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| Some Windows 2000 Server Products Get Per-Processor Pricing |
| Jul. 24, 2000 |
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Microsoft’s newly announced Per-Processor pricing model applies to six server applications in the Windows DNA 2000 lineup—including SQL Server 2000, BizTalk Server 2000, and Application Center 2000—but not to Exchange Server 2000 or Windows 2000 Server. The Per-Processor pricing model dispenses with the notion of Client Access Licenses (CALs) and instead bases the total server application licensing fee solely on the number of CPUs inside a server machine. While many specific details about the new pricing model have yet to be disclosed, organizations must begin to consider the model’s software acquisition cost and administrative implications, as well as how it might impact the architecture of their data center. When applied to e-commerce applications (i.e., used outside the corporate firewall), the new Per-Processor pricing model alleviates some of the complexity and inconsistency associated with previous server application pricing models. But, in many cases, it results in a higher overall licensing fee. Also, since only a subset of server products support the Per-Processor model for use inside the corporate firewall, organizations utilizing the full suite of Microsoft server applications on their corporate WAN still need to master the intricacies of Per-Processor as well as other legacy pricing models. The article that follows reviews the pricing for each of the products in the Windows DNA 2000 lineup and explores the ramifications of the new Per-Processor pricing model. The sidebar, "The Evolution of Server Pricing," maps out how Microsoft ended up with multiple pricing models for its server products and why the company feels compelled to move toward a Per-Processor model. The chart, "Pricing Models Used by Microsoft Server Products," provides a short definition of each pricing model and lists which Windows NT 4.0–series products and which Windows 2000–series products support each model. Pricing for Windows DNA 2000 Server Products Microsoft recently revealed that five products in its Windows 2000–based server application product line will use Per-Processor pricing exclusively (i.e., in all usage scenarios):
Furthermore, SQL Server 2000 will support Per-Processor pricing, in addition to providing customers with the option to use the legacy Per-Seat pricing, albeit within the corporate firewall only. Unfortunately, Per-Processor pricing doesn’t span the entire product line. Exchange Server 2000 continues to support Per-Seat pricing only, and Windows 2000 Server continues to offer Per-Seat, Concurrent-Use, and Internet Connector pricing models. Microsoft talks of the partial move to Per-Processor pricing within its server product line as a "first step toward improvement" and says moving forward it will continue "to work toward a simplified and consistent model." These comments open the door to possible changes to Exchange Server 2000 and Windows 2000 Server pricing models in the future. All current NT 4.0–based versions of the server products are unaffected by the recent pricing model changes. Microsoft indicated that discounts of approximately 50% would be available for existing customers upgrading to 2000 versions. All products in the 2000 lineup are expected to ship before early fourth quarter of 2000. The following sections discuss pricing for particular Windows DNA 2000 server products in more detail. SQL Server 2000 With the introduction of SQL Server 2000, Per-Processor pricing becomes the required model for Internet use, and the only option besides Per-Seat pricing supported within the corporate firewall. The older Concurrent-Use and Internet Connector models permitted by SQL Server 7.0 are essentially made irrelevant by the new Per-Processor option and therefore are not supported by SQL Server 2000. The estimated retail price (ERP) for a Per-Processor license is US$4,999 for SQL Server 2000 Standard and US$19,999 for SQL Server 2000 Enterprise. (Features added in the Enterprise version include support for more physical memory, a larger number of CPUs, and great availability via Microsoft Cluster Server.) In most, but not all scenarios, the new Per-Processor prices make SQL Server 2000 more expensive than its predecessor. More expensive. Any use of SQL Server 2000 as part of a Web site will be more costly. For example, the DBMS software cost for a 2 CPU Web site database server would be approximately US$10,000 (for two Per-Processor licenses) for SQL Server 2000 Standard, compared to US$7,000 (US$1,000 server license plus two US$3,000 Internet Connector licenses) for SQL Server 7.0 Standard. Similarly, SQL Server 2000 Enterprise running on a 4 CPU Internet DBMS machine would cost approximately US$80,000 vs. only US$16,000 (US$4,000 server license plus four US$3,000 Internet Connector licenses) for SQL Server 7.0 Enterprise. Less expensive. If SQL Server 2000 is being used inside the corporate firewall, there are