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Virtualization and software pricing: Very tricky

By Elisabeth Horwitt
August 16, 2010 06:00 AM ET

Virtualization can provide significant TCO savings for server and desktop hardware, and in desktop software and security administration. But saving on software license costs through virtualization is problematic. For one thing, vendors can't seem to agree on a model that works for both them and their customers, says Amy Konary, a research director at IDC.

[Read the related story, Get more for your enterprise software budget: Negotiating strategies.]

Many enterprise software vendors still charge per hardware box, which means customers can save by consolidating applications on a single server that has multiple CPUs. However, a growing number of vendors, such as Oracle, charge per CPU, says Altimeter Group partner Ray Wang.

Further, vendors often insist that you buy licenses for every hardware box that can run a virtualized application, even if the software is being held in reserve for backup purposes, says Gartner Vice President Bill Snyder. Companies with thousands of servers should determine a limited number on which a virtualized enterprise application, such as a database, can run, he advises.

RotaDyne, a printing press roller manufacturer, had to pay VMware for unused processors that are being held in reserve for backup purposes, says Kirk Patten, RotaDyne's IT director. On the plus side, the company could dispense with existing site-backup server licenses for each branch, he adds. Overall, migrating branches to VMware has saved the firm tens of thousands of dollar annually, Patten says.

Managing virtualized software assets also poses some unique challenges, IT administrators have found. "It's easy for administrators to bring up boxes on a whim, so you can lose track of licenses," says Patten. To help prevent this problem, software asset management vendors are working to provide tools that can track virtual machine instances across multiple physical machines, according to Howard Hastings, CA's IT asset management evangelist.

Virtualization software pricing is at least as iffy as it is on the desktop side, experts agree. Vendors like VMware and Citrix offer options like concurrent licenses, which charge according to the number of users online at peak times, says Simon Bramfitt, an analyst at Burton Group. However, such licenses can cost about twice as much as individual ones, he adds. Vendors such as NoMachine bundle the cost of virtual desktop clients into the server license.

Another key issue is roaming rights: How many licenses does an end user need in order to migrate his virtual client from his corporate desktop to whatever computing devices he uses at home or on the road?

One recent positive development was that Microsoft restructured its Virtual Enterprise Centralized Desktop license to provide end users with unlimited roaming rights, at a slightly cheaper price than it previously charged. Previously, individuals could use only one primary and one secondary device per license.

The bottom line: "You want to investigate vendors' licensing agreements," says Patten. "Sometimes you'll find opportunities to save money."

Horwitt is a freelance reporter and former Computerworld senior editor based in Waban, Mass. Contact her at ehorwitt@verizon.net.

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