Is Microsoft's virtualisation licensing policy a license for confusion?

Where do you want to go today?,' Microsoft asks in its adverts. For many virtualisation users, the answer is 'Back to a time when we knew what we were paying for.

Though Microsoft has yielded to requests to simplify its licensing agreements for the virtualisation market, feedback says it hasn't gone far enough. Analysts warn that virtualisation could alienate Microsoft's core markets and drive users to switch virtualisation providers -- but only if a supplier emerges with a less confusing outlook. Meanwhile, the sub-industry that specialises in license handling is booming, say market analysts.

 In September last year, Microsoft changed the rules on its server applications. Now any of its 41 server applications are bought under a volume license agreement for a server farm, it can be reassigned without additional cost.

Under the new terms, Microsoft has waived its previous 90-day reassignment rule so customers can reassign licenses from one server to another within a "server farm" as often as they like, as long as the servers are in the same country. So Morgan Stanley can shift a license from its Canary Wharf offices, to its data centre in Hounslow without worrying about a dawn raid from the Federation against Software Theft (FAST).

Phil Heap, the head of the FAST consultancy, was not disappointed that Microsoft has relaxed its rules. "Virtualisation is good because it's made it easy to create new servers. On the other hand, it could make virtualisation licensing an absolute nightmare -- because it's made it so easy to create new machines."

Virtualisation licensing hurdles
The hidden costs of virtualisation, such as the price of a license for each user attached to a virtual server, and a VECD (Vista Enterprise Centralized Desktop) license, plus Software Assurance could see costs quietly escalating in enterprises, he warned. "Big organisations could run up huge unbudgeted costs, if they don't think through the implications [of the new virtualisation licensing]," said Heap.

Even within a single platform
-- such as Vista -- there's confusion over which versions you're allowed to run in a virtualised environment.


Steve Broadhead,
directorBroadband Testing

 If you don't follow license models properly, to project your future costs, all your forecasts for the next few years could be horribly wrong, he said.

A Microsoft spokesman said the vendor had "been trying to evolve our licensing as part of our virtualisation strategy over time and we've adapted to what customers tell."

In that case, customers must have been telling Microsoft they wanted a licensing scheme that would bamboozle them, said analyst Steve Broadhead, a director at Broadband Testing. "[Microsoft] just seems to have confused the public with inconsistencies in its virtualisation licensing policies across different platforms," he said. "Even within a single platform -- such as Vista -- there's confusion over which versions you're allowed to run in a virtualised environment and which you aren't. It's a bit like the old train ticket system in the U.K.," he joked, arguing that CIOs and IT managers will soon become as confused as passengers of Network Rail were by the thousands of ticket price schemes that even the staff couldn't understand.

"Just because some of these issues have been eased doesn't mean that it's anything like as simple and flexible as Microsoft would have you believe," Broadhead said. Licensing specialists, which handle licenses for clients, are enjoying good business under virtualisation, said Broadhead.

Aydin Kurt-Elli, the CEO at Edinburgh based data centre service provider Lumison, agreed. It's calculating the right package to begin that's the hard part. "Deciding whether a client needs the data centre package, or the enterprise deal, can put us into spreadsheet hell," he said, "and we're specialists."

The virtualisation licensing scheme wasn't designed for the U.K. anyway, Broadhead argued. "There's a rule [transfer of server licenses must stay in one country] that is clearly designed with the U.S. in mind and simply doesn't work in Europe, where you might have offices in 20 countries or more."

Besides, the fabled flexibility of virtualisation could become a curse, he said, especially for small businesses. "An SME can get a volume license starting at five licenses. But otherwise there is zero flexibility. What happens when small businesses are sold, or sell off assets that include servers? It is clearly an issue."

Broadhead applauded Microsoft for at least abandoning the license scheme for physical servers. But as long as it continues to exclude server operating systems, Microsoft continues to force users to double their software licensing costs.

In their desperation to economise, some CIOs could make disastrous money-saving decisions.

Phil Heap at FAST recalled how a public-sector organisation that got in a muddle over its upgrades of SharePoint and Windows Server. It made the near fatal mistake of abandoning its Software Assurance payments, only to discover that all client access licenses, from a previous version, were not legitimate for the new setup. After the investigation, the organisation found itself £240,000 worse off.

"Understand why you want virtualisation," Heap advised CIOs, "and make sure you realise the long-term implications and risks." Which is a lot easier said than done, he admitted.

Licensing issues have been unclear for a long time, said one intellectual property (IP) lawyer in the city, and virtualisation licensing will only exacerbate that confusion. "There needs to be dialogue to make sure everyone's on the same page," said Mark O'Conor, a partner and IP lawyer at DLA Piper. Few companies are ever completely on top of their licensing issues. They are either oversubscribed or legally exposed. It would be easier, and more cost efficient, if companies used service providers or their ISV to manage their licensing issues for them, he argued.

Microsoft sheds light on the picture
The Microsoft licensing rules apply strictly to third-party hypervisors which have been certified under Microsoft's Server Virtualisation Validation Program. But the major virtualisation providers, such as Cisco Systems, Citrix Systems, Novell, Sun Microsystems and VMware – are covered.

Microsoft said the new rules will reduce the number of licenses an IT department has to support and track. A Microsoft spokesman was satisfied that it's all simple enough.

"If you buy a physical machine and it comes with Windows installed from the OEM, the license is typically assigned to that machine and that machine only. If you take a physical Windows server and turn it into a virtual machine -- regardless of what virtualisation software you're using -- the license for Windows Server is nontransferable," said Ewan Dalton a solution development manager, at Microsoft U.K. "and you need to license the VM on its own."

Windows Server 2008 Enterprise Edition includes four guest licenses, and the Datacenter Edition has an unlimited number of guest licenses. It shouldn't be "spreadsheet hell," he argued. If you check the Windows Server website, "there's even a Virtualisation Calculator."

But neither analysts nor intellectual property lawyers nor managed service providers seem to think the issue is simple.

Paul Mew, the technical director at service provider RAMSAC, which managed licenses for clients, said Microsoft had got it right in some areas. "I think there are areas where licensing for virtualisation is fair and works well, and areas where it's overly complex and arguably unfair," he said.

If it's any consolation, none of the vendors seem to have pleased their customer base.

After recently unveiling its new pricing strategy for SMEs, VMware has been accused of being disingenuous over the cost to its customers. The basic packages for a two-server deal are unfeasibly cheap, say critics. In an attempt to make licensing costs seem as affordable as Microsoft's Hyper V, Vmware has hidden the full extent of the costs by excluding essential support from the basic package, argued one vendor.

"Frankly, the whole thing is a mess, and no vendor seems to have got it completely right," said Kosten Metrewelli, the vice president of global marketing at Tideway Systems.

The continuing confusion over the true long-term costs of virtualisation licensing continues. Those who remember the "mission creep" of the original local area networks (LANs) reflect that Gartner eventually estimated that the costs of managing a LAN ended up being 10 times the original purchase price. The cost of virtual LANS could be even more of an exaggeration.

The only hope is better management tools. Michael Baum, the founding CEO and business development officer at Splunk, a new reporting tool for data centres, said that he may have the answer.

"No one really knows yet if virtualisation will bring greater efficiencies on cost," he said, "that's because up until now, none of the resources used by a system could be accurately measured." If Splunk measures up to its promise, every piece of CPU, memory and storage used by any machine on any process, virtual or not, can be measured, even if it runs on the cloud. Only when that level of detail is known, he said, will there be hope that CIOs can keep track of their licensing position.

Nick Booth is a contributor to

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