scenarios in which SQL Server 2000’s Per-Processor pricing model makes it less expensive than SQL Server 7.0 was under the old Concurrent-Use model. To make SQL Server 2000 less costly, the ratio of (simultaneous) clients per database server CPU needs to be sufficiently high. The "break-even" point beyond which SQL Server 2000 becomes less costly is about 35 clients per server CPU for SQL Server 2000 Standard and about 120 for SQL Server 2000 Enterprise. For example, it is less expensive to purchase one Per-Processor license for SQL Server 2000 Standard (US$5,000) than it is to buy SQL Server 7.0 Standard with 50 CALs (US$7,000). As mentioned earlier, the old Per-Seat pricing model continues to be available for use inside the corporate firewall. The Per-Seat option—which tends to make the most sense when workstations frequently connect to multiple SQL Servers within an organization—is $1,489 for SQL Server 2000 Standard (includes 5 CALs), and $11,099 for SQL Server 2000 Enterprise (includes 25 CALs). The corresponding Per-Seat costs for SQL Server 7.0 Standard and Enterprise were $1,400 and $8,000 respectively. It was particularly important for Microsoft to maintain Per-Seat pricing to keep SQL Server competitive when used in small business applications, such as a medical practice patient-management system. Host Integration Server 2000 Host Integration Server (HIS) 2000 is a PC-to-host gateway. It is used to integrate legacy host (mainframe and AS/400) programs and data with Windows and Web applications. The Per-Processor ERP price is US$2,500. No other pricing model is supported. HIS 2000’s predecessor, SNA Server 4.0, offered both Per-Seat and Concurrent-Use options. No Internet Connector was offered—the Concurrent-Use option was used instead. The fee for installing SNA Server 4.0 on a server machine was approximately US$1,000 and each CAL cost about US$50. Complicating licensing fee calculations was the fact that some SNA Server 4.0 services, such as 3270 connectivity, required the purchase of CALs (to apply either to the desktops or particular server machine), while other connectivity services such as COM Transaction Integration (COM-TI) did not. (Formerly code-named Cedar, COM-TI is server-based middleware that sits between client PCs and a MVS mainframe. To a Windows application, a CICS or IMS program running on the mainframe appears as a COM-based component; to the mainframe host, the Windows application appears as a CICS or IMS process. COM-TI is useful to developers creating Web pages that transparently access MVS mainframe programs—such as an order tracking system.) While the move to the Per-Processor model certainly makes HIS 2000 pricing far simpler, the effect on overall licensing fees is mixed. HIS 2000 is more expensive in some scenarios, and less costly in others. More expensive. Use of connectivity services that didn’t require a CAL in SNA Server 4.0 become more expensive. For example, a single CPU server supplying COM-TI services costs US$2,500 for HIS 2000, compared to US$1,000 for SNA Server 4.0. Less expensive. According to Microsoft product support group statistics, an SNA Server 4.0 machine used to provide 3270 terminal gateway connectivity is typically a single or dual-CPU box and services in excess of 400 client desktops. Licensing SNA Server 4.0 under the Per-Seat or Concurrent-Use options would cost about US$20,000, whereas HIS 2000 under Per-Processor pricing would cost either US$2,500 or US$5,000, depending on whether the server had one or two CPUs. Internet Security and Acceleration Server 2000 Internet Security and Acceleration (ISA) Server 2000, formerly code-named Comet, is used as a proxy server to allow users on the corporate network to access the Internet, as a firewall to insulate a corporate network from unauthorized access by Internet-based users, and as a caching server to speed the viewing of Internet content. The Per-Processor ERP price is US$1,500. No other pricing model is supported. Licensing for ISA Server 2000’s predecessor, Proxy Server 2.0, was unlike any other Microsoft server application. Proxy Server 2.0 did not require the purchase of CALs. Customers paid about US$1,000 to install the software on a server machine; there were no restrictions on client usage. The move to the Per-Processor model makes ISA 2000 more expensive under all usage scenarios. Commerce Server 2000 Commerce Server 2000 is a set of tools for building and managing e-commerce sites. Among the product’s features are wizards for guiding developers through the process of designing an online store, content personalization and catalog management capabilities, a prebuilt payment and ordering processing infrastructure, and tools for managing online advertising campaigns. Commerce Server 2000 supports only the Per-Processor pricing model. Commerce Server 2000 will have an estimated retail price of $8,499 per CPU, making it more expensive than Site Server 3.0 Commerce Edition in most applications. Site Server 3.0 Commerce Edition supported Per-Seat and Concurrent-Use pricing for use within the corporate