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Microsoft and the looming storm over virtualization

CNET News.com's Charles Cooper says an industry grumbling over pricing hints at a deeper rift. Is a legal showdown ahead?

The gathering consensus among the tech cognoscenti is that virtualization, a technology born on mainframes, is inevitably going to sweep the IT world. But they also assume that Microsoft will be content to watch this trend unfold with arms akimbo.

I'm not ready to take that bet just yet.

Virtualization allows multiple operating systems to run virtually on a single machine. I hate the term, but it gets to the meat of the matter. So it is that you can have several "virtual machines" carrying out separate tasks on a single computer, thus reducing the amount of space a business needs to run its daily computing jobs.

VMware is by far the No. 1 virtualization software seller. Meanwhile, an open-source virtualization project called Xen, which began at England's Cambridge University, has picked up several big-name endorsements. (And Microsoft offers its own Virtual Server and Virtual PC products as well.)

Grudgingly or not, Microsoft has accounted for this nascent change in IT tastes by modifying its licensing agreements.

Grudgingly or not, Microsoft has accounted for this nascent change in IT tastes by modifying its licensing agreements. Windows Server 2003 Enterprise Edition lets users pay for one license to run four copies of Windows. Also, the Longhorn (now Vista) Server Datacenter Edition will allow users to run as many as they want--and Microsoft might well debut that pricing option sooner with Windows Server 2003.

Good as far as that goes, but IT managers have enough on their plates without also needing to count how many copies of Windows run on each server. Also, there's the price issue. Unless you opt for one of the enterprise packages, Microsoft still requires a license for each copy of Windows. And tracking Windows licenses summons up an even uglier prospect when you imagine new virtual machines popping in and out of existence as administrators (or even computers themselves!) respond to changing demands.

My libertarian friends out there will argue that software companies can do anything they want with their licensing and pricing policies. As long as customers see the licensing rules as logical, fair, not arbitrary, what's there to complain about? But we're not talking about just any software company. A key difference here is that Microsoft has been found by a court to be a predatory monopolist. Does its insistence on charging for each and every virtual window constitute a violation of the antitrust laws?

As far as I know this has never been challenged in a court. But could it?

The last time Silicon Valley went down this road, it came away with nothing to show. Sure, David Boies, the government's lead prosecutor, made mincemeat of every Microsoft big shot dumb enough to testify. But the most serious charges in the antitrust case got overturned on appeal.

Zip it. Now, pay me
Microsoft wants to get paid by VMware (or other virtualization software product) users for each copy of Windows that runs on each Virtual VMware machine. Fair enough--since that's written in black and white on the company's end user license agreement (though details of Microsoft licensing in these scenarios reportedly vary).

But customers will argue that one license per computer is enough--or at least it was before we entered the virtual age. Chafing under the current restrictions, the virtualization crowd naturally believes they should be able to pay for one copy of Windows, thus freeing customers to subdivide it into as many partitions as they like. One industry executive believes Microsoft would immeasurably help its own self-interest by reversing course.

"It would open new usage scenarios and actually increase license revenues to Microsoft, while decreasing cost per used/useful computing unit for the customers," said the executive, who asked to remain unidentified. "If they try to charge for each (virtual environment), customers will resist and push more strongly to the Red Hat and Suse platforms, which will be far less expensive."

Maybe but it sounds like wishful thinking. Last time I checked Microsoft was not in the philanthropy racket. Any company that tries to get out of paying for the full costs of virtualization will find itself on the receiving end of a sweet lawsuit, courtesy of Bill Gates & Co.