The new calculator’s results, highlighted by Microsoft in a gloating blog post, show vSphere 5.1 Enterprise Plus as 19% more expensive than Hyper-V 3.0 with System Center 2012 when running 100 virtual machines (VMs) with an iSCSI SAN. Other configurations, such as running 150 VMs on NAS, also show VMware to be more expensive (by 6% in that particular case).

While embarrassing for VMware, this development is just one tiny part of bickering that has been going on for quite a while. And even these favorable calculator results are not good enough for Microsoft. In last week’s blog post, VMware’s rival insisted the findings are still off, particularly when the full vCloud Suite is taken into account.

Has anything really changed?

This summer’s SearchServerVirtualization.com special report on VMware and Hyper-V pricing and licensing found that the actual overall cost for the two platforms depends heavily on the size of the IT shop and the type of workload being virtualized.

It also found that the story doesn’t end there. For one thing, public-facing cost calculators are based on list prices, which enterprises rarely pay, thanks to Microsoft and VMware’s deep discounts.

Some shops may find the cost savings enticing enough to swap out one hypervisor for another, but VMware also remains the incumbent vendor in most enterprise shops, and the costs of switching have many users saying Microsoft’s savings aren’t worth it.

It’s also important to remember that VMware and Hyper-V don’t match feature for feature, especially with several of Windows Server 2012’s Hyper-V advanced features still waiting on System Center Virtual Machine Manager 2012 Service Pack 1 to be put to the test.

VMware has not responded to multiple requests for comment about its online calculator.

Update: VMware published a blog post yesterday called “Flawed Logic Behind Microsoft’s Virtualization and Private Cloud Cost Comparisons” which says that in the more common configuration of 128 GB memory server hardware, VMware vSphere remains on par with or cheaper than Hyper-V, and concludes that the Microsoft blog post pointing out the calculator’s findings “is yet another attempt to artificially inflate VMware’s prices and distract customers from the shortcomings of their own products.”

Users may be more wary of bugs today. But, in the case of vSphere 5, the delay may have as much to do with the lack of a major feature or driving need to make the switch, said Tim Antonowicz, a senior sales engineer with Mosaic Technology, an IT infrastructure consulting company based in Salem, N.H.

“In most cases that I’ve come across, people didn’t see a compelling reason to upgrade. If they had a vSphere 4.0 or 4.1 infrastructure, they could keep it patched and updated without doing a major upgrade. In their minds, why introduce something new into what is a stable environment right now, when there’s no confirmed need?” Antonowicz said.

In fact, it wasn’t the new features included in vSphere 5 that garnered most of the attention after the July 2011 launch, it was the change in the licensing model. While there have been some reported bugs with vSphere 5, more recently Antonowicz has seen customers deciding that it is safe enough to make the move. Instead of one keystone feature that might have pushed faster adoption, it has been a variety of smaller improvements driving this new wave of upgrades.

• With vSphere 5, you can have bigger file systems that allow you to put more of your data together in a consistent format. Admins can also now thin provision the data they don’t need, allowing for the proper interaction between the software and the array.

• “VMware finally got around to building a totally new high-availability system from the ground up. So High Availability, is much more robust and better supported in vSphere 5,” Antonowicz said.

• Storage optimization is now more efficient. The Storage Distributed Resource Scheduler helps automate storage management. Administrators can set the storage policy of their virtual machines (VMs) and automatically manage the balancing and placing of the VMs across storage resources.

“Taken individually, none of those changes are a compelling reason to upgrade,” Antonowicz said.

But taken together, along with the calming of fears over bugs, and we should start to see more organizations take the vSphere 5 plunge in the next few months.

RAID, or Random Array of Independent Disks, refers to the way data is striped and / or mirrored across disks to achieve redundancy. Higher RAID levels afford better data protection, but can eat up more disk capacity. Previously, the VSA required RAID 10, which offers high levels of data protection, but contributed to a 75% capacity overhead for the overall VSA.

Now, the VSA supports RAID 5 or RAID 6, which use fewer disks for data protection, resulting in more available capacity for users.

