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Chip advances blowing up software price assumptions

With the advent of multi-core processors, software companies like Microsoft and Oracle are lining up on opposite sides of the pricing fence. And that means upgrading hardware can have a direct affect on software costs for many enterprise customers.

New trends in hardware development are putting a strain on tried-and-true software licensing

People have to go into software procurement with their eyes open.

Andrew Butler, VP,

Gartner Inc.

practices that could lead to higher prices for enterprise customers if they're not careful.

With the development of multi-core processor systems, software vendors are re-evaluating the way that they price and license their products, and customers need to exercise caution and work their haggling muscles to make sure they're paying only for what they use.

"People have to go into software procurement with their eyes open," said Andrew Butler, vice president of server technologies at Stamford, Conn.-based Gartner Inc.

Butler co-authored a recent report that was meant to "blow the whistle on fundamental hardware architecture changes that [could] drive a bus through established software pricing models that have been in place for five or 10 years now for the major vendors," he said. "Every software vendor builds their products with a number of assumptions in place, and those assumptions are rapidly becoming incorrect."

The one server/one application mindset is becoming a thing of the past, Butler said, and hardware partitioning is creating a space in which vendors and their customers will have to negotiate. "A chip will no longer have just one [processor core]," he said, and indeed, manufacturers are putting more processing cores on individual chips. "Later in this decade it will move to four, eight or goodness knows how many the maximum [number of processors per chip] will be," Butler said.

Multi-core pricing policies vary

Software vendors are taking different approaches to managing the cost of their products in the face of advances in hardware technology.

Microsoft has said it will

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See Microsoft's position on multi-core processor prices


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continue to take what Butler calls a "philanthropic" view, and prices will not change when machines using dual-core processors are used by an enterprise licensing its software.

"We put a lot of thought into our decision to license our software that will run on machines with multi-core processors, but what we announced was no change," said Sunny Charlebois, product manager in Microsoft's worldwide licensing and pricing group. "It's how we license today. It's consistent with how we've licensed in the past, and we want customers to take advantage of advancements in hardware.

"Customers tell us over and over that they want licensing to be predictable. They don't like surprises. … As technology advances, our licensing policies will hopefully be flexible enough to accommodate those advances as they were with multi-core," she said.

Oracle takes a different view

On the other hand, Oracle Corp., of Redwood Shores, Calif., licenses its software on a per-core basis and considers each core on a processor to be an individual piece of hardware running Oracle software. Oracle did not provide a spokesperson to discuss its licensing policies, but it lists those policies on its Web site.

In either case, organizations should be aware of how updating their hardware will affect them and their licenses as a whole.

"Don't invest your time if the boss isn't going to back what you're pushing for," warned Scott Braden, president of Microsoft License Secrets, in Dallas." If you choose, as a company, to buy licenses via the perpetual license model, with that comes the responsibility of compliance management, and that is an incredibly hard challenge for big companies."

Outside pressure plays a role

Braden supports Microsoft's decision to continue to sell its licenses on a per-chip, not a per-core basis, but isn't convinced the decision was made out of generosity.

"Obviously, it's a good idea to do that because I think customers are leery enough spending money," Braden said. "Oracle is not ashamed of the fact that they charge high prices for their stuff. I think they think they can get away with it. Microsoft could probably get away with it too, but I think they've been burned lately by the Justice Department and the press."

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