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New server order, new IBM software pricing

Big Blue plans radical move in server pricing, based on "processor value units" instead of actual processors.

New server technologies, such as multicore processors and virtualization, have led IBM to begin radically revamping its server software pricing method.

Starting Tuesday, IBM will charge on the basis of "processor value units" rather than actual processors. And while the change starts only as one of vocabulary, eventually it will lead to a tighter link between the cost of software and the horsepower of the computer the software is using.

The move is one of several in the computing industry to make sure software pricing reflects new technology that's rewriting once-simple rules for describing a computer's hardware foundation. The days when software would have a single computer's undivided attention are vanishing as fast as the days when a processor was a simple unit of computing power.

Initially, IBM's actual prices won't change. But where a customer would buy one software license in the past, it will now buy 100 processor value units. A customer must buy 100 processor units to run the DB2 database on one dual-core Xeon processor; 200 for a two-dual Xeon system.

"Down the road, as new processors come out, we're going to measure those and assign them a certain number of processor value units based on performance," spokesman Jeff Tieszen said. The performance scores will be based on standard performance tests validated by independent analysts at Ideas International.

Eventually, IBM will move toward a pay-per-use, "utility computing" model. "That's the way we're going to address virtualization down the road," Tieszen said. "We're not announcing that today, but we're definitely headed in that direction."

IBM also has started selling new software, Tivoli Usage and Accounting Manager, based on Big Blue's acquisition in 2005 of CIMS Labs. The software lets administrators precisely track how much computing resources a particular job consumes.

Pricing problems
In days of yore--say, up to about two years ago--the server software license fee typically was linked to the number of processors on which it ran. That led to some awkward moments, however. For example, Oracle software would be expensive on Sun Microsystems computers, which use many moderately powerful processors, compared with IBM or Hewlett-Packard machines with fewer, beefier processors.

Things only got worse. With the arrival of multicore processors, which feature two or more processing engines on a single slice of silicon, software companies often charged per core, where hardware companies viewed a dual-core chip as a single processor.

Another complication is virtualization, which lets a single machine be carved into several independent partitions, each with its own operating system. As partitioning has advanced, the size of the virtual machines has become fluidly adjustable--and now a virtual machine can be migrated from one computer to another without shutting down, an even bigger software licensing headache.

IBM isn't the only one adjusting to the new realties. Microsoft last week announced it will let four copies of Windows run on virtual machines on a PC. And for a server running the top-end Windows Server 2003 Datacenter Edition, a customer may run as many copies of the operating system as is desired.

The Datacenter pricing matches how Red Hat and Novell charge for all their versions of Linux.

Sun Microsystems has taken the most radical approach. For its Solaris operating system, it charges a per-server support fee based on how many processors the system has. But for its Java Enterprise System server software suite, formerly code-named Orion, it charges a company $140 per year, per employee, for as much use as is desired. That means customers have simpler math--a 1,000-employee company would pay $140,000 per year--and almost no pesky software license auditing needed to ensure compliance.