Microsoft rethinks virtual machine pricing

A senior executive pledged that changes in the way Microsoft licenses virtualization technology across its product line will benefit customers.

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Microsoft executives are hashing out a plan, and could reach some decisions later this year, on how to handle the tricky problem of pricing virtual machine technology.

Today, our licensing is about installs. That world may not be relevant moving forward.


Bob Muglia, senior VP, Microsoft,

The company is looking at several proposals for licensing virtualization across its entire product line that will benefit

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customers, said Bob Muglia, senior vice president for the Windows Server division at Microsoft. "That's probably the kind of thing we will talk about later this year."

He declined to provide specifics.

Microsoft has already stated that it will continue to treat multicore processors as a single, physical chip. Products like SQL Server that are licensed per processor will only be licensed as a single processor, even if they run on a multi-core.

Vendors such as Microsoft realize that licensing per installation may become a thing of the past.

"With virtualization, you can put something on a machine, remove it very quickly and move it somewhere else," Muglia said in an interview at TechEd 2005 in Orlando, Fla. "We need to think about what that means from a licensing perspective. Today, our licensing is about installs. That world may not be relevant moving forward.

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Paying only for what you use

Customers are keen on having a less expensive way to license virtual machines. Instead of using a test lab, Clyde Johnson, senior network and systems administrator at HCC Aegis, a division of HCC Industries Inc., in Rosemead, Calif., currently uses VMware Inc.'s Workstation 5 to test how Group Policy will impact all of his clients.

"Problem is, every one of my virtual machines has to be fully licensed," he said. "A virtual machine, when it's turned off, is just like the same machine being on a tape drive," which customers don't have to pay for separately.

"I should only have to license those virtual machines I have running at any given time, like a shared network license," Johnson said.

Roger Thibodeau, chief network architect at Royal & Sun Alliance USA Inc., a Charlotte, N.C., insurer, agreed. "Pricing [for virtualization] can't be one for one; it has to be significantly under what it would cost today to buy all of the component parts," he said. "There has to be incentive for us. If it's a 10% improvement, we may drag our feet a little longer. If it's 50%, it is more of a compelling argument."

Hypervisor is the next step after Longhorn

Microsoft's current virtualization technologies will change significantly between now and the release of Longhorn client and server in 2006 and 2007, respectively. Virtual Server 2005 is in production today, and a service pack release is due out later this year that adds support for non-Windows operating systems, for 64-bit hosts and makes some improvements to performance.

Bob Muglia, senior VP, Microsoft

At some point after Longhorn becomes available, Microsoft will build virtualization technology into the operating system via a thin hypervisor, which will handle the allocation of basic resources, like CPU and memory. Microsoft CEO Steve Ballmer first discussed the use of hypervisor technology in April at the Microsoft Management Summit.

Beyond basic allocation, there is more that must be done, such as the start up and stopping of OS sessions, and saving sessions to disk. These functions will be added to a virtualization stack that will run on one copy of the OS -- typically a thin OS that has been stripped down.

"What has changed is that we have the hardware services that we can build on," said Muglia, referring to advances made possible with the availability of semiconductors from Intel Corp. and Advanced Micro Devices Inc., which have virtualization capabilities built into their chips.

Pricing is a challenge for all virtual machine vendors

The pricing of virtual machine technology is one of today's bigger challenges in this fast-growing market, said Dan Kusnetzky, vice president of system software research at IDC, a Framingham, Mass., consulting firm. He places the market for the entire stack of virtual environment software at about $15 billion in aggregate revenues for 2004.

Virtualization, which abstracts functions away from the hardware, challenges not just licenses but business terms and conditions, he said. "There are no simple answers," Kusnetzky said.

"Say I'm a developer using virtual machine software," he said. "I have one virtual machine image I run under development, another I use for testing and one that is my production environment where I run e-mail, etc. It's just a single person, but many vendors would say you have three instances of the OS and you should pay for three.

"As we see more multitiered group environments, the less likely anyone will be happy with a licensing architecture that ties software to a single machine," Kusnetzky said.

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