going through an upgrade to an R2 version. Currently in beta, a final release of the software is expected in the second half of 2006.

Microsoft officials also said they’ve secured pledges from software companies such as Quest Software and Surgient and manufacturers such as Dell , AMD , Fujitsu, HP and IBM to integrate their products with Virtual Server 2005 R2.