WHITE PAPER. ISV Licensing in Virtualized Environments

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1 WHITE PAPER ISV Licensing in Virtualized Environments

2 Table of Contents Introduction... 3 Consider Virtualization Use Cases... 3 Hardware resource pools and fractional use... 4 lication mobility Consolidation VMware Opinion: Considerations and Advice for Licensing in Virtualized Environments... 5 Licensing scalability and metric selection Clear virtualization rights and license keys Pros and Cons of Existing Metrics in Traditional and Virtual Environments Conclusion

3 By adopting the recommendations in this document, Independent Software Vendors (ISVs) can create win-win pricing models that preserve or enhance existing price-to-value relationships when their products are deployed in virtualized environments. Key Take-Aways Virtualization alone doesn t require ISVs to necessarily adjust their pricing or licensing models; however, it may upset the price/value relationship and thus needs to be considered. Most ISVs have already addressed, or are presently addressing, the unique licensing issues created by virtualization. Fair, enforceable and auditable options are available. ISVs, particularly those licensing based on some form of hardware metric (core, processor or server), need to consider that virtualization is breaking the traditional bond between hardware and software such that applications are no longer tied to a particular physical host or processor. Where possible, ISVs should use non-hardware based metrics but if this isn t possible, the metric definition must equate virtual processors/ machines to physical. Introduction Industry pundits, analysts, resellers and most importantly, software consumers have long argued that Software Licensing is needlessly complex and more recently, doesn t meet their requirements for deployment in today s dynamic, virtualized IT environments. That said, ISVs have maintained that some degree of complexity is necessary to provide customers with scalable price points that correlate to the intended usage entitlement thus matching received value to price. The trick is finding the right balance, but the rapid adoption of virtualization technology has made it even more important to do so. In the pre-virtualization / dynamic datacenter world, things were somewhat simpler. Software was typically installed on a particular piece of hardware and frequently would reside there until the hardware was decommissioned. Although this model didn t necessarily optimize software and hardware utilization, it did make software asset management and purchasing decisions somewhat easier. Most ISVs built their pricing models and licensing grants around this static model. Things have changed. Customers have now embraced the numerous benefits of virtualization (as evidenced by rapid adoption) and have increasingly designed IT architectures that optimize their investments through virtualization. Using virtualization technology, customers are now achieving significantly higher hardware utilization and are dynamically balancing workloads across their physical resources while moving applications in real time. However, while many ISVs have updated their policies to accommodate virtualization use cases, some ISVs have not. In the absence of a well defined policy, customers are left to interpret their usage right which will inevitability lead to differences of opinions between customers and ISVs. This strains what may have been otherwise good relationships. Relationships, however, don t need to be strained. In fact, by creating licensing models that specifically address virtualization use cases, ISVs can create win/win pricing models and thus help to ensure existing price-to-value relationships are maintained or enhanced. Moreover, by removing ambiguity, customers will have a clear understanding of their use rights in physical and virtual environments. In this paper, VMware will highlight key issues ISVs should consider when developing their virtualization licensing policies, industry best practices for licensing in today s dynamic environments and the pros and cons of existing models. Consider Virtualization Use Cases Virtualization does not, in and of itself, require ISVs or customers to license software any differently. An application, database or piece of infrastructure software that is licensed per instance, physical host, processor or any other metric can still be licensed using that same metric in a virtual versus physical environment. An ISV who licenses per-user, for instance, may still provide and receive fair value in a virtualized environment. However, unless the ISV considers the following benefits of virtualization, it may find that the connection between price and value is changed when its solutions are running in virtual versus physical environments. Specifically, its solution may be either more expensive or, perhaps, more affordable than intended when running in virtualized environments. Specifically, three concepts must be addressed: Hardware resource pools and fractional use lication mobility Overall server consolidation 3

