Microsoft users catch price break

In what's being called a shrewd licensing move, Microsoft last week put its competitors on the defensive and avoided price increases for customers by announcing it would not charge extra fees for server software running on dual-core, processor-based computers.

The decision eventually could influence software-buying decisions, given that IBM and Oracle have opted to license their software per core. The first x86-based multi-core chips will come from Advanced Micro Devices next year and Intel in 2006. A number of multi-core chips from IBM, Sun and HP already exist for Unix-based platforms.

The question of how to license software to run microprocessors with two or more processing engines is contentious. The decision puts pressure on IBM server software such as WebSphere and Oracle database packages, and helps Microsoft fend off pressure from open source advocates who say their software is better and less costly.

It also highlights that advancements in hardware and network architecture are no longer a tight fit with software licensing models.

The dual-core issue also is a precursor to other licensing complexities that will crop up in the next few years with the introduction of virtualization in chip and hardware technology, which will provide the ability to run multiple copies of software on one server.

Microsoft rejected per-core pricing for per-CPU pricing for its server software, such as SQL Server and BizTalk Server, and other software such as Windows XP. The decision means software prices won't increase based on the number of cores on a chip. For example, licensing SQL Server on a dual-core chip would be the same as the price of a license on a single-core chip.

"If Microsoft had come out like IBM and Oracle, the open source community would have had a field day," says Jonathan Eunice, president of research firm Illuminata. "Microsoft has dodged a competitive bullet there."

While users are happy that the dual-core decision won't affect licensing prices, reaction was muted because many users have lingering issues with CPU-based pricing, which they contend is a penalty for the improved performance of more-sophisticated hardware.

"I think everything is still status quo," says Matthew Bailey, LAN engineer for CSK Auto in Phoenix, which operates Checker, Schucks and Kragen auto parts stores. "The per-processor pricing is a strategy that most people don't like. It penalizes you for buying more processing power."

While Microsoft's licensing obviously disagrees with that assessment, it's not taking the same angle on dual-core technology.

"A core is not a processor; a hyper-thread is not a processor," says Sunny Charlebois, product manager in the worldwide licensing and product group at Microsoft. "A processor is a processor."

The issue of licensing has been controversial for Microsoft since 2001 when it introduced its Licensing 6.0 volume licensing program and Software Assurance maintenance plan, which angered many users. The company has been trying to repair the damage ever since, with enticements such as adding training, support and home-use rights to Software Assurance.

"The longest road is the road to redemption," says Laura DiDio, an analyst with The Yankee Group, citing a General Motors advertising campaign. "That is a pretty long road for Microsoft, but they are walking it."

Experts say Microsoft has figured out that it is under pressure from all sides.

"What Microsoft has done is protect their customers' investments," says Julie Giera, an analyst with Forrester Research. "Microsoft has taken a lot of criticism over the past couple of years in general over licensing, but they have used this to distinguish themselves from the rest of the pack, which is a fabulous move."

Giera chided IBM and Oracle for their stance. "They have to live with it and it puts them in a position of being extremely greedy. But IBM and Oracle are worried about the four- and eight-way cores, and that is why they have taken their particular approach."

But Giera and others know Microsoft's dual-core decision is not all altruistic. Even Microsoft admits its decision in part is to help drive the market.

"The bottom line is we want to do right by customers, but we wanted to drive adoption of multi-core technology by making it more cost-effective," Microsoft's Charlebois says.

The multi-core decision, however, is only the beginning, as chip technologies and system architectures evolve, including the emergence of virtualization capabilities in the next few years.

While multi-core technology equates to improving performance, virtualization from either the hardware or software side speaks to consolidation.

"Looking out a year or two, we have this virtualization issue coming up. and that is a stickier issue when we get to it," Illuminata's Eunice says. The problem is that users could run multiple instances of operating systems and applications on a single server.

Microsoft has said that it will charge per instance for the operating system running on its Virtual Server software technology. Red Hat has the same model for its Linux operating system.

But some vendors, such as Novell with SuSE Linux, say they will charge per server regardless of the number of virtual operating systems.

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