Negotiate to avoid paying twice as much on fees for dual-core processors
Analyst firm Gartner caused a stir at the end of last month when it warned corporate IT users that their software licence costs could double by 2006 unless they began engaging in serious negotiations with their software suppliers.
Gartner said that licence costs could rise as a result of four key technology changes occurring simultaneously:
- An industry shift to multi-core processor-based servers
- Server virtualisation
- Rapid provisioning tools
- Capacity on demand.
The analyst firm said software suppliers were unlikely to change licence models unless users put them under pressure to do so.
The move to multi-core chips raises the biggest questions as users will find it increasingly difficult to buy single-processor servers in 2006, said Gartner.
Server virtualisation also has licensing implications since it allows multiple operating systems or applications to share or partition the same hardware. With virtualisation users can save costs through server consolidation. Gartner warned that software suppliers were unlikely to recognise logical partitioning in a multi-processor server. Instead they could charge users for all processors, irrespective of how many were actually run by the software.
Another factor that could lead to higher licensing costs is rapid provisioning: the ability to move or scale software between servers as demand requires.
Such a scheme looks attractive in terms of server utilisation, since an IT director can rapidly configure the software on datacentre servers according to the changing needs of the business, but server-based licensing is not flexible enough to support such deployments. So users could end up paying licence costs for software based on the maximum capacity of all datacentre servers.
A related development, capacity on demand, is yet another option users have where they buy, for example, a 64-processor system but only pay for what they use. Again, licensing will need to take into account how many processors are actually being used for a given application.
Julie-Ann Williams, special interest group chairwoman for IBM user group Guideshare Europe, said, "There is no direct correlation between hardware development and software licensing."
In her experience of the mainframe environment, changes in hardware are not generally mirrored by independent mainframe software suppliers.
Some software suppliers are treating multi-core processors as multi-processor systems and charging extra per-processor fees for each core. Some will charge a premium for software running on multi-core systems. But others have said they will not charge any additional fees.
David Roberts, managing director of the Corporate Infrastructure Forum (Tif), urged user organisations to take Gartner's warning seriously.
"From the business' point of view anything that increases the cost of IT is not going to be welcome," he said. "This is potentially a huge issue because of the financial impact and unreasonable practices in software licences. Paying four times as much just because a processor processes four times as much is not helpful."
Oracle is one supplier that will treat each core in the same way as a processor. Ronan Miles, chairman of the UK Oracle User Group, said Oracle's stated policy did not take into account the fact that performance of a multi-core system might not be equivalent to multiple processors.
"Oracle ignores processor speed at the moment, and the two cores are not 'half the power each' of a single-core chip," he said.
But other suppliers have signalled they will not charge for additional cores. Microsoft will only charge per processor, irrespective of the number of cores. And BEA intends to charge a 25% additional fee for dual-core, rather than doubling the fee.
Gartner analyst Andy Butler said this was a fair position for both user and supplier.
"A price change such as the 25% from BEA is reasonable. An additional core does not provide double the performance," he said, but added, "There are people who would disagree with us."
Although multi-core processors will have most impact on licensing in two years' time, rapidprovisioning is set to become a more immediate problem as users move towards on-demand datacentres, where server capacity is grown and shrunk to meet the fluctuating demands of the business.
Experts have warned that software suppliers require their programs to be licensed and priced on the basis of every server in an organisation that could run it. Such a licensing regime would make rapid provisioning and on-demand datacentres prohibitively expensive in many cases.
Neil Macehiter, research director at analyst firm Ovum, said, "If you did buy Oracle, say, for 16 CPUs, then today you would pay for 16 CPUs." He warned that on-demand datacentre users who ran an application on four of those 16 CPUs would have to pay fees for CPUs they were not using.
Kevin McIsaac, research director at Meta Group, said users could reduce their costs by managing their software better.
He said software was the second biggest cost to the IT department after staff and that users should start to look at managing software as an asset.
This would enable them to understand which software applications were really being used, what could be eliminated, and what could be consolidated from running on multiple servers onto a single machine running virtual partitions.
Neil Macehiter, research director at analyst firm Ovum, said open-source software licensing models, such as monthly subscriptions, had put pressure on traditional upfront licences.
As evidence, he cited Salesforce.com and Red Hat's subscription pricing, Sun's Solaris 10 (which has no upfront licence costs), and Microsoft's subscription-based software assurance model.
Ronan Miles, chairman of the UK Oracle User Group, said he saw open source as more of a threat to software suppliers than the multi-core because "the software is obtained or purchased without the complex usage restrictions. The market will address multi-core quickly enough, whereas open source is a significant change in the overall licence model."
Hardware drives up software costs
- Multi-core chips: a shift to servers with dual-core processors could lead to a doubling of licence costs, with some suppliers pricing software per processor core rather than per processor
- Server virtualisation:this allows multiple operating systems or applications to share the same hardware. Software suppliers are unlikely to recognise logical partitioning, but would charge for all processors instead
- Rapid provisioning:the ability to move or scale software between servers as demand requires could inflate costs if a supplier charges for every server in the organisation that can run the software
- Capacity on demand:where users buy, say, a 64-processor system but only pay for those processors used. Software suppliers generally charge for total potential capacity, irrespective of what is used.
This was first published in December 2004