Slap Me Again, Mr. Softy!

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Microsoft (Nasdaq: MSFT  ) used to ask for a separate software license for every copy of its applications your business owns, and for every server that might run it. Not anymore. It's another slap in VMware's (NYSE: VMW  ) face, and this one might sting. Right?

What's new, pussycat?
Under Redmond's new licensing policies, you can move that SharePoint or SQL Server installation from server to server within your server farm, without applying a new license to each possible combination of software-to-server. Any business with large data centers is likely to move things around a bit from time to time, especially now that virtual server software has made it so easy to reassign hardware assets on the fly. Your database needs more memory? Move that virtual server to a beefier physical machine. Running a disaster recovery test? Sync up to an IBM (NYSE: IBM  ) server in Gaithersburg, and leave those installation discs at home. And now you can do these things for free.

Well, free under certain circumstances. Microsoft's definition of a server farm is any combination of two data centers within four time zones of each other, as long as you put that pairing down on paper. Customers are expected to track this new business attribute, but I don't think it's too much to ask.

Small companies probably don't have a whole lot of data centers; they're probably running just one or a couple of server farms. The likes of Wal-Mart (NYSE: WMT  ) or News Corp.'s (NYSE: NWS  ) MySpace are a whole other ball of wax, with multiple Microsoft installations across the globe, but they also have the resources to laugh at this trivial requirement. All told, it really is a positive change for nearly any class of customer imaginable.

The savings in license costs are well worth it. Microsoft cites a reasonable example with three instances of SQL Server 2008 running in an environment with 20 dual-processor machines. Under the new rules, you'll need at most six licenses to support those three SQL installations at any given time, but to have your backside covered under the old rules would require as many as 80 licenses. Multiply that by a license cost ranging from about $3,500 to (gulp!) $24,000 per processor, and you can save millions.

Take that -- and like it!
Now, the new rules don't actually require that you run your Microsoft applications on Microsoft's virtual server platforms. You're free to use VMware if you want. Citrix Systems' (Nasdaq: CTXS  ) Xen works, too, as does Virtual Iron and Sun (Nasdaq: JAVA  ) xVM, or any other virtual server solution you like. Indeed, you don't actually have to virtualize at all to qualify for the new license mobility rules. But you know that Microsoft's shrewd sales people will wrap this benefit up in a nice package deal with Microsoft Virtual Server and Hyper-V, with some volume discounts and customer loyalty rewards.

So Mr. Softy might steal a few hypervisor and virtual server sales from its rivals that way, but at a large cost. Remember, the company is giving up a lot of potential revenue here. Even so, I still think it's a great move -- but Citrix and VMware shouldn't panic just yet. Microsoft just grew the addressable market for virtual servers by relaxing licensing rules that would otherwise keep some IT managers on the virtual sidelines. Even those customers who already took the plunge might be encouraged to do more with virtual servers, and actually use those tasty hardware reassignment and system mobility features.

VMware must be jumping for joy right now. "Slap me again, Microsoft. It feels so good!"

Further Foolishness:

Wal-Mart Stores and Microsoft are Motley Fool Inside Value picks. VMware is a Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund spent 9/11 in Gaithersburg, Maryland, but holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure likes to flash its sysadmin certifications at cocktail parties. And you wonder why it has no friends.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 24, 2008, at 10:03 PM, Jerilyn1006 wrote:

    Thank you, PLEASE may I have another?? This is GREAT news for VMware customers! It's good to see that Microsoft has it's head in the "cloud", where the market is going

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