Microsoft Has Early Lead in Multicore Processor Prices

Microsoft could have an early advantage over competitors IBM and Oracle as some software companies begin shifting pricing to accommodate servers with multicore processors, analysts said.

IBM recently created a ripple of confusion in the industry when it announced it would one day charge for software based on how fast it runs, not the number of processor cores on which it’s running. The company created a new license pricing unit called “processor value unit” and will set software prices this way beginning with the release of Intel’s quad-core Xeon processor, which is expected to be available later this year.

For example, dual-core Power5 chips will be rated at 200 processor value units (100 per core), while x86 processors will score 100, whether they have one core or two. Full details of the new processor rating system can be found at IBM.com.

IBM’s move follows Oracle’s pricing change of last December, which accommodates multicore processors and came after customers responded negatively to an earlier plan by the company to charge for software per processor core. Details of Oracle’s software pricing can be found here.

Microsoft, however, will continue to charge per processor for software, not per core or by some new way of measuring processor performance. The company also allows customers to purchase some of its software by buying Client Access Licenses for employees who will be using the software.

“Moore’s Law shouldn’t mean more expensive software,” said Andy Lees, corporate vice president of server and tools marketing at Microsoft, referring to the observation by Intel cofounder Gordon Moore that microprocessor power will double every 18 months without raising the cost of manufacturing. “Multicore is just a way of making processors more powerful. We embrace it because it’s good for the customer.”

The advent of chips that have multicores has muddied the waters of software pricing, and it’s not likely to get easier anytime soon. Software vendors have traditionally priced software per processor, but as server processors now have two cores, and someday will have four, eight and even 16 cores, one processor will be far more powerful, faster and able to handle bigger workloads. Software vendors have been grappling with how to accommodate this transition for some time.

Julie Giera, vice president with Forrester Research, said IBM’s new pricing model will be “messy” for customers, at least at first. She said until customers have firsthand experience with the new pricing and how it affects the price of software they purchase, Microsoft’s continuation of its traditional pricing plan will provide them with a more straightforward option.

“It appears as though Microsoft does have the advantage as far as simplicity because they’re charging by processor,” she said. “You don’t have to go to a chart [and figure it out].”

Whether IBM’s pricing will be more expensive is still unclear, Giera added. At this point, it appears that “as these machines get bigger, your IBM software prices are going to go up,” she said.

Al Gillen, research vice president of system software at analyst firm IDC, said IBM’s new pricing could be problematic for customers because the vendor, not the customer, is in control of defining how much a processor is worth in regard to software pricing. This means IBM could change software prices at will.

“As soon as a new processor comes out that delivers higher performance than the one you’re using, you may have to pay more to utilize that because they might change the definition of the processing units,” he said. Of course, this all remains to be seen since IBM has not made its pricing change yet, Gillen added.

Still, though Microsoft’s licensing may be simpler in the short term, IBM’s might make more sense in the long run as pricing for both software and server capacity moves universally to a more utility-based pricing model, he said. “It could be that all vendors will do what IBM is doing at the end of the day,” Gillen said.

Software pricing on dual-core and multicore servers is likely to become even more complex as more customers move to using virtualization, which allows multiple versions of OSes to run on one server, analysts said.

By Elizabeth Montalbano, IDG News Service (San Francisco Bureau)

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