Under RAID 10, hosts in a three-node VSA cluster running the maximum eight disks at the maximum 2 terabytes (TB) capacity each would have a raw capacity of 16 TB, but a usable capacity of just 4 TB. Across the entire cluster, this means that 48 TB raw capacity would be needed to yield 12 TB of usable space.

VMware’s VSA documentation now contains a capacity calculator showing the new capacities available with the new RAID levels. Long story short, the same maximum configuration of eight 2 TB disks per host in a three node cluster now yields 21 TB in a RAID 5 configuration and 18 TB in a RAID 6 configuration.

High storage overhead was among the chief complaints about the VSA after its launch last August. The relaxed RAID requirements do not address other areas of criticism about the product, such as the fact that users must choose between a two and a three-node cluster before provisioning; the VSA cannot start as a two-node configuration and scale up to a three-node configuration.

“While this makes the VSA more functional by increasing the capacity of the storage, I still see it as a ‘niche’ player,” wrote Tim Antonowicz, senior architect at Salem, NH-based VAR Mosaic Technology, in an email. “There aren’t many scenarios where the VSA will be a better play than a dedicated SAN…as for our customers that were looking at deploying the VSA, we have been able to move them into a low-cost SAN solution for similar pricing and they have gone that route instead of using the VSA.”

The issue affected vSphere 5 virtual machines connected through software-based iSCSI initiators, and occurred, according to VMware’s Knowledge Base, because “ESXi 5.0 attempts to connect to all configured or known targets from all configured software iSCSI portals. If a connection fails, ESXi 5.0 retries the connection 9 times.”

According to the Knowledge Base article, “VMware is delivering an ISO file for this patch release due to the nature of this issue. This is not common practice and is only done in special circumstances.”

In some cases, this bug led to boot times of up to 90 minutes. Bill Hill, infrastructure IT lead for a Portland-based logistics company, said it took some of his servers that long to boot with the buggy version of ESXi 5.0.

This would be an open-and-shut case of a simple bug fix, Hill said, but it remains a mystery to him, as well as to some VMware insiders, why the original buggy ISO file remains available for download on VMware’s website as of today.

“It’s a frustrating situation,” said Hill. “Why leave a time bomb out there?”

VMware’s PR representatives did not have an official response as of this post.

Print news is no longer tied to newspapers, thanks to the Internet. Books are no longer tied to bookstores, thanks to e-readers. Music is no longer tied to CDs, thanks to Napster and iTunes and Spotify. Movies are no longer tied to DVDs, thanks to Netflix streaming.

Our whole world has been virtualized.

These changes have been a boon to some and troublesome to others. The virtualization of news, books and music have all been great advancements for consumers. If a major event happens, you can open up your browser and read about it almost immediately. If a friend recommends a novel, you can buy it on your Kindle in a matter of minutes. And if you hear a song you like on the radio, you can download it right onto your phone.

But businesses are having a hard time adapting to the new model. Most newspapers are struggling to stay afloat, Borders is closing its doors and the music industry is suffering from poor sales across the board.

Now contrast this picture with what’s happening in the movie industry, specifically with Netflix. Here, it’s consumers who are feeling the pain. Netflix — a thriving enterprise — is fully embracing the abstraction of movies from physical DVDs. And to get customers on board, they’re penalizing customers that want old-school DVDs: $15.98 a month for streaming and one physical DVD at a time, compared to $7.99 for streaming-only.

Does this sound familiar? It’s the same approach VMware — another thriving enterprise — is now taking. The new vSphere 5 licensing model partially abstracts pricing from the underlying hardware. (It’s still based on physical CPUs, but it also limits the amount of RAM you can assign to VMs.) And much like Netflix subscribers, some VMware customers are up in arms.

In a recent blog post (that inspired this one), music industry blogger Bob Lefsetz wrote, “You move the public to where you want to go, you don’t follow them. Not today, not in today’s high tech digital world.”

That’s VMware’s approach with its vSphere 5 licensing. The hardware doesn’t matter when you’re managing a private cloud, they’re saying, so it shouldn’t matter when you’re paying to build a private cloud, either. We know you’re probably not at this level yet, but you will be, so you might as well get used to it.

