Microsoft plans software licensing revamp

Microsoft is preparing an April Fools' Day announcement that's no joke. The company plans to change how it licenses the majority of server software, which could significantly reduce a company's cost of running large, multiprocessor servers.

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The new licensing plan, which goes into effect April 1, affects eight Microsoft server products, but not its flagship Windows Server operating system software, according to a company representative.

The changes will apply to Microsoft's Application Center 2000, BizTalk Server 2002, Commerce Server 2002, Content Management Server 2002, Host Integration Server 2000, Internet Security and Acceleration Server 2000 and SQL Server 2000.

A key component of the change is how Microsoft counts server processors. Under the existing licensing scheme, a company running Microsoft's SQL Server 2000 database on a 16-processor system, for example, "would probably have to pay for all 16 processors, even if you only use four of them," said IDC analyst Al Gillen.

Beginning in April, however, Microsoft will charge for the number of processors used by the software.

That means companies running systems with more than one processor could see significant cost savings, depending on whether they "partition" servers into multiple segments.

Partitioning is a cost-saving measure for consolidating several lower-end machines onto a single larger machine. An application or server software is installed on one partition, while a different partition is used for other applications and server software. Such a plan is also good for responding to spikes in processing demands because a partition under a heavy load can quickly be assigned more computing resources than a comparatively idle one.

"Some Microsoft customers complained about having to license all CPUs on a multiprocessor server even though not all of them access the software," Gartner analyst Alvin Park wrote in a research note issued last week. Many customers consolidating several severs to, say, one with 32 processors balked at the current licensing scheme.

But Park warned that "the technical aspects of using logical and physical partitioning of servers to achieve licensing cost reductions are complex."

Microsoft plans to issue amended "use rights" for enterprises with volume licenses for the eight products, Park said. But the Redmond, Wash.-based company plans to issue no refunds or credits.

Rather, "customers can reuse freed-up licenses," Park said.

Gillen and Park agreed that the licensing changes could lead to significant cost savings for customers using large servers from Hewlett-Packard, Unisys and others with 16 or more processors. That means only a small percentage of Microsoft server customers would benefit, but analysts see those customers as key to Microsoft's intention of generating more enterprise-level business.

The changes could also help Microsoft to smooth any ruffled feathers among its customers because of an earlier, controversial licensing plan. That plan, called Licensing 6, effectively raised volume-licensing fees from 33 percent to 107 percent, according to market researcher Gartner. Many Microsoft customers did not initially sign up for the plan, and it remains a contentious issue.

"The people that have the horsepower to run two instances of SQL Server on a single system, they (have) a pretty high-end system," Gillen said. "Those are large, very important customers to Microsoft."

Two for one
Companies partitioning large servers would receive a second benefit that could be very important when consolidating applications from smaller servers onto one larger one. Under the new scheme, Microsoft would let companies run multiple instances of applications on the licensed segment, or partition, Gillen said.

Businesses typically consolidate using virtual-machine technology that essentially emulates the operating system from older servers being consolidated on newer, more advanced servers. A virtual machine offers customers many advantages, such as the ability to use existing applications on a newer operating system with better security.

"Let's say you have a four-way system and you license four processors and you decide that you want to have two virtual machines running and you want to run those applications under both those virtual machines," Gillen said. "You can do it under this license. Previously, you would buy a four-processor license for every instance of the application."

In February, Microsoft agreed to buy virtual machine technology from Connectix, in part to support this kind of server consolidation among larger customers.

"I think this was in motion before the Connectix deal was finalized," Gillen said. "They've been working on plans to make these kinds of changes for some time.

Gillen added that "there's one major shortcoming to this announcement--that it stops short of the OS," referring to Windows Server 2003. He said that omission might be disconcerting to customers preparing to move to Windows Server 2003. Microsoft is expected to release final code to manufacturing within the week, according to sources. Windows Server 2003 officially launches on April 24 in San Francisco.

Bob O'Brien, group product manager for Windows Server, said in some ways the OS already is available on a per-processor basis. "The product we deliver now is rated to run based on the processor," he said. But the new plan does not specifically apply to Windows.

Gillen is convinced that Microsoft will eventually respond with Windows Server licensing changes to at least partly match the other products.

"I think they're well aware that they need to deal with the operating system and they will come forward with something," he said. "But we're going to have to wait awhile for that."

Already, Microsoft has made changes on the client side. In December, Microsoft amended Windows Server 2003 licensing so customers could buy client access licenses per use as an option to per machine. The change lowered costs for companies that have users accessing a single server from multiple devices.