IBM changes dual-core pricing for new AMD chips

Should a dual-core processor count as one chip or two? IBM and Advanced Micro Devices (AMD) provided two very different answers to that question Thursday as the two companies unveiled contrasting pricing strategies around AMD's dual-core processors.

IBM broke with its long-standing dual-core pricing policy and said it would charge the same price for software licenses for single-core and dual-core AMD systems. AMD, on the other hand, took the launch of the dual-core chips as an opportunity to significantly hike the price of its high-end Opteron processors.

Unveiled Thursday, the dual-core Opterons are AMD's first products to contain two separate processing engines, or cores, on a single chip. The first three of these chips, which are targeted at servers with four processors, will begin shipping over the next few weeks in products such as Hewlett-Packard Co.'s ProLiant BL45p and DL585 systems and Sun Microsystems Inc.'s Sun Fire V40z servers.

At present, IBM has committed to shipping the dual-core Opteron in only one server product, the IBM eServer 326, which is designed for technical and high-performance computing users. IBM has not said when it expects to ship a dual-core version of the eServer 326.

Still, Big Blue's announcement is good news for WebSphere and DB2 customers who may be looking at the dual-core Opterons. IBM has been offering dual-core versions of its Power processor for several years now, but it has licensed the software on a per-core basis.

With Opteron, and Intel's upcoming dual-core server processors, customers will buy licenses for each processor, not each core, said Ari Fishkind, an IBM spokesman.

"For the newer first-generation Opteron and Xeon chips that are now emerging, the advances in power are incremental," he said. "We think they're terrific chips and offer a lot of potential, but for now most customers will not be fully exploiting the chips' performance."

AMD sees things differently. "If you look at some of the benchmarks, you'll see the utility that we're delivering with the processor. What we're trying to do is price for the utility that we deliver," said Margaret Lewis, a senior software strategist at AMD.

The top-of-the-line dual-core Opteron lists for US$2,649, more than US$1,000 above the price of AMD's highest performing single-core Opteron.

Enterprise software vendors have developed dual-core licensing policies in the Unix market, which has already seen dual-core systems from a number of vendors. But with the Opteron servers now hitting the market, software companies will need to take a hard look at whether they have to change pricing models for the lower-cost Linux and Windows market, said Amy Konary, director of software pricing and licensing with IDC.

"The argument becomes, 'How much more value are you going to get out of your software for having this additional core?'" Konary said. "There's been a lot of customer concern that having the dual-core is not going to double the value of the software."

One early Opteron customer said he's not worried about licensing issues. "This isn't an issue for enterprise customers. They have site licenses and enterprise deals with the vendors," said Alan Walker, vice president of technology prototyping and integration for Southlake, Texas, travel reservations system operator Sabre Holdings. "It's the small to medium [business] guys who are going to have problems."

Sabre runs its infrastructure almost entirely on open-source software such as Linux and MySQL, which helps it avoid worrying about per-processor license costs. Still, Walker doesn't think licensing would be an issue for Sabre even if it were using commercial software. "Big companies have leverage. You can work with the vendors and play them against each other to get what you want," he said.

Another question ahead is how software vendors will license dual-core systems based on Intel Corp.'s Itanium 2 processor. IBM's Fishkind could not say whether IBM intended to apply the per-core licensing model to Itanium.

In fact, IBM reserves the right to change its dual-core licensing strategy for AMD or Intel systems, Fishkind said. "By all rights it should be considered as two processors," he said of the dual-core Opteron.

Microsoft, which has already stated that it will not license its software on a per-core basis, confirmed that this policy would apply to "x64" Opteron and Xeon systems as well as Itanium. "Microsoft's multicore licensing policy is the same, per processor regardless if it's x64 or dual-core Itanium," a Microsoft spokesman said in a statement.

Oracle, which has long said it intends to retain its policy of licensing dual-core systems on a per-core basis, may be the ultimate target of IBM's pricing strategy, said Kevin Krewell, editor-in-chief of Microprocessor Report. "This is all going to put pressure on Oracle, especially in the (x64) server space, where there's a lot of competition," he said. "Oracle's got to decide for themselves what kind of pain they're willing to take."

(Joris Evers in San Francisco and Stacy Cowley in New York contributed to this story.)