VMware and Netflix probably could have handled the announcements of their changes better. People in both cases were shocked, which led to a lot of their anger. VMware gave plenty of notice about ESXi taking over for ESX in vSphere 5, and that helped that transition go relatively smoothly. Why couldn’t they have done the same thing regarding licensing? Listen, just as a heads up, we’re going to this new model next year. It may seem bad at first, but here’s why we’re doing it, and here’s how you can make the adjustment.

Regardless, VMware has moved to this model and will probably go to 100%-virtual licensing (i.e., no tie-ins to physical hardware at all) at some point. It is disruptive, and there is no guarantee that it won’t backfire. (Netflix stock dropped 10% in the backlash to the company’s price hikes, and some VMware customers have said they’ll now take closer looks at Hyper-V and XenServer because of vSphere 5.)

It’s a risk, but one VMware needs to take. As the newspaper, bookstore and music industries have shown us, sticking to the physical-world way of doing things would definitely not end well.

Photo (cc) by _tar0 on Flickr and republished here under a Creative Commons license. Some rights reserved.

Some of the initial customer outrage has subsided, but problems remain, and VMware needs do something about them. Here are some suggestions:

Discount vSphere 5 upgrade licenses

Why not sell memory upgrade licenses at a discount, instead of forcing customers to buy full licenses? Making customers buy a full, per-socket license for more memory is ridiculous. If I need to expand my house to accommodate more people, I don’t buy another house.

Raise the vRAM bar

VMware could Increase the vSphere 5 memory limits, because they are pretty low right now. On a six-core CPU, you might run 20 virtual machines (VMs). Right now, with the Standard license, I get only 24 GB of virtual RAM (vRAM). Modern Windows OSes are memory hungry, and 4 GB of memory is becoming standard. Under the current allotments, I could assign each VM only 1 GB of memory, or, I’d have to buy three or four additional licenses.

Throw customers a bone

When VMware released vSphere 4, VMware gave deals to existing customers that upgraded from Enterprise to Enterprise Plus. Why not do something similar with vSphere 5? VMware could offer one-time compliance discounts for those customers that need to close the vRAM shortfall with the new licensing model. Instead of ticking off your loyal customers, maybe act like you care a bit and help make the financial burden easier for them. Your customers are responsible for your success. Remember, there are now viable alternatives to VMware. If you want to keep your customers, work with them.

Exempt virtual appliances

VMware is punishing customers that run its virtual appliances. There are more and more appliances running these days, because that’s the model that VMware uses to deliver applications. But these virtual appliances count against the vRAM totals, leaving less memory for virtual machines and applications. I have several appliances, including the vSphere Management Assistant, vCenter Server, vCenter Mobile Assistant, vShield and CapacityIQ. Make these appliances exempt from the vRAM totals.

I agree that the vRAM model is probably the easiest and fairest way to implement licenses changes. But the way VMware first delivered the news was bad. Because of that, VSphere 5 will forever be known for this licensing mess, instead of great features such as Storage Distributed Resource Scheduler, increased scalability and improved High Availability. It’s not too late to make changes that will make it easier for customers to swallow this giant licensing pill without choking.

According to a post by Gabrie Van Zanten, there will be a new policy that raises virtual RAM (vRAM) entitlements to 64 GB in the Enterprise edition and 96 GB in Enterprise Plus. The blog post also states that the amount of vRAM that counts against the license pool will now be capped at 96 GB per VM.

Reached for comment, a VMware spokesperson sent the following statement:

There is nothing to announce at this time. If we make any refinements, we will be sure to let you and the community know.

The new licensing, announced with vSphere 5, went from being being based on physical CPUs and physical RAM per server to per-CPU licensing, with a maximum amount of vRAM per license, based on the specific vSphere edition. The initial entitlements and prices per vSphere edition were as follows:

• VSphere 5 Standard Edition: 24 GB per $995 license
• VSphere 5 Enterprise Edition: 32 GB per $2,875 license
• VSphere 5 Enterprise Plus: 48 GB per $3,495 license

Once the initial furor died down, most users conceded that the new model wouldn’t add costs for their shops, but few users will pay less under the vSphere 5 licensing model — especially as server hardware gets beefier. Given this, users have made suggestions for making the licensing more palatable. The most popular suggestions have been moving to vRAM entitlement SKUs that aren’t tied to CPU licenses, and raising the memory limits per licensing level.

