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VMware says new licensing favours customers

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In July, virtualisation technology provider, VMware updated its flagship product, vSphere to version 5.0. With the update came a huge increase in the capability of virtual machines, which can now use up to one terabyte of virtual RAM.

However, the licensing scheme for vSphere also changed substantially.

In version 4, VMware used a per-CPU licensing model, based on the number of server cores, but changed that in version 5 to pegging licensing costs based on the amount of physical memory allocated to virtual machines on the host, explained CRN Magazine at the time.

The result for many customers was a huge increase in licensing costs. So great was the impact that an Ars Technica article asked whether VMware's licensing scheme would open the door to rival virtualisation vendor, Microsoft.

On the VMware online communities, harsh feedback started on the day of the licensing changes.

The reaction was described as a “revolt” by CIO Magazine, “even at large companies that rarely considered competing virtualisation platforms due to VMware's lead in the technology”.

Three weeks later, VMware adjusted the new licensing model, but the “sting of the accounting change that angered users” had not been removed, according to Information Week.

Pricing change benefits

At two press conferences during VMworld Europe, last month, the company's executives discussed how they reacted to the licensing backlash, what customers can expect in the future, and where they're going with service provider licensing.

“We, as an industry, are looking at a lot of change that needs to happen around software licensing,” said Rick Jackson, VMware's chief marketing officer.

“We come from an era where we based licensing on physical entities. That is not going to work [in future], especially as we move to multi-cloud provider environments. With our announced changes [earlier this year] we find that, for many customers, it is a more flexible and easy way to manage their environment.

“Our initial price constraints were a little bit tight. We heard that feedback loud and clear, and based on that, we went back to the drawing board to re-look at how we continue to drive this new licensing model, and what we hear from customers on what their environments are like.

“In reality, no matter how you price, there will be some customer who will be affected. Less than 2% of our customers have had a negative impact. It is a significantly larger percentage that will benefit from the pricing changes,” concluded Jackson.

Towards consumption models

At another VMworld event, VMware CEO Paul Maritz was asked whether VMware would change its licensing model again, given that it was not economical for scaling, for some customers.

“On the economic part, you have to realise that we're not the only actor in this space. The size of the [virtual] machines that are being delivered now on the x86 space are truly monster devices. Before, if you had five or 10 virtual machines per server, you were doing well. [But] we have customers now who are looking to put 40, 50, even 100 virtual machines on an individual server. Moore's law has been accruing greatly to our customers' benefit here. They have been able to buy fewer licences from us, and virtualise much more.”

Continued Maritz: “Looking at the overall economic picture, I think it's been fairly favourable towards the customer.

“On the other hand, all of us in the industry are going to have to move away from the tying of licences to underlying physical infrastructure, and more towards a consumption-based model. This is where things are going, this is how customers want to buy capacity in the future, whether it be provisioned on their premises or coming out of the cloud. In some senses, we are having to walk down that path to a consumption-based world.

“Can I promise that we have got it right and never will have to change it in the future? No. We have no intention of changing our licence at any time, we are going to keep it stable for as long as we can, but 10 years from now, things will have changed quite radically.

Service provider licences

VMware manages licences for service providers according to a separate programme. For service providers, consumption-based billing is a key issue.

“VSPP is the VMware Service Provider Programme, and it has been in existence for about two years,” said Jackson.

“It is specifically designed for people who are delivering IT services to multiple customers. The pricing model is complete for all of our products, and it is aligned to their business models. So they have a very different licensing based on pay-as-you-go services.”

Added Ramin Sayar, VP Product, Cloud and Virtualisation Management: “Today, we offer VSPP pricing for some management products already. More importantly, we're also working with some of the service providers as we continue to move up the stack, not just with the vCentre Operations Management screen, but also with system integrators and system outsourcers around application management and provisioning.

“Ultimately, around the newest suite, some of our partners are very keen to start looking at the IT VM suite [sic, called VMware IT Business Management Suite], typically because they can now start to have that frank conversation with customers around how to measure and how to improve in terms of service quality and cost.”

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