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Microsoft-VMware Rivalry Puts Spotlight on Cloud Licensing

The rivalry between Microsoft and VMware over the costs of tapping virtualization infrastructure has intensified, first with VMware's announcement in July of licensing changes, and most recently with a Microsoft whitepaper published this month that distills the company's economic argument against VMware.

The whitepaper, titled "Microsoft Private Cloud: A Comparative Look at Functionality, Benefits and Economics," is Microsoft's latest effort to chip away at VMware's first-to-market lead. It can be downloaded at Microsoft's new Server and Cloud Platform portal here.

Microsoft argues that its private cloud offerings have cost benefits over VMware's virtualization approach, and Redmond even claims to have a simpler licensing scheme. Microsoft's private cloud licensing is organized under the Microsoft Enrollment for Core Infrastructure (ECI) program, an Enterprise Agreement segment. ECI solutions encompass Datacenter, Enterprise and Standard editions, which are licensed on a per-processor basis.

That licensing per-processor approach is similar to the approach taken by VMware. However, when VMware rolled out its vSphere 5 virtualization platform last month, it also changed the licensing by limiting the virtual memory, or vRAM, entitlements per processor. This change caused some observers to note that it would cost more to upgrade from earlier VMware VSphere versions to VSphere 5. VMware quickly addressed these complaints by raising the vSphere 5 vRAM entitlements earlier this month.

Microsoft's whitepaper pointed to the different licensing requirements for building private clouds, both with its own solutions and that of VMware. Microsoft's ECI Datacenter customers get the rights to use components such as System Center Server Management Suite Datacenter and Forefront Endpoint Protection. Microsoft's whitepaper claims that VMware customers wanting to build comparable private clouds would have to license the whole VMware cloud suite.

Microsoft is also attempting to distinguish its private cloud platform implementations from VMware's offerings, which are just based on a "virtualization platform," according to Microsoft. The mantra offered from Microsoft is that the "cloud is not virtualization." That claim is based on a definition (PDF) published by the National Institute of Standards and Technology. Brad Anderson, corporate vice president of the Management and Security Division at Microsoft, explained in a Microsoft-conducted Q&A that Microsoft's cloud is based more on an application-centric approach than that of virtualization.

Anderson also emphasized that Microsoft's private clouds offer "unlimited virtualization."

"Our private cloud solutions are licensed on a per-processor basis, which means customers get the cloud computing benefits of scale with unlimited virtualization and lower costs consistently and predictably over time," Anderson said in the Q&A. "With Microsoft, as your workload density increases, so does your ROI. With VMware, as your workload density increases, so do your costs, which is kind of counter to the promise of the cloud. This approach to pricing is just another proof point to me that VMware is really just a virtualization company trying to talk cloud, as showcased in some of our outreach."

The unlimited virtualization claim is associated with Microsoft's ECI Datacenter edition, according to Edwin Yuen, director of cloud and virtualization strategy at Microsoft. He clarified that while the Windows Server 2008 R2 Enterprise edition licensing includes the rights to run four copies of Windows in a virtual machine, "that edition is not limited to 4 VMs." He explained that "you can run up to the maximum supported by the hardware and software, as long as the OS (from any vendor), is properly licensed."

"Overall, when we speak of unlimited virtualization, it's really about using the most of your configurations without artificial restrictions," Yuen explained in an e-mail. "The restrictions that VMware places with their new licensing model go against the principal of unlimited virtualization through resource maximization."

Technically, Hyper-V supports up to 384 virtual machines per processor or "up to 256 dual processor VMs," Yuen stated. "The limits are beyond the practical requirements for almost all customers, due to current state of server hardware. So for almost all customers, it is unlimited virtualization," Yuen explained. He countered that VMware now can charge its customers more as they add VMs or increase VM memory size, which is a new licensing approach taken by VMware.

VMware's had also announced in July that vSphere 5 will support virtual machines with "32 virtual CPUs." That announcement appeared to induce Microsoft to make claims about its still-under-development Windows Server 8. In a seemingly rushed demo at the Worldwide Partner Conference in July, Microsoft showed a sneak peek of Windows Server 8 running 16 virtual processors within a virtual machine. Possibly, the new server would support even more virtual processors by the time of its release, Microsoft suggested during the demo.

VMware is potentially challenging Microsoft's global build-out of cloud computing datacenters through its newly announced Global Connect partnerships with hosting companies. Gartner Principal Research Analyst Lyle Hilgendorf saw VMware's efforts there mostly as a challenge to Amazon Web Services. He expressed some skepticism about whether VMware could pull off the terms and conditions of such deals with multiple service providers.

The marketing battle continues between Microsoft and VMware over private clouds, and it's almost incoherent, and possibly irrelevant. Many businesses may be just trying to tap Software as a Service (SaaS), rather than build their own clouds. A recent Gartner survey of 33 midsize businesses found that most cloud users (91 percent) were using SaaS. Only 9 percent used the cloud for infrastructure as a service. The most prevalent services used were e-mail filtering, CRM and payroll applications, according to the study, "Survey Analysis: Cost Savings Drives Cloud Adoption in North American Midsize Businesses."

A survey conducted by IDC and IDG Enterprise at the Cloud Leadership Forum in June found optimistic views about the proliferation of private clouds. According to this "Future Proofing the Cloud" survey, more than 70 percent of participants expected that a third of all IT organizations will be providers of cloud services to customers or business partners by 2014.