Microsoft's Licensing Changes Aid Virtualization

Microsoft has made significant licensing changes to address the growing mix of virtual machines and traditional server software running in the data center.

The new policies, which go into effect Dec. 1, give customers flexibility and simplicity when running Windows Server system products in virtual machine environments, Microsoft said.

Under Microsoft’s new terms, customers will be able to run four virtual machines at no additional cost on Microsoft’s forthcoming Windows Server 2003 R2 Enterprise Edition. Currently, customers buy a license for each operating system, regardless of whether it runs as the host or as a guest in a virtual machine. Now, with the introduction of per-virtual-processor licensing for Windows Server system products—which for the first time separates the software license from the hardware—Microsoft ushers in a new usage-based server pricing model for the utility computing era, observers and partners said.

“These steps are the first real signs that Microsoft is taking virtualization seriously, and one should not underestimate the effort to change their licensing conditions,” said David Crosbie, CEO of Leostream, an ISV in Waltham, Mass. “This is a huge step and a huge change in mindset.”

Virtualization software, which was pioneered on the Intel architecture by VMware, is being widely embraced as a method for consolidating servers, cutting management costs and automating resources in a data center. It allows users to run tens or hundreds of guest operating systems and workloads on a single server.Microsoft’s licensing changes were announced one week before the launch of VMware’s ESX 3, the first commercial offering of Xen open-source virtualization from Xensource, Palo Alto, Calif., and Microsoft’s own upgraded Virtual Server 2005 R2.

VMware’s market-leading ESX has been extended to support four-way SMP and bigger workloads such as database workloads.

Microsoft also announced changes to ease the process and costs of virtual machines. First, customers will only have to pay for active virtual machines running at any given time. Reversing its prior policy, customers no longer must pay for inactive machines that are created and stored for specific purposes such as backup or disaster recovery.

The revised licensing terms also allow customers to move virtual machines from one server to another without limit—provided the physical server is licensed for the product. For instance, a customer would be able to move a SQL Server 2005 workload from one physical server as long as the target server is licensed for that application.

The changes were dictated by the changing times, Microsoft said.“Virtualization helps reduce server sprawl, but it has caused confusion about how to license in a virtual world. Today it’s done at the install, and [the license] is bound to the physical device,” said Bob Kelly, a general manager of server infrastructure at Microsoft. “But when you move to a virtual world, how do you count if customers have a blend of both physical and virtual machines? They need to manage both, and [they need] licensing models so you can consume them in an easy-to-understand way.”

The new policies will save some Microsoft customers money but could increase costs for others, such as those who plan to run many instances of SQL on a single box at a fixed per-processor license fee, observers said.

Alvin Park, a Gartner analyst, estimates the typical cost savings for running four virtual machines on R2 to be about 20 percent, since most Microsoft customers run Windows Server Standard Edition and would have to buy or upgrade to Enterprise Edition of R2 before enjoying the relaxed policy.

Still, per-virtual-processor licensing should eliminate confusion about how to pay for server applications.

“Microsoft is leading the way in this over their competitors, showing the industry how to price software in a way that enables customers to gain the advantages of virtualization without being penalized by excessive license fees,” said Erik Josowitz, vice president of marketing for Surgient, an Austin, Texas-based ISV.0