Analysts warn that software license costs could skyrocket
Analysts warn that software license costs could skyrocket
Nov 19th, 2004: Software licence costs could rise by at least 50 percent by 2006 because of four recent emerging trends that have affected traditional pricing models, according to Gartner.
These trends, which affect Oracle, IBM, Sybase, and many others that have pricing models based on microprocessor capacity, include multi-core chip architectures; the move to virtualise hardware resources across physical servers; the growing availability of servers to support capacity on demand and the increased interest in rapid provisioning tools.
Speaking at the Gartner Symposium/Itxpo in Sydney, Andrew Butler, a Gartner analyst, said: "Any one of these trends would present a great challenge to software vendors to maintain a fair and acceptable pricing policy.
"The fact that all four are happening at the same time is a recipe for a software pricing mayhem. Software vendors will have to change their policies, but that change will not come quickly. It is therefore crucial for enterprises to understand the risks and protect themselves by starting contract negotiations with their vendors now."
Butler warned that multi-core chip architectures have emerged to increase server performance without requiring more power or generating more heat, but software vendors are intending to charge the current CPU fee for each core on the chip.
"If a new dual-core design offers only a 50 percent improvement, a doubling in the license fee becomes a tax on technology innovation with little return."
"The current licensing model does not give software vendors an incentive to write more efficient code. It also leaves users unable to control costs when single core systems become unavailable, perhaps as early as year-end 2006. By that time, many enterprises will pay at least 50 percent more in software fees from a number of mainstream software vendors that currently license based on CPU."
Gartner has spoken to many different vendors and have found that they are undecided on what their pricing policy will be, so Gartner recommends that customers should initiate discussions now with vendors to accelerate pricing policy changes.
Some vendors have already reacted positively to these kinds of discussions, according to Gartner, such as Microsoft, which recently announced that it intends to only charge for each CPU irrespective of the number of cores.
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