4 Hardware resource pools and fractional use To maximize resource efficiency, VMware technology allows customers to pool resources from multiple physical hosts 1. As illustrated in Figure 1, the resources may then be managed independently of the physical servers that contribute the resources. Business Demand Resource Pool Business Unit Figure 2. Resources are assigned to specific virtual machines in the resource pool as needed. Resource Pool 2 CPU 36 GHz, Mem 50 GB Priority High Agregate Resources CPU 48 GHz, Mem 80 GB Figure 1. Pooled resources from multiple physical hosts can be more easily managed. Once the resource pools have been established, virtual machines are then created using the resources from a specific resource pool. When creating a virtual machine, the user defines the amount of memory, disk and number of GHz it wants to dedicate to the virtual machine. The size of the virtual machine then remains static unless the user physically changes the resources assigned to the VM or VMware Distributed Resources Scheduler (DRS) is in use. Technically, each virtual machine may comprise fractions of, or multiples of entire physical processors. The resources assigned to a specific virtual machine may be easily increased or decreased as demand dictates. Servers, Storage, Networking Resource Pool 3 CPU 12 GHz, Mem 22 GB Priority Low DRS dynamically allocates and balances computing capacity across a collection of hardware resources in a given resource pool. VMware DRS continuously monitors utilization across resource pools and intelligently allocates available resources among the virtual machines based on pre-defined rules that reflect business needs and changing priorities. When a virtual machine experiences an increased load, VMware DRS automatically allocates additional resources by redistributing virtual machines among the physical servers within the network based on the parameters established when the virtual machine was created. For instance, a virtual machine may be created using 1 GHz of processing capacity from a resource pool with 8 GHz available in total. The 1 GHz of required resource may be supplied from one physical processor or fractions of one or more physical processors within the resource pool. Moreover, the physical resources supporting the application may dynamically vary and as the workload of that virtual machine increases, additional computing resources may be easily allocated. At present, an estimated 40 percent of VMware Virtual Infrastructure 3 customers are using DRS in production. 1 Please note, even though resources may be pooled across multiple physical hosts, each unique virtual machine will entirely reside on one specific physical 4

5 lication mobility The second concept ISVs must contemplate is that of application mobility. Products like VMware Vmotion technology enable customers to dynamically move a running application, in real time, from one physical host to another. Vmotion functionality allows users to, 1) perform live migrations with zero downtime, undetectable to the user, 2) continuously and automatically optimize virtual machines within resource pools, 3) perform hardware maintenance without scheduling downtime and disrupting business operations, and 4) proactively move virtual machines away from failing or underperforming servers. At present, an estimated 62 percent of VMware Virtual Infrastructure 3 customers are using Vmotion in production. ESX Server Hardware VMotion Technology ESX Server Hardware Figure 3. VMotion technology lets you move virtual machines from one physical server to the next without service interruption. Consolidation Finally, ISVs must consider the overall changes in hardware/ software deployment scenarios that virtualization enables. In the past, for a variety of reasons, software programs were isolated on specific physical hosts. However, in virtualized environments, multiple programs run side-by-side on a single physical host, each isolated from one another. Since virtualization enables customers to use fewer servers to support a given workload, ISVs licensing per physical node must contemplate this new deployment scenario. Virtualization allows customers to achieve server consolidation ratios as high as 30+:1, but more typically in the neighborhood of 4-6:1 per core, thus driving significantly higher utilization rates out of their physical hardware resources. To read more about the specific benefits of the products mentioned above, please visit VMware Opinion: Considerations and Advice for Licensing in Virtualized Environments Given the large variety of software solutions available and various deployment and usage scenarios, it is impossible to identify an ideal, one-size-fits-all model for the industry. However, common themes have emerged that are equally applicable across each segment. In the following section, we provide specific advice on how ISVs can maintain licensing price scalability while ensuring that their license grant language and key strategies are suitable for virtual environments. Licensing scalability and metric selection In most cases, software provides a different amount of value when used by one user versus 20; when running on a small server versus a large one; when running on a single core processor versus multi-core; or when running on part of a server versus the entire server. To ensure customers receive compelling value in each possible deployment scenario, most software vendors have selected granular pricing models that allow their sales teams flexibility to easily customize pricing for each situation. However, when hardware based metrics are used to license software, unique challenges emerge in both physical and virtual deployment scenarios. Oracle, for instance, licenses the majority of its products on a per-core basis. However, realizing that customers do not necessarily receive twice the performance boost when running their software on a dual-core versus a single-core chip, they apply a ratio to determine the number of licenses required for a specific environment. Symantec, on the other hand, licenses many of its products on a tiered-processor or tiered-server basis, charging more when their software is deployed on more powerful chips, which effectively enables scaled pricing. Both the Oracle and Symantec models achieve the same goal and enable price scalability at the time of initial license sale. However, changes in a customer s environment after initial deployment may upset this balance of fair value. Customers often move software products to new platforms. Servers and/ or chips are replaced. Today, since software rarely lives and dies on one piece of hardware, ISVs must consider the increasingly mixed customer environments in which their software is running. Virtualization is an additional element that must be considered and as the example below illustrates, more challenges arise for those ISVs who license their products based on hardware metrics. 5

