Microsoft cuts costs of virtual servers

Microsoft‘s new virtualization licensing model for its Windows Server System could dramatically lower costs for users and help advance industry efforts to define how software should be licensed as virtualization takes off on corporate networks.

Last week, Microsoft added licensing terms for its server operating systems that support virtual machine technology. The company also added various use-rights, including a pay-only-for-what-you-use model, for the other software it develops under the Windows Server System banner, including SQL Server, Exchange, SharePoint Portal Server and BizTalk.

While some users were pleasantly surprised by the licensing changes, analysts say in the long term Microsoft has only taken its first step into the evolving virtualization-licensing arena.

“This is better than I was expecting,” says Lance Auman, director of enterprise infrastructure for the San Francisco Unified School District. Auman uses Microsoft’s Virtual Server to consolidate infrastructure. “Up until now we have been treating virtual machines like regular hardware in terms of licensing,” he says. “When you put these changes into [Microsoft’s] educational pricing, cost is almost nothing. It is so negligible it is almost free.”

With the virtualization licensing, which takes effect Dec. 1, users can run four virtual machines on top of the Enterprise Edition of Windows Server 2003 Release 2, which is slated to ship in December, without any additional licensing costs beyond the base server. Users can run any Windows server version within those virtual machines, including Windows 2000 and NT.

Microsoft says given current retail pricing a user would pay $4,000 for a Windows Server 2003 Release 2 license plus $1,000 each for four copies of Windows Server Release 2 Standard Edition to run within virtual machine technology, for a total of $8,000. Under the new licensing the same configuration would be half that price.

The company also changed its licensing for virtual copies, or images of Windows Server System software, such as SQL Server and Exchange, and will now charge only for virtual images that are active. Previously, Microsoft charged for every image of a system whether it was actively used or on standby for tasks such as failover.

Microsoft also announced a number of partners that will support its Virtual Hard Disk technology, a format designed to help third parties create management tools for Virtual Server.

Analysts say there could be other benefits beyond cost.

“This is going to give organizations a lot of ways to think through disaster-recovery and business-continuity plans,” says Chris Burry, technology infrastructure practice director for consulting firm Avanade. “In the past, those decisions may have been cost prohibitive.” He says the benefits could extend to blade server deployments.

“You might keep some virtual servers on some storage fabric and shift them in and out of blades as you need them because you only license what you are running,” he says.

Microsoft’s new licensing model also presents incentives and possible cost savings for end users of virtual machine technology not only from Microsoft but from VMware, SWsoft and XenSource.

VMware, which hosts its annual user conference this week and for which Microsoft is a gold sponsor, says Microsoft’s licensing is a plus.

“We think this is a good step forward from Microsoft in establishing ‘virtualization-friendly’ licensing policies that should encourage other leading [vendors] to follow suit,” says Brian Byun, vice president of products at VMware. “The next step should be to make virtualization deployable everywhere and for all workloads.”

Microsoft officials say it all adds up to making it easier to adopt virtualization.

“It is an important technology, customers want to use it, but it can become an unwieldy technology, hard to license, track and price; with this it just gets clear,” says Bob Kelly, general manager of infrastructure server marketing.

What is less clear is what it all means in the big picture.

“Microsoft has done something important in taking a stand on making licensing simple under virtualization,” says Frank Gillette, an analyst with Forrester Research. “But we have a lot more work to do in the industry, Microsoft included, to make licensing fall into place for dynamic systems, utility computing, grid, whatever you are going to call it. This is just the beginning of rethinking how the technology works, how it is charged.”

Today, licensing from Microsoft and others assumes that server software will be licensed to run on specific hardware and a specific number of processors, or for a specific number of users.

In the virtualized world, software is separated from hardware and can run dynamically and intermittently in various portions of a network. Microsoft knows its historic model of licensing does not translate well and doesn’t fit under its Dynamic Systems Initiative strategy to create a self-managed dynamic infrastructure.

Gordon Haff, an analyst with Illuminata, says Microsoft is taking a first step but “it is more oriented toward virtualization as a partition rather than virtualization as dynamic infrastructure.

“There is a lot of talk but not a lot of resolution on how software should be licensed in a virtual world,” he says. “What we are seeing today is a lot of incremental steps at a base level. We are not dealing with issues such as dynamic sizing or moving of virtual containers.”

Haff says Microsoft has addressed some near-term issues, and has injected itself into the virtualization discussion.