firewall. The fee to install the software on the server was about US$3,500 and each CAL cost US$40. For use outside the corporate firewall, an Internet Connector costing US$3,000 was necessary. Only a single Internet Connector was required regardless of the number of CPUs in the server machine. Since many e-commerce servers have more than one processor and Commerce Server 2000 carries a Per-Processor fee, Commerce Server 2000 will end up being more costly. Hopefully use of Commerce Server 2000 will not involve fees beyond Per-Processor licenses. Site Server 3.0 Commerce Edition required Commercial Service Providers to purchase a special "Domain Access License" (DAL), costing about US$250, for each third-party site hosted on a Site Server 3.0 Commerce Edition server machine. If DALs disappear, pricing for Commerce Server 2000 will be much simpler to comprehend and manage than for Site Server 3.0 Commerce Edition. Application Center and BizTalk 2000 Servers Both Application Center 2000 and BizTalk 2000 are entirely new products and support the Per-Processor pricing model only. Microsoft has yet to announce actual Per-Processor prices. Application Center 2000 is a deployment and management tool designed to provide corporate, e-commerce, and ISP firms with the ability to deploy and administrate a Web application across PCs in a "server farm." Features include dynamic application load balancing between servers to increase reliability and performance, monitoring tools to provide a real-time view of system performance, and replication services to manage distribution and maintenance of all server content and application components. It isn’t clear yet whether Per-Processor licenses for Application Center will be required for each machine in the Web farm, or only for each server that runs certain Application Center services. BizTalk Server is an application integration toolkit and server. It is essentially a programmable "hub" that enables existing programs to exchange business data—such as purchase orders and invoices—via XML-based messages. Used mainly to allow companies to quickly incorporate legacy applications in business-to-business (B2B) commerce systems, BizTalk provides developers a means to decode, route, convert, and encode business documents sent between particular applications. Windows 2000 Server and Exchange 2000 Server Windows 2000 Server and Exchange 2000 Server are the two server products that continue to use legacy pricing models. Legacy pricing models continue and prices rise somewhat. The price of installing Windows 2000 Server on a server machine and the cost for CALs are comparable to Windows NT 4.0 Server. Prices rise modestly for Exchange 2000 Server Standard, and, at first glance, increase rather substantially for the Enterprise edition. For example, Exchange 2000 Server Enterprise with 25 CALs is about US$7,000 (roughly US$5,000 to install the software on a server and slightly more than US$60 for each CAL), compared to US$3,500 for Exchange Server 5.5 Enterprise (roughly US$2,000 to install the software on a server and a bit less than $60 for each CAL). However, given the fact that Exchange Server 2000 Enterprise should be able to service significantly more clients than a similarly equipped Exchange Server 5.5 Enterprise machine, the resulting "server consolidation" should close, if not eliminate, the price gap. Why Per-Processor pricing wasn’t applied. Although extending the Per-Processor pricing model across its entire server line would have the obvious benefit of simplification, Microsoft does have good reason for not doing so at this point in time. From a revenue standpoint, it is just too risky to modify the pricing model of the two most profitable server product lines. For a move to Per-Processor pricing to be revenue neutral, the number of CPUs in a Windows 2000 Server or Exchange 2000 Server machine would have to be a relatively good predictor of the number of clients that could be supported. That way Microsoft could essentially price-in the cost of today’s CALs into the Per-Processor license. However, the number of CPUs is not a good predictor. Windows 2000 Server offers so many different services—File, Print, Remote Access, Active Directory, DDNS, etc.—and is used in so many different scenarios that it is almost impossible to come up with an average number of clients that a single server CPU would support. With Exchange 2000 Server, Microsoft is coming out with an entirely re-architected messaging and groupware offering. At this point in time, the company has no way of knowing the average client load a server CPU could handle, or even if it were possible to determine such a number with any level of confidence. Ramifications for Customers Microsoft’s recent pricing announcements have several important ramifications for customers. In most usage scenarios, software costs will rise. In more cases than not, software licensing costs will go up. Microsoft’s perspective is that its products are priced appropriately compared to the competition, and that any increase in price is matched by