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» VIEW ALL POSTS Aug 22 2012   7:12PM GMT

Why VMware shouldn’t give up on new licensing



Posted by: Colin Steele
Tags:
Colin Steele
licensing
VMware

A little more than a year ago, VMware ignited a firestorm by overhauling its vSphere pricing and licensing. Next week, the company will reportedly go back to the old way of doing things, in the hopes that we’ll all forget this whole fiasco even happened.

But it did happen. And it showed a serious lack of foresight on the part of VMware. The vRAM licensing model was supposed to answer the question, “How does VMware align its business model with its vision for the future?” As implemented, it didn’t. But going back to per-CPU licensing won’t answer that question either.

In case you’ve been living under a mainframe for the past 13 months, here’s a very quick rundown of the controversy:

Why VMware is giving in

The question now is, what’s VMware’s motivation? What changed between July 2011 and now that led the company to make this change? Signs seem to point to a less-than-overwhelming response to vSphere 5 among customers.

“I haven’t seen any hard numbers as to the uptake of vSphere 5, but there have been hints that it has not been as fast as VMware had hoped,” wrote blogger Nate Amsden. “… I have little doubt that VMware was forced into this change because of slow uptake and outright switching to other platforms. They tried to see how much leverage they had at customers and realized they don’t have as much as they thought they had.”

Elizabeth H. Henlin, analyst with Technology Business Research, tweeted that this change was overdue, because vSphere 5 licensing drove market share gains for VMware competitors Microsoft, Citrix Systems and Red Hat over the past year.

And blogger Gabriel Chapman wrote that going back to the old model will help VMware compete better with Microsoft, which challenged VMware on price.

“This also takes away a key leg of the Microsoft Hyper-V 3 marketing playbook,” he said.

Short-term fix, long-term problem

With those comments in mind, it’s easy to see why VMware made this move: to address an immediate problem. In the long term, however, bigger problems await.

VMware championed cloud computing for years, and in a way, the vRAM licensing model marked the culmination of that push. You can say the underlying hardware is irrelevant all you want, but it doesn’t really matter until you put your money where your mouth is — and VMware did just that.

Assuming that VMware does in fact revert to the per-CPU licensing model, however, there’s a disconnect. The company still promotes private cloud and the utility model of computing, but its business model is based on the old way of doing things.

VMware should have better anticipated customers’ angst over new licensing and spent more time evaluating options that met customers’ needs without compromising its corporate strategy. After all, it doesn’t matter how strong a company’s vision is if it can’t figure out how to make money on that vision.

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