Microsoft Stays Pricing Course

By Peter Galli  |  Print this article Print

By announcing plans to maintain its current per-processor server software licensing, Microsoft has pleased customers and, in the process, put serious pressure on competing software developers to do the same.

By announcing plans to maintain its current per-processor server software licensing, Microsoft Corp. has pleased customers and, in the process, put serious pressure on competing software developers to do the same.

The Redmond, Wash., company announced last week that it will keep licensing products in the Windows Server System family—including SQL Server, BizTalk Server and others—on a per-processor basis. There had been concern among some customers that Microsoft would adopt a per-core licensing plan that based fees on the number of cores running within a single processor, effectively doubling or quadrupling the fees. Now the licensing spotlight is shining on other software makers, namely Oracle Corp., which views dual-core chips as two separate CPUs.

"Our license policy hasn't changed in this regard; we charge per CPU. If an eight-way box has 32 CPUs, customers pay for 32 CPUs," said Kristin Hollins, an Oracle spokesperson, in Redwood Shores, Calif.

Hollins left the door open for change by adding that the company will evaluate Microsoft's move and is "always evolving our pricing policy and listening to our own customers."

Both Intel Corp. and Advanced Micro Devices Inc. have plans to deliver dual-core processors for server hardware, and both vendors' road maps include plans for multicore chips. In fact, Intel executives have said that by the end of 2006, they expect more than 80 percent of the Santa Clara, Calif., company's server products to be shipping with multicore technology.

Analysts decipher the market for dual-core processors. Click here to read more.

As the chip development moves apace, customers such as James Holt, director of server development at Townsend Analytics Ltd., a financial services software developer in Chicago, are shunning Oracle's approach. "What it comes down to is, if you're going to charge for a dual-core [system] as a dual-CPU, it better have the exact same capabilities as a dual-CPU. And dual-cores really don't," Holt said.

Microsoft's licensing move appears to be designed to make customers feel better about the value of their enterprise licensing agreements. It comes after months of customer unrest over Microsoft's revamped enterprise programs and controversial and unpopular Licensing 6.0 and Software Assurance program that it rolled out two years ago.

Those moves forced users to pay for future software upgrades on an annual basis over several years or face paying full price when they upgrade. Since then, Microsoft's licensing officials have been careful not to do anything that would cause further unrest to its large customers.

Customers expected their licensing to be "predictable, fair and logical," said Cori Hartje, Microsoft's director of marketing and readiness in the worldwide licensing and partnering program.

"This move lets customers plan for that technology and for their Microsoft licensing," Hartje said. "We want our customers to be happy with their investments."

That move certainly seems to have struck the right chord with some users. For Bobby Jefferson, the decision has opened up a world of possibilities. Jefferson, IT director at Hillco Ltd., in Kinston, N.C., wants the benefits of dual-core processors in his system—the company runs Dell Inc. servers powered by Intel 64-bit Itanium processors—but was concerned about the cost. "This is a big deal. Since we lease all our servers from Dell, about a third of our equipment [leases] will be coming up next year," Jefferson said.

"We've been interested in dual-core chips, and they look very promising," he said. "We've wanted to bring them in and run some tests, but if it were going to double my costs on the operating system, that's a lot of money and I'd have to think twice about it," he said.

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Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at www.eweek.com.


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