Microsoft Partners, Licensing Experts Expect Virtualization To Cost More With Windows Server 2016

Microsoft said last week that it will switch from a per-processor to a per-core licensing model when Windows Server 2016 Standard and Datacenter editions hit the market sometime next summer, claiming this will make it easier for customers to use the software in hybrid cloud scenarios.

While this isn't technically a price hike, Microsoft partners and licensing experts said the change will likely result in higher costs for customers that use virtualization, as some will have to either buy more Windows Server Standard licenses or upgrade to the more expensive Datacenter edition.

Microsoft is also switching to per-core licensing for System Center 2016, which the vendor said it also expects to release in the third calendar quarter of 2016.

[Related: Microsoft Pitching New Volume Licensing Program As Customers' On-Ramp To The Cloud]

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Partners and licensing experts also said the change will add complexity to a Microsoft licensing scheme that's already notoriously difficult for customers to navigate. Organizations will have to make sure that all of their processor cores are properly licensed, or they will run the risk of being audited by Microsoft, they said.

"There's going to be a burden on customers, partners, and suppliers to try to compute the number of cores per server," said one longtime Microsoft partner who didn't want to be named.

A Microsoft spokesman, in response to CRN's questions about whether the new rules will result in higher costs for some customers, said only that "We are sharing Windows Server and System Center business model updates directly with our customers."

Tim Hegedus, senior analyst at Miro Consulting, a Woodbridge, N.J.-based firm that helps customers with Microsoft licensing, said the switch to per-core licensing in Windows Server will have the biggest financial impact on customers with heavily virtualized environments.

Under Microsoft's current Windows Server 2012 licensing rules, a server with four processors -- each with four cores -- requires two Standard licenses, which makes it eligible to host up to four virtual operating system instances, according to Hegedus. Each Standard license, with a mandatory client access license (CAL), costs $882.

But under the new Windows Server 2016 rules, which Microsoft outlined in an FAQ last week, the same server will require eight per-core licenses for Windows Server Standard, Hegedus said.

However, customers that upgrade to the more expensive Windows Server Datacenter version -- which costs $6,155 with a CAL -- can run an unlimited number of virtual OS instances.

"This will drive customers who stack Windows Server Standard Edition licenses on a single server to increase virtual instance eligibility to upgrade to Windows Server Datacenter Edition," Hegedus said.

Hegedus said Microsoft's shift to per-core licensing isn't surprising because many customers have been running workloads on fewer servers, with multi-core processors, to minimize their Windows Server licensing costs. Microsoft switched to per-core licensing when it launched SQL Server 2012, and also uses it for Biztalk Server.

However, Microsoft's shift to per-core licensing for SQL Server has caused problems for some customers.

Kim Addington, COO of NPI, an Atlanta-based firm that helps companies manage software licensing, told CRN that many customers saw their SQL Server costs "go up exponentially" when Microsoft adopted the per-core model.

"There may not be a price increase on the surface, but this model allows Microsoft to more favorably align revenue growth with their customers’ growing data center capacity needs," Addington said of the Windows Server licensing change. "Essentially, Microsoft is betting on Moore’s Law here; computing power needs typically go up year after year, and now they have a better revenue model to monetize that."

While shifting to per-core licensing makes financial sense for Microsoft, it also places a greater burden on customers to calculate exactly how many licenses they'll need to buy under the new rules.

"When Microsoft makes significant licensing changes, such as this one, the increased complexity creates an even bigger opportunity for customers to license incorrectly," Addington said.

Addington said NPI saw Microsoft increase its auditing of customers after the SQL Server 2012 changes went into effect. "Confused customers and incorrect licensing opens the door for Microsoft to conduct more audits, whether formal or soft," she told CRN.

Yet some Microsoft partners see the logic in shifting Windows Server to a per-core model, mainly because it will clarify licensing for customers that want to use Azure for things like cloud backup and disaster recovery.

Pete Zarras, CEO of Morristown, N.J.-based Microsoft partner CloudStrategies, said that while some businesses might find the Windows Server 2016 licensing change complicated, it makes sense from a cloud perspective.

"It’s somewhat consumption oriented, and if you use more processing (more cores), then they charge more for Windows Server," Zarras told CRN. "It’s not a wholesale difference from what Microsoft does in Azure -- more powerful workloads cost more, and less powerful ones cost less."

"It makes sense for Microsoft to move to per-core -- especially in [Azure], where it is all provisioned per virtual machine core," said Matt Scherocman, president of Interlink Cloud Advisors, a Cincinnati-based Microsoft partner.

With Windows Server 2016, Microsoft is also drawing a larger distinction between the Standard and Datacenter versions. Windows Server 2016 Datacenter will include new networking, security and software-defined storage features that won't be available in the Standard version. With the current version of Windows Server, the primary difference is that Datacenter allows customers to run an unlimited number of virtual OS instances.

A portion of Microsoft's Windows Server FAQ seems to spell out its rationale for roping off these features. "There is a tremendous amount of new value in software defined infrastructure and cloud app development and potential solution cost savings for customers with regards to storage and networking investments," Microsoft said in the FAQ.

Microsoft certainly isn't the only vendor to adjust its licensing in response to the value customers get from virtualization. But these changes usually don't go over well, as evidenced by the backlash to VMware's introduction of vRAM licensing in 2012.

It remains to be seen whether Microsoft will experience a similar response to Windows Server per-core licensing, but the new technologies in Windows Server 2016 Datacenter could help silence any grumbling over higher virtualization costs.