Vendors Face Tough Licensing Choices

The arrival of multi-core chip architectures and the proliferation in
virtualization technologies is creating a sea change in the software

These creative methodologies, designed to help customers consolidate server
farms and develop a more efficient use of existing computing resources, have many questioning how companies with set licensing schemes will charge for their

Models of traditional infrastructure software vendors typically involve
charging customers per single processor, a clean one-to-one ratio for single-core chips. But multi-core consists of a piece of silicon, or a socket, with
more than one core, or processing engine.

Developing a Virtual Plan

The issue has sparked mixed results. For example, database
specialist Oracle has claimed that each dual-core chip — a single processor
running two cores — runs at one and a half times the processing power of
its single-core ancestor.

Accordingly, Oracle has changed
its per-processor model, taking the number of cores in a multi-core chip and multiplying them by .75. Previously, each core was counted as a full

While IDC analyst Matt Eastwood praised the improvement, he also questioned
whether or not that would work, noting that, as multi-core systems and
virtualization instantiations ramp up, Oracle will be forced to make a
change that will be fair for corporate customers.

Eastwood, who claims the virtualization market will balloon to nearly $15
billion worldwide by 2009, sees similar questions swirling around Microsoft. As
primarily an operating system and applications vendor, Microsoft offers a
mixed bag of licensing schemes, making its move to accommodate
virtualization and multi-core a tricky one.

Last month, Microsoft became the latest large software maker to lay out a licensing scheme designed to be more amenable to the new computing methodologies
customers are looking to implement.

Those that license Windows Server System products that are licensed per
processor, such as Microsoft SQL Server and BizTalk Server, can now stack
multiple instances on a machine by licensing for the number of virtual
processors being used, instead of being charged per physical CPU.

In another scenario, licenses for the upcoming Windows Server 2003 R2
Enterprise Edition will allow customers to run up to four virtual instances
on one physical server at no additional cost. Microsoft also said customers
can now create and store unlimited numbers of instances and pay only for the
maximum number of running instances at any given time.

Eastwood said this is a step in the right direction for Microsoft, but he
isn’t sure that it will work, because virtualization software running multi-core
machines allows customers to carve out different paths for operating systems,
applications and databases.

Eastwood said that while Microsoft has improved or at least articulated a
strategy, they still have not defined what a license is. This step is
crucial at a time when the industry is moving toward more virtual
infrastructures where workloads are being moved around on the fly in an
automated fashion.

“A license is something that needs to be tied to a physical piece of
hardware,” Eastwood said. “I believe they [Microsoft] only allow that
association to be changed every 90 days. So it’s still not dynamic in any

“Customers starting to do some provisioning will need to
buy more licenses than they need,” Eastwood continued. “Over time, I believe Microsoft realizes they’ll need to evolve to a model that allows their licenses to be moved around in a much more dynamic way.”

AMD’s Commercial Strategist Margaret Lewis agreed the technological changes
are curve balls for ISVs.

“The model was simpler with one application per server,” Lewis observed.
“We’re blowing that whole model away. What is a server? Do you count it as
virtual or physical? Where is the application running? Across multiple
servers, or many applications running on one server?”

Lewis discussed the options available for ISVs in a recent presentation at
SoftSummit, a conference where software licensing issues filled the day.

She said one solution is to allow people to run multiple instances of
software under one license, which is what Microsoft did. Another option is
to move to some usage metric for your software that counts the number of users,
timed use in CPU hours, number of transactions, number of threads and the amount of data transferred.

Eastwood said companies such as Microsoft and Oracle have to be very careful of
going down this path because of their various licensing schemes. He said
charging customers for cores isn’t going to resonate with users once it
starts to get out in the marketplace.

“Customers very much understand the cost benefits of going from 1-way to
2-way to a 4-way. When you start to introduce a new tradeoff, which is the
additional throughput of adding cores to the processor, it’s not going to
be a one-to-one benefit.

While challenges remain, Lewis said AMD is seeing people starting to take a
stance in one direction or another, which is progress.

“We find other ISVs are moving to some metrics approach as fast as they
can,” Lewis said. “It’s a way to keep users happy and have a good way of
charging for their software.”

Virtualization For The Customer

Microsoft and Oracle have already spoken their piece about licensing, but
what do other software vendors think? Kurt Daniels, director of marketing
and alliances for virtualization software maker SWSoft, has spent many hours
thinking about the issue.

Daniels, who spent four years as a Microsoft product manager with a focus on
licensing issues, understands how tricky the licensing issue is. He
sympathizes with both the ISV trying not to lose the farm and the discerning
customer who doesn’t want to feel hustled.

He said a lot of customers want the best of both worlds: to pay as they go
in a utility computing model and to buy the licenses and not have to buy every month for the rest of their lives.

“The other issue is, if you charge by data, or different workloads,
databases, e-mail, etc., there are all these different metrics, so there is
almost no way to make it not super complicated,” Daniels said.

As an employee of an infrastructure software maker, he is partial to the CPU model. He believes in slight increases in the CPU pricing over time, with the ISV giving away multi-core models over time.

“No one likes counting users or devices, as we well learned with Microsoft
licenses,” Daniels said. “It’s not really their fault, they just happen to
be the biggest software company, so everyone questions them. No model will
ever be perfect, but this is not a mature market. It’s really ‘Let’s get this
out there and not overcharge.'”

SWSoft, like VMware, is one of the software vendors making virtualization
products that are at the eye of the licensing storm.

But unlike VMware, SWSoft’s Virtuozzo software allows users to create
multiple partitions on a single box with a single Linux or Windows operating
system, instead of loading many different operating systems on one box.
This, Daniels said, requires fewer virtualization software licenses, as well
as reduced licenses for other software installed on the server.

In short, it’s yet another option to help ISVs and customers meet in the
precarious middle.

Overall, Daniels said he has been encouraged by the industry changes.

“There’s been some good pressure put on other ISVs that are lagging behind
us and Microsoft and Oracle,” Daniels said. “Oracle’s model might be a little
complicated. It reminds me of the megahertz pricing strategy on databases a
few years ago that backfired. I’m not sure that will hold up.”

Analysts remain unsure, too.

“I’m not sure what the right metric is, or what will resonate the most for
users,” said Eastwood, whose team is conducting a survey on licensing

“That’s the problem with x86, or any chip architecture for that matter.
There is no good way to measure performance in terms of a MIP .
They have never been able to come up with a meaningful and consistent way of
measuring the throughput of the system that you can price software around.”

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