Microsoft licensing and virtualisation: Taxation needn't be taxing

When you understand Microsoft’s licensing policies, the so-called “Microsoft tax” disappears and the company’s “virtualisation discount” becomes available.

I’m well known in the virtualisation community for my close affiliation with VMware, but I’ve often been dismayed by customers’ willingness to bash Microsoft and bang-on endlessly about a “Microsoft tax” when it comes to Microsoft licensing. I think Microsoft is being very generous on a number of fronts.

In a classroom some years ago I had a debate with a student about Microsoft licensing and virtualisation. He believed it was inevitable that Microsoft would use its leverage over Windows to push its virtualisation layer over another vendor’s product. I wasn’t so sure about that. In many respects, despite an initially slow start, Microsoft has perhaps done more than any other vendor to accelerate virtualisation and has done so in a way that is, to a great degree, independent of the virtualisation platform. I think this is particularly true in the small to medium-sized business or enterprise (SMB/SME) space.

Prior to virtualisation, most smaller shops would buy physical servers on an as-needed basis. They would often stick with the Standard edition of Windows that retails for around £740. Nowadays, if you are an SMB/SME, you’d be better off buying either the Enterprise or Data Center edition. A quick look at the mathematics makes it clear why a small shop would want to buy the Data Center edition of Windows.

Do the math: Licensing for Enterprise and Data Center editions

You can buy the Enterprise edition for about £2467. When you do, Microsoft gives you the right to run five instances -- that is four virtual machines, and the fifth instance would be Windows 2008 with Hyper-V enabled. If you were running VMware’s ESX, that number would increase to five instances of Windows. When you divide £2467 by five, it works out to around £493 per copy, which is less expensive than the Standard edition. If your budget can stretch as far as the Data Center edition of Windows, you can then run unlimited copies once you have five to six VMs per virtualisation host. In that case, you will find it’s cheaper to run Data Center edition than to use Standard or Enterprise.

We are a ways off from being able to merely “rent” Windows 7 instances for remote access, but the prevailing wind is blowing in that direction.

With this scenario, it’s a wonder that Microsoft even bothers with having different flavours of its operating system unless you recognise that some people are still buying Windows and installing it to physical servers -- as strange as that might sound (especially to me, who hasn’t done such a thing since 2003).

Remember: This “virtualisation discount” applies to all customers regardless of whether they use VMware, Citrix or Microsoft virtualisation, so it puts to rest the idea that Microsoft uses its dominant market position to force-feed Hyper-V to customers. The reality behind Microsoft’s licensing strategy is really about the vendor protecting its presence in the data centre -- a presence the company fought hard to acquire from Novell back in the nineties.

Microsoft licensing doesn’t stop with server virtualisation

This sort of licensing extends to virtual desktops as well. Microsoft recently introduced Virtual Desktop Access licenses as the new model for Microsoft licensing Windows 7 inside a VM. Customers might already be licensed for this if they have Windows Client licensing together with Software Assurance. If you’re running on the old Windows XP platform, you can add remote access to a Windows 7 desktop by buying the VDA license at about £61.60 per year.

I’m eagerly looking forward to a new model called Windows Client Licensing for Legacy PCs, which will allow customers to install a super thin version of Windows onto a physical desktop merely to access virtual desktops. For now, it is likely that most SMB/SMEs will continue to replace and acquire new PCs when an existing one blows up or a new employee needs one.

The cheapest way to acquire the new version of Windows is by purchasing a new PC or laptop. But another way to get on Windows 7 is to make the most out of an existing Windows XP environment by simply adding the virtual desktop access (VDA) license. We are a ways off from being able to merely “rent” Windows 7 instances for remote access, but the prevailing wind is blowing in that direction, especially if more SMB/SMEs opt for the “hosted” model and abandon running server-based VMs on their own terra firma.

One of the downsides of virtualisation vendors rushing to offer their hypervisors for free is that in the early days it meant they were “free” of any management capabilities. And a platform without management capabilities isn’t a platform; it’s a liability.

Virtualisation vendors quickly realised that the “me too” approach that typified those early attempts to hoover up the SMB virtualisation sector needed something more robust. VMware came on the scene with its Essentials SKUs, and so did Microsoft and Citrix. So if you still need to run your systems internally because the public cloud isn’t ready yet, and you’ve selected Hyper-V as your platform, then it’s worth looking at the new bundles for Microsoft System Center.

The base entry version of System Center Essentials (SCE) 2010 isn’t worth looking at; it’s hampered by the number of hosts it’s allowed to manage -- a maximum of 15 servers and 150 clients. The Standard edition is backed by the full-fledged Microsoft SQL Server 2008 and allows you to manage up to 50 servers.

It doesn’t manage just the Hyper-V server but all of the VMs running upon it. This leaves the SMB/SME sector in an interesting situation. That sector may well end up running a capable operating system, together with a data centre management system, where previously in the physical world this would have been cost-prohibitive. The vendor’s virtualisation-friendly Microsoft licensing policies make them much more accessible.

If you want to talk about licensing being a tax on virtualisation, we should really talk about Oracle. But that, as they say, is a whole other story.

About the author
Mike Laverick is a professional instructor with 15 years of experience with technologies such as Novell, Windows and Citrix and has been involved with the VMware community since 2003. Laverick is a VMware forum moderator and member of the London VMware User Group Steering Committee. In addition to teaching, he is the owner and author of the virtualisation website and blog RTFM Education, where he publishes free guides and utilities aimed at VMware ESX/VirtualCenter users. In 2009, Laverick received the VMware vExpert award and helped found the Irish and Scottish user groups. He has had books published on VMware Virtual Infrastructure 3, VMware vSphere 4 and VMware Site Recovery Manager.

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