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How Virtualization Is Changing Software Licensing for the Data Center

Erich Latchford

In the days before data centers were virtualized, the licensing model for operating systems and application software was simple: 1 server = 1 license. But this model doesn’t work in an environment where a single physical server can host multiple virtual servers.

To reflect this new reality, software vendors and IT departments have been looking for ways to adjust licensing models. IT also wants to reduce licensing costs through economies of scale and accurate information about how many licenses are actually needed.

Two Cisco products now help Cisco IT substantially reduce the cost of licensing operating systems and application software in our data centers:

  • The Cisco UCS B420 M3 Blade Servers have the ultra-dense memory that allows us to provision up to 192 virtual machines per blade. For operating system licenses, we buy one license with unlimited guests for the blade. We configure as guests all of the virtual machines (VMs) hosted on that blade. This approach means that some of our operating system license costs are 80 percent less than what they would be if we purchased individual licenses for each VM.
  • The Cisco Intelligent Automation for Cloud (Cisco IAC) solution is orchestration software that we use to create the virtual machine instances. For application software licenses, we also use Cisco IAC to track the number of licenses actually used, then we buy those licenses at a negotiated volume discount. We’ve found that this approach can be less expensive than buying an enterprise license with an unlimited number of users.

Another benefit to IT: You won’t need to guess how many licenses you may need at the beginning of the contract term. Instead you can use the Cisco IAC counts to “pay as you grow,” buying licenses at the contract price when you actually need them.

Accurate license counts also benefit vendors with the assurance that you’re not using more licenses than you’ve paid for. License tracking has long been a difficult issue between vendors and IT departments because “true-up” counts can be very hard to do without the automation and cloud perspective offered by Cisco IAC.

One caveat to keep in mind: Different software vendors define their licenses in different ways and a vendor’s license coverage and terms are always subject to change.

As virtualization plays a bigger role in more data centers, we expect that licensing options will continue to evolve. We recommend looking at your virtualization designs and licensing models with the goal of balancing hardware investments with the ability to reduce licensing costs.

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1 Comments.


  1. You said, “You won’t need to guess how many licenses you may need at the beginning of the contract term. Instead you can use the Cisco IAC counts to “pay as you grow,” buying licenses at the contract price when you actually need them.”

    There’s another compelling option, the zero-license subscription model. As an example, here’s a price comparison of RHEV vs vSphere http://red.ht/1ncq4l4

    Perhaps the benefits of each approach depends upon the current use of Linux and the degree of existing virtualization, if any.

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