"Software should cost more when run on multi-core chips."

25 February 2006

Oracle has relented under pressure from customers and changed its stance on software licensing for multi-core chips. Is this just the start of radical changes in the way software is charged for?

When software maker Oracle decided to revisit its licensing policy for the latest multi-core dual processor chips in June, many analysts were not surprised. The latest processors, from Intel, AMD and others, are powerful and consume less heat, but Oracle's policy of charging per processing core, rather than for the overall processor, penalised the customer. In the light of Microsoft's decision that multi-core chips would be treated as single processors, the policy looked to be unsustainable.

Oracle has subsequently softened its stance, and will now apply a premium on licences for servers running multi-core chips. This, says Jacqueline Woods, vice president of global licensing at Oracle, reflects the reality that those using processors with more than one core are gaining a significant performance enhancement. "The incremental value in performance that you get using dual core is between 1.5 and 1.75 times better," she explains.

For the majority of users running servers with multi-core processors (there are some exceptions) Oracle will in future charge a 75% premium for each additional core.

Customers running Oracle's database software on a server with two dual-core chips will be charged as if they are running the software on three different servers. Oracle has been stung by criticism of its licensing policies, but, as Woods points out, there is little agreement among vendors of how to charge for processors with multiple cores. "If you look at Microsoft, Oracle, IBM, we're all doing things slightly differently. We think we have the pricing right for this [multi-core] environment."

However, Woods also recognises that the issue of how businesses pay for software is likely to become increasingly complex. Technologies such as virtualisation and grid computing make the calculations of how much processing power is used by any given application almost impossible, "Over time, I think we'll see a trend to user-based licensing," says Woods. ° For a detailed discussion on software licensing models, see Information Age, September.

Reaction...

Ronan Miles, chairman of the UK Oracle User Group, says many businesses are unprepared for forthcoming changes to licence models.

"Our main priority is for licence costs to be clear and predictable. And with dual-core processors there is some performance advantage, so these changes reflect what is happening within the wider industry.

"But whether that helps end users predict licensing costs remains to be seen: too often companies are not doing the calculations that will help them work out what they should be spending. There needs to be a more mature approach from users and vendors alike."

Kevin O'Marah, VP of strategic research at AMR Research says savvy buyers can use licensing models to negotiate good deals - but within limits.

"This isn't about making licensing easier, it's about making it more complex. Most likely, Oracle will see changing the terms of its licensing models as a way to open negotiations over what users are paying. List prices never hold, and there is an opportunity for deep discounting, especially for key accounts. Ultimately you're paying for the capability of the software, and the value it has for your business. If you want to play hardball, you need to be very sure about how much you rely on the software."