6 Consider the challenges that arise when licensing per-processor in a virtual environment: Software vendor XYZ licenses its products per-processor. This model has historically allowed the ISV to easily differentiate its price point for small vs. large software deployments of. In a physical world, this model works well. However, in a virtualized environment, this pricing model may present a problem for that vendor unless the proper considerations are made. The challenge stems from the fact that at any given point in time, each virtual machine on a physical host may be using resources provided by one, or fractions of all the physical processors on the host. If the ISV licenses per physical processor only, they may require the customer to purchase a license for every processor in the resource pool. The rationale for doing so is the fact that technically, each physical processor, or fraction of a processor, may access the ISV s software at any particular point in time even though the virtual processors that were created out of this pool, may only use a fraction of the overall pool s processing capacity. In this case, that ISV s price point no longer scales based on the value provided and will usually make the vendor s solution appear extremely expensive relative to vendors who have adjusted their models to account for this deployment scenario. To address this issue, some ISVs have developed partitioning policies to segregate specific processors into resource pools on a large server. However, it is important for ISVs and customers to carefully consider the various types of partitioning technology and the implications on the scalability of the overall model. There are two general categories of partitioning technology: Software (Soft) Partitioning: Software partitioning is technology that allows multiple instances of an operating system () to execute within a single server. Processor resources are allocated to programs running within a partition and other server resources such as memory, disks, network, and input/output subsystems can be shared dynamically among the partitions. This computing environment can be dynamically adapted to changing application needs. Examples of software partitioning technology include: VMware, HP Adaptive Partitioned MultiProcessing (APMP), HP Process Resource Manager (PRM), HP vpar, Solaris Processor Sets, IBM AIX Workload Manager. barriers. Each separated system acts as a physically independent, self-contained server, typically with its own processors, operating system, boot area, memory, input/output subsystem and network resources. It is impossible to read or write across a hard partition boundary, and there is no resource sharing between hard partitions. Examples of hardware partitioning technology include: HP npar, Sun Dynamic System Domains (DSD), IBM LPAR. The differences in partitioning technology are important because each type of partitioning makes resources available to software applications differently. While hard partitioning makes all resources within a resource pool available to a particular application, soft partitioning does not. Moreover, in an X86 environment, soft partitioning is the dominant technology used, because it allows for higher utilization rates. To address these complexities, VMware suggests that ISVs move away from hardware based metrics where possible, and onto more value-driven metrics such as user, concurrent user, or running instance (where physical or virtual instances are treated equivalently). Alternatively, offering a specific licensing model that is tailored to virtual environments may be appropriate. If non-hardware based metrics are not an option, at a minimum, usage rights should address the concept of virtual processors and resource pools. Specifically, we recommend that ISVs that license per processor allow each processor to be defined as either physical or virtual. To alleviate concern over the varying processing capacity of the virtual versus physical processor and to maintain the price / value relationship, we suggest adding wording such as the following: The licensing requirements for virtual processors shall be no different than for physical processors, provided that the virtual processor is no more powerful than any physical processor on a given server. Moreover, in the event that the number of virtual processors in a given resource pool exceeds the number of underlying physical processors, the customer need only license the number of physical processors. Hardware (Hard) Partitioning: Hardware partitioning physically segments a server, by taking a single large server and separating it into multiple smaller systems that define the boundaries of shareability of hardware resources. This physical separation of computing resources is performed by hardware-enforced access 6

7 Finally, consider a hypothetical infrastructure ISV that licenses its software on a per physical server basis: Software vendor ABC licenses its products per physical server. However, increasingly, customers are running ABC s software within virtual environments, and they now realize that up to six virtual machines are now running on a server that once hosted one. More specifically, multiple instances of that ISV s application are running side by side, providing the same workload benefit as the previous six physical servers. Due to server consolidation, the ISV that may once have been able to sell licenses for six servers now only sells one. Although customers would initially rally and claim success in driving down their software costs, this would be a nightmare for the ISV. To address this scenario, the infrastructure ISV has a variety of options. First, it could consider moving to a per-instance model versus per physical server model, which will enable the ISV to effectively maintain revenue neutrality while maintaining a simplistic licensing model. BEA just moved to a per-instance model specifically for this reason. Second, in situations where the ISV s application provides somewhat less value in a virtual environment relative to a physical environment, the ISV could offer a licensing option specifically tailored for virtual environments and a per virtual machine licensing option in addition to physical. Third, and perhaps most ideal, the ISV could find a non-hardware based metric that correlates to the value its product provides. As the example above illustrates, with proper planning, both ISVs and customers can create win-win solutions when licensing and deploying software in virtual environments. may have challenges with this key strategy if its software is deployed in virtual environments. Given the concepts outlined in this paper, such as application mobility and resource pools, the node-locked license key may prevent the application from running as intended. Again, the ISV has multiple options. First, if piracy is a major concern, there are third-party vendors that offer license activation and registration solutions. Serial-based license keys and/or electronic license files that unlock product functionality yet do not limit deployment to specific physical hosts may be a second option. Site based licensing models and related key strategies may be applicable for some ISVs. Clear virtualization rights and license keys VMware believes that most customers want to comply with their licensing agreements; but it is the responsibility of the ISV to clearly communicate usage rights and, where possible, help their customers maintain compliance. Customers must be able to clearly understand their usage entitlement and track deployments. Virtualization rights must be clearly articulated. However, given licensing inconsistency across vendors and the large number of metrics used to price products, the real customer challenge lies with unintentional unauthorized use. Pirates intent on stealing software will usually find a way; however, most customers will only use software they didn t pay for if they don t know they were doing so. To help customers maintain compliance, ISVs must first clearly articulate usage rights, including those for virtualization deployment scenarios. Second, license enforcement strategies must take into account virtualization use cases. Specifically, an ISV that generates a license key that is tied to the physical characteristics of a particular piece of hardware (node-locked) 7

