Update: Microsoft readies server pricing change

Microsoft plans to adjust its per-processor licensing model at the start of April in a way that should provide relief for customers who run its software on partitioned servers, a Microsoft executive said Monday.

The change could lead to significant cost savings for customers who use partitioning to segregate applications running on a single multiprocessor server, said Alvin Park, an analyst with Gartner. Some of those customers have complained that Microsoft's current pricing system requires them to pay a license fee for each processor on their server even though the software may not actually be running on all of those processors, Park said.

On April 1 Microsoft will introduce new per-processor licensing terms for eight server products that aim to provide a fairer option for customers who use partitioning, said Rebecca LaBrunerie, who heads Microsoft's licensing program. Under the new system, businesses will pay only for the processors that the software actually runs on, rather than every processor in a partitioned server, she said.

The change will affect SQL Server 2000, BizTalk Server 2002, Internet Security and Acceleration Server 2000, Commerce Server 2002, Content Management Server 2002, Host Integration Server 2000, Microsoft Operations Manager 2000, and Application Center 2000. Microsoft disclosed its plans at an analyst meeting in Redmond, Wash., last week.

Using partitioning to cut licensing costs can be complex from a technology standpoint, but the new model offers the potential for big savings for some customers, Gartner's Park said. The issue primarily affects customers who consolidate single- or dual-processor servers onto larger systems as a way of cutting hardware and systems management costs, he said.

LaBrunerie said the new model will be "a lot more fair and logical" for customers who use partitioning than the current system. Server consolidation is a growing trend as businesses seek ways to cut down on their IT costs, and the new pricing model aims to address that trend, she said.

The model eventually will be extended to Microsoft's Windows 2000 server operating system, LaBrunerie said. Microsoft recently acquired technology from Connectix with a view to providing software that will allow a single Windows server to act as a series of separate machines, she noted. The company will discuss pricing changes for Windows 2000 when that virtualization software is released, she said.

The new model will also apply to previous versions of the Microsoft products listed above. However, Microsoft won't offer refunds to customers who have already paid for software they are running on partitioned servers. Those customers will be able to reuse licenses that are "freed up" by the new system.

For example, under the current model a customer running SQL Server on a partitioned eight-way server would have paid for eight processor licenses, even though the software might have been running on only four processors. When the new model kicks in on April 1, that customer will have four unused SQL Server licenses in hand, LaBrunerie said.

The changes apply only to customers on per-processor licenses and do not affect the server/client access license (CAL) model, Gartner's Park said.

Microsoft has posted some information about the changes on its Web site at http://www.microsoft.com/licensing/resources/server_overview.asp.

Some analysts have predicted an industrywide shakeup in per-processor pricing as technologies such as clustering, partitioning and chips with multiple cores become more widespread. Those technologies can make it harder to apply traditional per-processor pricing systems.

Further out, grid computing and the idea that computing resources can be tapped as a utility from wherever they are available could make the per-processor model redundant, those analysts have said.