Changes to Windows Server hosting prices take effect Jan. 1
Microsoft is planning to lower Windows Server licensing prices for hosting providers starting Jan. 1.
That’s great for Microsoft’s partners. But will IT shops see any change in their bills?
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The answer is, “probably,” if you’re a customer of Terremark. But other hosting providers, such as Rackspace, GoGrid, CSC and Amazon, aren’t saying whether they will adjust pricing, and a Microsoft official says service providers are free to price their products however they see fit. If they want to pocket the extra cash instead of passing savings on to customers, that’s their business (literally).
A little background first.
A couple of weeks ago, Microsoft announced changes to four SPLAs (service provider license agreements). There will be a 21% price decrease for the Web, Standard and Enterprise editions of Windows Server 2008 R2. The fourth change is a 30% increase (yes, increase) in price for the Windows Server 2008 R2 datacenter license.
Raising the datacenter license may not be as punitive as it appears at first glance. The license provides unlimited virtualization rights, so customers don’t have to pay more as they add virtual machines to a server. As virtualization technology improves, the number of VMs per server is also increasing. This could turn out to be a wash.
In any case, these pricing changes do not affect enterprise customers directly. Only service providers will see any change in their bills from Microsoft.
But it stands to reason that customers who rely on hosting providers to run Windows Server or applications that run on top of Windows Server might see some changes.
I contacted the five hosting providers mentioned above to see if this would be the case. Based on the statements I received, Terremark is the only one that seems likely to lower prices, but it will also increase prices to accommodate for the 30% rise in the datacenter license.
“Terremark keeps a very close eye on market pricing, and given the changes in Microsoft’s license pricing we will make the appropriate changes, both increasing and decreasing pricing as needed, to properly align our pricing with what is being offered in the marketplace by other service providers,” the company said.
GoGrid said “we will have a formal announcement on pricing changes (if any) in the next month,” and Rackspace said its team is “currently looking into how this may or may not have an effect.” I didn’t get any specific response from CSC or Amazon.
The service providers, as independent businesses, are free to set their own prices, notes Tom Rizzo, senior director of Microsoft Online Services (Rizzo isn’t directly involved in Windows Server SPLA pricing but is familiar with the process). Even if a hosting provider’s costs are lowered, the vendor could argue that the services it provides on top of the Windows Server hosting justifies the price they charge end users.
“At the end of the day those companies set their own prices on top of the SPLA price,” Rizzo said. “If they think the value they offer is worth it, that’s their decision.”
Of course, one thing I haven’t mentioned is that licenses aren’t the only costs service providers have to worry about. Like any other business, the price of electricity, manpower, facilities management, and a whole host of other things contribute to the prices ultimately paid by customers.
Even if hosting providers don’t lower prices, it could be that the Windows Server licensing changes help them keep prices level instead of raising them. Ultimately, it’s up to customers to decide whether they’re getting a good deal.