8 Pros and Cons of Existing Metrics in Traditional and Virtual Environments Across the industry, the majority of software today is licensed via one of the five metrics listed below. While all were well suited to physical environments, non-hardware based metrics appear to be appropriate for both. Metric Traditional Environment Virtual Environment Components Pros Cons Pros Cons Server / Host Simple pricing Limited scalability Limited correlation to usage / value Constantly changing H/W may require pricing updates Simple pricing Lack of granularity may drive high price perception Limited scalability Limited correlation to usage / value Under/over pricing in virtualized environments Processor / Socket Simple pricing Limited correlation to usage / value Doesn t contemplate the virtual processor concept May drive perception of high price Limited scalability Limited correlation to usage / value Core Granular, simple pricing Scalable pricing Core performance doesn t scale linearly Doesn t contemplate the virtual processor concept May drive perception of high price Limited scalability Limited correlation to usage / value User Simple pricing May not be easily applicable to infrastructure software Metric is equally applicable to traditional vs. virtual environments Scalable Instance Simple pricing Limited scalability Metric is equally applicable to traditional vs. virtual environments 8

9 Looking at the key ISV segments, a few models may be particularly appropriate for virtualized environments. Please note, however, these comments are generic and specific consideration must be given to the products value driver, position within the software stack and pricing scalability. lications lications are best suited to non-hardware based metrics as it is much easier to correlate value to the number of users or related metric. Where this isn t possible, per-instance licensing is most appropriate given that even in a virtualized environment, the value provided may closely match the value that would have been otherwise provided in a more traditional non-virtual, physical server-based licensing model. The simplicity of perinstance licensing is equally suitable to physical and virtual licensing scenarios. Databases Databases are best suited for either per-processor/virtual processor licensing or per-instance models. For example, Oracle today licenses per core because there is a correlation between the number of cores (and type) supporting a particular solution and the value provided to the customer. That said, this model may be easily extendable to a virtual environment, assuming that the licensing model covers both virtual and physical processors. Alternatively, a much more simplistic, per-instance model may be appropriate as well, assuming that the size or capacity resource requirements of the database are not the primary value drivers. Infrastructure software Given its close tie to driving the performance of underlying hardware, infrastructure ISVs may find that licensing per physical server, processor or instance is best, assuming that fractional use is not a concern; that is, of course, unless there is a nonhardware based metric available that directly correlates to the value the product provides. However, if a server or processor price point is chosen, as this paper explains, to the ISV should take into account the scalability of its price point and consider using mobility and fractional server / processor licensing. Conclusion The world has changed. Software is deployed, moved and redeployed. Companies are consolidating services and allocating resources dynamically to Resources to meet workload requirements. Given our new environment, ISVs must adapt their models to ensure they maintain their value / price correlation and, most importantly, provide the flexibility customers demand. 9

10 VMware, Inc Hillview Ave Palo Alto CA USA Tel Fax Copyright 2008 VMware, Inc. All rights reserved. Protected by one or more of U.S. Patent Nos. 6,961,806, 6,961,941, 6,880,022, 6,397,242, 6,496,847, 6,704,925, 6,496,847, 6,711,672, 6,725,289, 6,735,601, 6,785,886, 6,789,156, 6,795,966, 6,944,699, 7,069,413, 7,082,598, 7,089,377, 7,111,086, 7,111,145, 7,117,481, 7,149,843, 7,155,558, 7,222,221, 7,260,815, 7,260,820, 7,268,683, 7,275,136, 7,277,998, 7,277,999, 7,278,030, 7,281,102, 7,290,253; patents pending. VMware, the VMware boxes logo and design, Virtual SMP and VMotion are registered trademarks or trademarks of VMware, Inc. in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.

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