Should dual-core chips be considered as one CPU or two for software pricing? Vendors and users square off.
Moore’s Law – which states that processing power will double every couple of years – will not disappoint users in 2005. Advanced Micro Devices and Intel plan to deliver newly designed processors that boost performance by putting two cores on a single chip. These new designs will increase performance anywhere from 30% to 90%, according to analysts, without increasing clock speed and thus raising power consumption.
However, what might disappoint users is how some software vendors raise prices based on the design of these new chips. In these vendors’ eyes, the new dual-core chips look like two separate processors on one piece of silicon, meriting two licenses instead of one.
On one hand, you’ve got vendors like Oracle, which says it will require one license for each core on the processor, effectively doubling the price of its software. On the other hand, you’ve got vendors like BEA Systems, which intends to impose a 25% uplift on its software running on dual-core chips.
Users say the increased licensing costs are ridiculous. “It’s like a double tax,” says Brian Perlstein, lead systems architect in the design and infrastructure group at Oakwood Healthcare System in Dearborn, Mich. “I’m not getting better value out of Oracle – I’m getting better value out of the CPU that I purchased. It’s essentially charging twice for the same product just because it’s running better.”
Historically, software vendors have benefited from hardware improvements, adds Harry Vanicelli, director of technology at Oakwood. “You can’t have Moore’s Law go by the boards just because people want to charge more,” he says.
The chip makers themselves recommend independent software vendors continue with per-processor licensing, a factor that helped Microsoft reach its verdict to continue licensing software by the processor. But BEA and other software vendors say they’re taking their logic from the chip vendors’ own pricing practices – chip makers have indicated they will charge 30% to 40% more for their dual-core CPUs, says Kuldip Hillyer, BEA’s strategic marketing manager. BEA has translated this to a 25% premium in software prices.
Money on the table?
The upshot The new year will bring higher-performance CPUs from AMD and Intel, both of which will introduce processors that combine two cores on one chip. Independent software vendors are taking mixed approaches to licensing software for these chips, with some charging per-core and others sticking with a per-processor approach.
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Indeed, you have to wonder whether Microsoft is leaving money on the table by not charging for what is architecturally two processors in one. But the company’s stance actually might have the opposite effect. “Especially if other vendors continue to charge per core, Microsoft can make up the potential lost revenue by gaining market share,” says Alvin Park, a research director at Gartner.
Perlstein agrees. “We run a lot of Oracle, and if we can get a database that doesn’t have a harsh version of licensing, we’ll go with the cheaper model,” he says.
Microsoft’s stance might pressure vendors to at least rethink their licensing policies. “It’s pretty hard not to follow Microsoft’s lead if you’re a player that runs on top of its platform,” says Al Gillen, research director at IDC.
And as dual-core processors evolve into multicore processors, analysts see the per-core licensing model becoming even more untenable. “If somebody came out with a 32-core chip, I can’t imagine a software vendor saying, ‘I want 32 licenses,’ and Microsoft saying, ‘I only want one,'” Park says. “It will really get to be a sticky issue, and I think there will be a movement toward new licensing models or more will follow Microsoft’s suit.”
In the meantime, experts have this advice for users struggling with the licensing issue:
Research licensing approaches at the time of your hardware purchase. This does not only apply to licensing for dual-core processors but also to hardware and software partitioning, says Jane Disbrow, a research director at Gartner. “If you buy brand-new hardware without taking into consideration the different licensing requirements, you could raise the price considerably,” she says.
Do the same when you migrate applications or perform server upgrades. “It’s not the initial purchase that’s bad in managing costs – it’s three years down the road, when I do a refresh of hardware and move from one four-CPU box to another that might have multicore CPUs,” Perlstein says. The new costs could kill a project by throwing ROI out of balance, he says.
Encourage vendors to price by “socket.” Gartner and AMD suggest software vendors count processors based on the number of physical sockets used, meaning that a dual-core chip would count as a single socket.
Negotiate. Users should try to negotiate a maximum 25% price increase for software running on dual-core processors, using examples of major software vendors that offer more flexible policies, Gartner suggests. Park warns that users initially might not get companies such as Oracle to budge. “But if enough people demand preferential treatment, eventually they’ll have to do something,” he says.
If you buy from Microsoft, get dual-core licensing agreements in writing. Microsoft is not writing its dual-core licensing stance into contracts as yet, so it could change its policy, Park says. “If it decided to renege on this, it can do so by changing the product usage rights document. So as you go to sign new agreements with Microsoft, negotiate a lock-in.”
Implement an automated license compliance system if you don’t already have one. Tracking will become very difficult if all the vendors come up with separate licensing models. However, with an automated system such as LANDesk from LANDesk Software, managing a variety of licensing approaches won’t be too difficult, says Brad Carpenter, senior systems analyst with Lane County, Ore. “We’ll just write a query that asks, ‘How many SQL Server licenses do we have, how many Informix, how many Oracle, running which systems, and how many processors or cores are on those systems?’ ” he says.
Research innovative licensing techniques. With trends such as virtualization, capacity on demand and now with multicore processors on the horizon, per-processor licensing likely will give way to more innovative licensing arrangements based on business metrics, such as number of transactions or the amount of work being performed, analysts say. “At some level, this is just the tip of the iceberg,” says Gordon Haff, senior analyst at Illuminata. “There are going to be more radical multicore designs in the future.”
Brandel is a freelance writer in Grand Rapids, Mich. She can be reached at mary.brandel@comcast.net .