new capabilities of greater value. As any corporate IT department knows, software licensing costs comprise but a small fraction of the total cost of ownership of Microsoft products. They are dwarfed by other cost areas, such as code development, deployment, and ongoing maintenance. If Microsoft can deliver on its .NET promises—such as an improved programming environment that lowers site development costs and automated content and code deployment tools that cut ongoing administrative expenses—the latest software cost increases will prove insignificant. Pricing should get simpler for e-commerce applications. Per-Processor pricing for SQL Server 2000, HIS 2000, ISA 2000, Commerce Server 2000, Application Center 2000, and BizTalk 2000 will make it much simpler to calculate licensing fees owed to Microsoft and free up some of the IT resources devoted to license compliance. For use inside the corporate firewall, pricing still remains complex. Organizations deploying the full spectrum of Microsoft server products on their corporate WAN still need to master the intricacies of several pricing models, taxing whatever IT resources are devoted to license compliance. For example, organizations will need to purchase and track Per-Seat CALs for Exchange Server, purchase and track CALs under either a Per-Seat or Concurrent-Use option with Windows 2000 Server, and assess whether to use a Per-Seat or Per-Processor model with SQL Server 2000. Furthermore, Windows 2000 Terminal Services has its own set of pricing/licensing peculiarities. Per-Processor licensing will impact how data centers are architected. With Per-Processor pricing, software licensing costs become a bigger factor in determining how organizations distribute server applications across machines and what type of server hardware customers buy. A Per-Processor pricing scheme provides an incentive to dedicate individual machines to particular server applications rather than to consolidate several server applications onto a single large server. With the more distributed approach, each server CPU runs the licensed application exclusively and thus more fully utilizes the Per-Processor license. Furthermore, Per-Processor pricing encourages customers to buy servers with the highest CPU clock rates available and to favor server machines that can have their CPUs upgraded at a later point in time. It will also reduce knee-jerk tendencies to avoid or address performance issues by "throwing in" an extra processor or two. For example, before IT managers sign off on the installation of an additional CPU into a SQL Server 2000 Enterprise machine—at a software licensing cost of about US$20,000—they’ll likely insist on a performance analysis proving that an extra CPU, as opposed to additional memory or a faster disk subsystem, will correct the problem. Wait for more details before making a complete assessment. Even with the recent Per-Processor pricing announcement, many open issues remain. Will Microsoft let customers divide large multiprocessor machines into partitions (as will be possible with Windows 2000 DataCenter) and pay only for the number of CPUs actually running a server application? How will clustered installations be charged—based on the total number of CPUs or the number of CPUs on the active nodes? Will Windows DNA 2000 products have some sort of Per-Processor enforcement mechanism, and if so, how might this impact deployment and administration? How will upgrades to Per-Processor (from Per-Seat, Concurrent-Use, or Internet Connector models) be priced? How will Enterprise Agreement customers—who purchased the rights to all upgrades over a three-year period—be handled? How will Per-Processor licenses be weighted when determining discount levels for Enterprise, Select, and Open License customers? Such issues may not become clear until the launch of Windows DNA 2000 (expected in September). Resources A "Microsoft Windows DNA 2000 Pricing and Licensing Market Bulletin" summarizing the recent pricing model changes is posted at www.microsoft.com/directaccess/products/windowsdna/market.asp. More information about Windows 2000 Server pricing is available in "Windows 2000 Licensing Adapts to the Web-Based World" on page 3 of the Dec. 1999 Update, and "Windows 2000 Multiprocessor Licensing Terms Improve" on page 8 of the Oct. 1999 Update. Microsoft’s overview of Windows 2000 Server pricing is posted at www.microsoft.com/windows2000/guide/server/pricing/. For a review of new Web access and XML features in SQL Server 2000, see "XML Hooks SQL Server into Next Generation Applications" on page 8 of the June 2000 Update. For a technical overview of BizTalk 2000 Server and the BizTalk framework, see "BizTalk Server Previews B2B Commerce Strategy" on page 14 of the July 2000 Update. For a technical overview of Internet Security and Acceleration Server 2000, see "Comet Becomes Internet Security and Acceleration Server 2000" on page 9 of the July 2000 Update. For an overview of Application Center, see "Microsoft Announces AppCenter Application Server" on page 3 of the Nov. 1999 Update. |
