VMware Dumps Controversial Pricing Scheme for Virtual Servers - Wired

As Pat Gelsinger takes over as VMware CEO, the virtual server kingpin is abandoning a controversial pricing scheme in the hopes of maintaining its market dominance. Photo: Intel

“Mea culpa,” said Paul Maritz, the ongoing CEO of VMware.

On Monday, at its massive VMworld trade show in San Francisco, VMware abandoned the controversial pricing scheme it attached to its virtual servers over a year ago, and during a briefing with reporters along incoming CEO Pat Gelsinger, Maritz was forthright in saying that the scheme was a “big mistake.”

The move shows that even as it moves into other markets â€" including “cloud” software and virtual networking â€" VMware is determined to keep its lead in the good ol’ virtual server business, fending off both Microsoft and competitors that pitch open source software for spinning up virtual servers.

VMware sells software that lets a single physical server run multiple virtual servers, machines that exist only as software, and last July, it changed the pricing for this hypervisor software, charging customers according to how much virtual memory they used. That may sound like Greek to some â€" it took a whopping 10 page white paper to explain the scheme â€" but many VMware customers immediately protested the change.

The idea was to charge not for how many physical servers the product was installed on or how many virtual machines the customers created, but for how much virtual RAM they attached to each virtual machine. Each license came with a RAM “entitlement” and users would pay for however much RAM they used over that limit. VMware positioned this as a way of saving customers money since many users would install the product on many servers but leave lots of RAM unused. Unused RAM entitlements from one machine could be carried over to another.

But many customers, especially SMBs, pulled out their calculators and realized it would penalize them for making extensive use of the software. “Forget the hoopla about a VM with 1 TB of memory. Who in their right mind would deploy that using the new license model?” one commenter wrote on VMware’s forum. “It would take 22 licenses to accommodate! You could go out and buy the physical box for way less than that today, from any hardware vendor.”

The protests were so fervent, VMware revised the pricing scheme within a month, raising the RAM limits per license and setting maximum fees. And on Monday, the company abandoned the thing all together. VMware said that with its vSphere 5.1 software, it’s dropping the RAM based pricing model entirely, in favor of a return to pricing based on physical infrastructure.

Maritz said it was too complicated for customers to understand, but the bigger issue is that it too costly for customers â€" at least in certain cases.

On Monday, as it typically does at its annual conference, VMware also unleashed a scattershot of jargon and buzzwords meant to describe its latest products, and we think we can wade through the marketing nonsense and give the basics on what’s changing.

To make further amends with the SMB market, VMware said that it has announced expanded the capabilities its vSphere Essentials Plus product, which is specifically aimed small businesses. The changes include new security, backup, and recovery tools.

At the same time, the company said that its newly announced vCloud Suite will include tools for managing “multi-cloud environments,” meaning it will help you run applications across many cloud services as well as software platform installed in your own data center. This fits with he company’s slow shift towards embracing open source software and heterogeneous environments, and it follows this morning’s revelation that the company applied for OpenStack membership.

The suite will include existing products, including vSphere and vCloud Director, a tool for building cloud services. When vSphere 5 was announced, VMware described its cloud related offerings as a suite, even though customers would still need to buy each product separately. This appears to be the real deal, though pricing for the bundle was not announced.

The company also announced Cloud Ops, which will offer cloud computing related education and consulting services.

Additional reporting by Cade Metz