In an interview on the VMware campus yesterday, product marketing execs Tim Stephan and Alberto Farronato discussed some of these other ideas and why the company ultimately rejected them.

One consideration was to completely abstract the licensing from all physical components. (VSphere 5 licenses contain virtual RAM (vRAM) limits, but they are based on physical CPU resources.) But there was a feeling that model would be too revolutionary — and even more upsetting to customers.

I asked if this vRAM/physical CPU model is just a stopgap measure, paving the way for all-virtual licensing in the future. The VMware execs said they couldn’t say if it will go that way eventually, but they did say that’s how other utilities charge their customers. (Power companies charge by the kilowatt, phone companies charge by the minute, etc.)

VMware also looked at licensing models based on processor size and the amount of physical RAM on a host. The company put the kibosh on those ideas because they charged customers before they even started virtualizing.

The trend of absorbing infrastructure functions into the hypervisor has been going on since ESX 2, when VMware introduced its first storage multi-pathing feature. In subsequent releases, vSphere also developed its own virtual switching capabilities; began to offer its own snapshot-based backup with VMware Data Recovery; and build its own virtual firewalls with the vShield product line.

Now, vSphere 5 can now perform its own replication with Site Recovery Manager 5.0 and automate the placement of virtual machines on disk arrays with Profile-Driven Storage and Storage DRS. With vShield 5, VMware added data loss prevention and regulatory compliance features through a new integration with RSA’s Data Loss Prevention (DLP) suite. For SMB users, vSphere now offers its own shared storage capabilities with the new virtual storage appliance also announced this week.

So, we asked VMware’s execs, how far will the company go in its quest to deliver infrastructure services through the hypervisor? And where will it ultimately draw the line between rolling out its own offerings and leaving advanced infrastructure services to third parties?

For example, today, the ability to pool the storage on ESXi hosts’ internal disks through the vSphere 5 storage appliance is limited to three hosts at the Essentials Plus licensing level. Storage commands have to take a roundabout path through the hypervisor with this product, according to Raghu Raghuram, general manager of VMware’s virtualization and cloud platforms, so its scalability may remain limited.

But it’s certainly not beyond VMware’s engineering capabilities to offer similar storage pooling well beyond 3 nodes – after all, pooling storage and processing capacity among vast numbers of scale-out commodity hardware is already going on in the cloud today, with Google File System being the most famous example. There’s nothing stopping VMware from offering something competitive in that space going forward as well.

In fact, Raghuram revealed, while not officially on the roadmap, VMware has some prototypes percolating in its labs along these lines.

VMware also intends to go deeper into DLP with vShield, according to vShield director of product management Dean Coza – into areas that may include encryption and policy-based data placement controls.

In the meantime, there are certain businesses VMware has no plans to get into at this point, according to Raghuram, such as intrusion detection and prevention and antivirus services. Such services will be left to partners. “We don’t have their 24 by 7 [Network Operations Centers] where they’re watching for all sorts of security attacks.”

But ultimately, these lines are drawn in ever-shifting sands as technology advances. The build-vs.-partner question “is something that’s debated all the time, and the specifics of the answer change…it becomes a case-by-case decision rather than a uniform policy,” Raghuram said.

So why doesn’t VMware offer multi-hypervisor management? CEO Paul Maritz addressed the issue at yesterday’s vSphere 5 launch, citing technical hurdles and the cost of engineering such a solution. But Raghu Raghuram, senior vice president and general manager, gave a shorter answer today on the VMware campus: VMware doesn’t feel like it has to.

“We have no religion on this,” Raghuram said. “If the customer says we need a product to manage Hyper-V, we’ll have that product tomorrow.”

Despite recent momentum around Hyper-V and all the talk about heterogeneous environments, Raghuram’s comments indicate that there are still plenty of VMware-only shops out there, and that VMware doesn’t feel very threatened by Microsoft’s advances.

*The extent to which System Center manages VMware is up for debate, and some VMware products do have visibility into non-VMware environments.