SANTA CLARA, CALIF.—Microsoft Corp. customers reacted with surprise and even some disbelief Monday at the software giants announcement that it was simplifying its software licensing terms for virtual machine environments.
Under these terms that go into effect on Dec. 1, customers will only pay license fees for the time they actually start running a new installation of its Windows Server System rather than when it is installed.
Bob Kelly, Microsofts general manager of infrastructure server marketing, introduced the new licensing terms at the SoftSummit conference on software pricing, licensing and management here Monday.
Microsoft customers who attended the briefing Monday questioned Kelly on why the company would implement a licensing policy that would have the potential of sharply cutting its server licensing revenue.
The goal, Kelly said, is to address concerns that customers have about the amount of money they are spending on IT system maintenance fees, which sharply limits cash available to spend on new systems.
Another goal, he said, is to jumpstart the discussion in the software industry about how to license software as more corporate IT departments start implementing virtualization technology in their data centers.
In such an environment IT managers can run multiple virtual server processes on a single physical machine to allow them to respond faster and more economically to demands for data processing capacity.
Microsoft is taking the position that if it reduces the cost of the server license fees, customers will be able to spend more on Microsoft application software and more new server systems, Kelly said.
The licensing system for virtualized system comes nearly a year after Microsoft announced its policy that it will continue to license software per process rather than per core for the dual-core servers that were starting to arrive on the market in late 2004.
That prompted other software companies to re-evaluate there licensing policies, Kelly said, and Microsofts policy for virtualized systems “is going to have a similar effect. It is going to accelerate” the review of licensing models in other software companies, he said.
“Were confident this is the right thing for the industry and the right thing” for Microsofts business model, he said, since it comes after a lot of study and discussions with customers. “The CFO is happy with our forecasts,” Kelly added.
Under the new policy, customers will be able to run up to four virtual instances of Windows 2003 R2 Enterprise Edition and Windows Server “Longhorn” Datacenter Edition on one physical server at no additional charge.
Customers will no longer have to license every inactive instance of the server software that is installed on the physical server, under the policy.
“Microsoft is taking a real leadership position in the software licensing arena” with this policy, said Margaret Lewis, enterprise software strategist with Advanced Micro Devices Inc.
Kickstarting the Discussion
“They picked a wiser approach to software licensing to start the ball rolling by recognizing that a server is not going to be running just one instance of an operating systems,” she said.
“I think other vendors are going to have to sit down and immediately start making adjustments,” Lewis said.
“But they arent necessarily going to do it happily, because it is far different from what they are used to doing,” she said.
The decision will also likely add more movement toward alternative licensing models such as site licenses, or per user license, she said.
The new policy may actually help Microsoft sell more copies of Windows Server 2003 R2 Enterprise Edition rather than the Standard Edition if customers are convinced the new policy will provide more value for their money, Lewis said.
But the licensing policies have to change as more IT organizations start to move toward virtualization and providing computing services on a utility model, she said.
“Within a year we are going to see a huge movement,” of revised licensing policies to accommodate virtualization as software companies review their policies in light of Microsofts decision, she said.
“I dont think you are going to see five press releases in the next two weeks,” but as the next year progresses there will be more announcements in this area, Lewis said.
Database, grid computing, storage management, system management and security software are among the technology categories that will have to respond to the Microsoft announcement, she said.
The licensing model that Microsoft is implementing “seems to be the way to go” to enable customers to get the best utilization of the systems they have in place while complying with licensing terms, said Paul Oliphant, application support manager with the University of Wisconsin at Madison.
It certainly appears that software “licensing is going to be the bottleneck” that impedes the implementation of virtualized IT systems, just as licensing impeded the implementation of grid computing, Oliphant said.
However, Microsofts new policy will have little short-term impact on the University of Wisconsins IT infrastructure.
“In the university environment we are a little bit behind the curve than private industry in the virtualization field,” he said. But it will likely examine the potential of the technology at some point, he added.
Microsofts virtualization policy comes none too soon because some “people have been struggling with that issue for a long time,” said Nelson Ruest, a consultant with Resolutions Enterprises, an IT consulting firm based in Victoria, British Columbia.
The licensing policy is going to help convince some organizations that this is the time to start exploring virtualization, clustered servers, grid computing, Ruest said.