VMware to overhaul service provider licensing

Points system

VMware's new licensing model will offer service providers bulk discounts via a "points" system.

Every VMware product made available under the VSSP program will be attributed a set amount of points.

So, for example, a gigabyte of RAM consumed by a virtual machine using vSphere may be worth x points, every concurrent user on a hosted desktop offering using View may be worth y points, and every hosted inbox using Zimbra might be worth z points. The sum of these points determine what the service provider pays VMware (or its distributors) every month in licensing fees.

Service providers will be offered discounts by committing to a given volume of 'points' per month in the same way a mobile phone user would choose a monthly "plan".

"The service provider will look at model and take a ballpark feel for how much VMware products they will use to service their customers," Waters said. "Then they make a commitment to a minimum amount they expect to use. If they commit to a higher number of points, they get a bigger discount from the aggregator (distributor)."

The mobile phone analogy ends when it comes to "overages". If the service provider spins out more services (memory, hosted desktops, etc) than it had anticipated (over and above the points in its 'plan' commitment), it still pays the same discounted rate for those services.

(On mobile phone plans, by contrast, users typically pay higher call costs if they exceed the volume of calls included in their plan).
 
Service providers only lose out if they over-commit to a monthly amount of points that they don't consume. For this reason, Waters expects service providers to set a conservative commitment in the first instance and adjust the monthly "plan" as they win more contracts and build their cloud business.

The 'points' system will also provide compelling incentives for service providers to broaden the range of VMware products they sell to end users as a service from the same investment in physical infrastructure. 

The more VMware services a service provider sells, the higher the points they would consume and the bigger discount they would enjoy across the entire VMware suite. So, for example, selling more hosted desktops (View) or managed inboxes (Zimbra) would drive down the cost price of the virtual machines provided under its IaaS service.

Reporting and (self) compliance

To ensure licensing compliance, service providers will be asked to report to VMware how many instances or services are rented to customers over a given month.

But for greater granularity, Waters said VMware will also use metering software that will "pulse" a service provider's vCenter management console every hour to count and "size" the number of virtual machines being offered, and thus calculate the total "allocated virtual memory" over the month.

He said the new model is a sign of VMware's maturation as a vendor, as it mimics the service provider programs used by the likes of Microsoft and Oracle.

Dan McLean, senior vCloud business development manager at VMware Australia said he expected Australian service providers would prefer the new program.

He conceded that rumours around memory-based pricing had spooked some hosting companies, unsure of how it would impact their costs. But once pricing is fleshed out, he expects they will warm to it.

He argued that the new formula involves lower starting costs and is "more closely aligned with the way end users want to consume computing."

"They are looking to avoid CapEx investments and move to OpEx models," he said.

He also expects end users will enjoy a better grade of service under the program.

Some service providers on the older host-based licensing model "saw their infrastructure like an airline," he said.

"The more customers they could get on the plane, the better the return. So the more VM's they could cram into the box, the better the return. With that mindset you start to run into issues - the end user experience gets variable because it depends how many customers are on that service."

A warning

Waters warned service providers not to attempt to sell cloud computing or multi-tenant hosting services off EULA licenses purchased for in-house use.

iTnews knows of several Australian hosting companies that do this in practice.

"If a EULA license is purchased for internal consumption, that's fine," he said. "If it's a large telco and they are using vSphere in-house - they can buy EULAs all day long. But if they want to be compliant they can't serve that up as a multitenant service."

Waters said there are "legal ramifications" for those service providers that choose to ignore these rules. 

"What sort of message are you giving your end users if you are out of compliance?"