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VMware extends vSphere Enterprise licensing, but it's a catch-22

Originally VMware planned to expire Enterprise licensing on Dec. 12, 2009. Plans have changed, but upgrading later could be drastically more expensive. Meanwhile, VMware still isn't paying enough attention to the SMB market, which it needs to if it wants to stay on top.

Virtualization Viewpoints is a semi-monthly column that discusses current VMware- and virtualization-related trends, news and topics. Here we offer opinions and viewpoints on the competitive, quickly growing and ever-changing virtualization industry with a focus on VMware, the current virtualization market leader, which is in an ongoing battle to remain on top and distance itself from its competitors.

When VMware released vSphere in May 2009 it also changed its licensing structure. At the time, the new high-end edition, Enterprise Plus, was going to replace Enterprise, the previous high-end edition, by the end of the year. Enterprise Plus is very similar to Enterprise but adds a few new features, Host Profiles and Distributed vSwitches.

To promote the new high-end edition, VMware is offering an upgrade special for customers with existing Enterprise licenses. Customers can currently upgrade from Enterprise to Enterprise Plus at a significantly reduced cost, $295 per processor instead of $795.

But there are two problems with this: the special pricing is only good until Dec. 15, 2009, and businesses are forced to buy an additional year of Support and Subscription (SnS) in order to get the upgrade pricing.

The expense of an additional SnS took many customers by surprise, and many had not budgeted for it. Secondly, many customers had already renewed their current SnSes and the expense of renewing a second time made the switch even more costly. Further, VMware announced that customers would not be able to purchase Enterprise licenses after this year which would cause problems with customers who could only buy Enterprise Plus licenses for any new servers. Also, the new features of Enterprise Plus do not work with hosts that currently have Enterprise licenses, rendering them useless, as the new technologies are meant to be used by all hosts in a cluster.

It appears that VMware has had a change of heart concerning the phasing out of the Enterprise licensing and will keep it around a while longer. One could only guess that an outcry from its customers was the reason behind this. VMware chose not to publically announce this change but instead quietly let its partners know. Why? Because VMware still wants people to go with the Enterprise Plus license, which is a bigger money maker.

But now that VMware has decided to keep Enterprise edition licensing around, what is VMware going to tell the customers that have already upgraded to Enterprise Plus? VMware pretty much forced existing customers to upgrade by telling them that Enterprise would no longer be available.

In my opinion, this is where VMware went wrong. What VMware should have done was extend the special upgrade promotion for existing Enterprise customers into 2010 and drop the SnS renewal requirement. That way, customers could have budgeted for the change ahead of time and upgraded their licenses when they made their usual SnS renewals.

There are too many VMware licensing editions; removing Enterprise from the lineup would have made it simpler. VMware licensing has long been a point of frustration for customers, and VMware certainly didn't help the situation when it released vSphere. What VMware needs to do is simplify the licensing and offer features on an a-la-carte basis like it did with VI3.

VMware still needs to pay attention to the SMB
What VMware really needs to do is cater to the small medium business (SMB) market. VMware already owns the Fortune 1,000 market and most large enterprises. But its SMB edition of vSphere, Essentials, is very limited in features. If a SMB wants VMotion technology it currently needs to move out of the lower priced Essentials editions, which is geared towards customers with three hosts or less, and purchase much more expensive editions, putting vSphere out of reach for many SMBs.

As for the free edition of ESXi, VMware has rendered it pretty much unusable for most customers by making it incompatible with vCenter Server and by severly limiting management by any third-party vendor tools. VMware Go is being billed as a management solution for free ESXi, but all things considered it's more likely a way for VMware to get customers hooked on its product, off of free ESXi and on to its paid editions.

So where does that leave customers? VMware is sending a mixed message by continuing support for the Enterprise edition. Does VMware plan on keeping Enterprise around indefinitely or not? If not, VMware is going to cost customers a lot more money later on if they are forced to upgrade to Enterprise Plus after the promotion has ended.

If you're a current Enterprise customer I'd still advise upgrading to Enterprise Plus this year if you can. The promotional price that expires on Dec. 15, 2009 is a pretty good deal and there is no guarantee that VMware will not cancel Enterprise licensing next year, at which point it would likely cost you much more to upgrade.

Lastly, catering to the SMB market is something that VMware can't afford to screw up right now. VMware is currently in the lead —it's VMware's game to lose. If Microsoft gets a foothold in the SMB market with Hyper-V then the battle is lost for VMware. To make sure this doesn't happen VMware should consider doing several things including aggressive marketing and aggressive pricing.

I work in the restaurant industry, and when you want to attract customers you need to do two things: let customers know you exist, and give them a deal that they can't afford to pass up. You may have the best food around, but unless people know about it, they'll eat elsewhere. If you give them a great deal and great service customers will remain loyal customers.

Microsoft installs Windows on just about every PC sold; if VMware wants to beat Microsoft at the SMB game VMware should try the same thing -- make a deal with the hardware vendors to preinstall free ESXi on all servers that they sell. It will give customers a taste of VMware virtualization which they may decide to continue to use. VMware needs to change its focus. There are a lot more little guys out there then there are big enterprises. VMware is currently winning the enterprise war; going after the little guys and winning them over would ensure that VMware remains the market leader.


Eric Siebert is a 25-year IT veteran with experience in programming, networking, telecom and systems administration. He is a guru-status moderator on the VMware community VMTN forums and maintains, a VI3 information site.

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