Pricing out IT


Adoption of virtualization technology may be hampered by questions and uncertainties surrounding application licensing, according to one Canadian research analyst.

Virtualization — technology that enables one physical server to run multiple instances of virtual machines — has become increasingly widespread in the enterprise in recent years. Its advantage lies in its ability to allow IT managers to make more efficient use of their available processing power.

Traditional IT environments would normally run on a ratio of one application per physical server, which often leaves processors underutilized.

Virtualization software allows one physical box to run multiple applications by creating multiple virtual operating systems within that physical machine.

The trickiness of the issue becomes evident when software vendors license certain server applications by way of a per-processor basis, said Matt Brudzynski, senior analyst at Info-Tech Research in London, Ont. Database software vendor Oracle Corp.’s licensing program for certain applications is a good example, said Brudzynski.

“Oracle will ask you what hardware you are running [the application] on.

“In the case of virtual machines, that hardware may be running 30 virtual machines and you [may only be taking up] one-thirtieth of the processing power (to run that particular application), but they don’t care; all [Oracle asks] is what hardware you’re running it on and that is what they license.”

Oracle did not respond to interview requests.

Brudzynski said software licensing practices that are based on the number of processors may be “unfair” for customers that have virtualized their IT environment. A customer using a four-processor server, for instance, running a server application that is licensed per processor, would have to pay its vendor four licences. It would not matter, therefore, that the customer is only using one processor out of the four-processor server to run that particular licensed application.

Application licensing with enterprise virtualization can also be a double-edged sword. The Info-Tech analyst explained that as much as it may become a hindrance to virtualization, adoption of certain applications can also be negatively affected.

“As you see a lot of the market moving to virtual servers, not because of any software issue but because of simple hardware consolidation, [software vendors may] also run into an issue where customers will now demand that licensing accommodate virtual machines,” he said.

Failure to acknowledge this software pricing issue for virtualization can also lead to “customer resentment” toward companies with licensing policies that aren’t conducive to virtualization environments, added Brudzynski. “And then you are going to see some creative ways in which [customers] will try to get around those licensing agreements.”

Some software vendors, however, have started recognizing the trend towards virtualization and have already taken steps to make their pricing models virtualization-friendly.

One such vendor is Microsoft Corp. “They have made (licensing cost for) classic products such as SQL Server and other server-based applications based on the virtual CPUs that they reside on, [rather than] the physical CPUs,” said Brian Byun, vice-president for products and alliances at VMWare in Palo Alto, Calif.

A similar trend is seen on middleware and Java application servers, where fractional licensing and other cost-effective licensing policies are adopted for virtualized environments, Byun said.

The issue of licensing, however, only comes up in virtualization when the cost is based on the number of processors. In most cases, licensing does not pose any concern because software vendors have implemented either user-based or value-based pricing structures, Byun noted.

German firm SAP AG, for instance, enforces a “named user model with add-on options that are priced by metrics” and claims virtualization does not have any impact on the company’s pricing structure.

“SAP customers pay per user and not per core. Hence, it doesn’t matter if the servers at the customer site run multi-core processors. In this regard, it doesn’t matter what technology runs underneath our applications,” said John Nugent, executive vice-president for SAP Americas Inc.

VMWare’s Byun stressed that many software vendors already have “proactive support policies” with regard to application licensing for virtualized IT environments, and those that run into licensing issues with virtualization are in the “low minority.” In some cases, licensing issues can be resolved through the enterprise agreement between the vendor and the customer, the VMWare executive said.

He advised customers to sit down with their ISVs to clarify any confusion or uncertainty with regards to application licensing with virtualization.

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