VMware Slaps Enterprise and Cisco In Face, Opens Door For Competitors

Today was supposed to be a happy day. Finally, after months and months of being kept under wraps, the vSphere 4 code was announced to the world as having reached “gold” status.

But for VMware’s large enterprise customers and Cisco, the announcement had more insult than insight. I am of course talking about the introduction of the new “Enterprise Plus” license option, which no existing VMware licensee is eligible for without further payment. At a time when corporate IT spending is way down, and businesses are struggling, VMware decide to invent a new category of license above the previous top of the line option, and think it’s OK to ask enterprises to pay for the privilege. Here’s some news for you VMware – it’s not OK to do this. In fact, it’s not just ‘not OK’ – it’s fucking insulting. If you wanted to create another tier of licensing, you should have just rolled the old Enterprise features into the new “Advanced” option (I’m still trying to figure out what the target market is for “Advanced”), put the new stuff into Enterprise and jacked up the Enterprise price for any new contracts / customers. But no, someone in VMware either got greedy, ballsy, or is just plain stupid. My money is on the latter. Looking at the differences between “Enterprise” and “Enterprise Plus”, it is clear this is a blatant money grab by VMware. Because 12-18 months from now, there won’t be a single enterprise that is eligible for the “Enterprise” package. Read on to see why.

According to the vSphere Pricing document (hat tip to Boche for breaking this news first), “Enterprise Plus” is some $600 per socket more expensive than “Enterprise”, and includes the following features that “Enterprise” does not:

  • >6 cores per socket
  • 8 way virtual SMP
  • VMware Host Profiles
  • VMware vNetwork Distributed Switch

Point one, >6 cores per socket tells the real story here. From Intel, 6 cores are imminent and they are talking of 8 cores in the next 12 months. AMD are talking about 12 cores in the next 12-18 months. So given that the “Enterprise” license from VMware is capped at 6 cores per socket, in the near future no Enterprise will be able to buy the “Enterprise” license, because all our boxes will have too many cores. What will happen then I wonder? Will the “Enterprise Plus” just become “Enterprise”? If it does, it will unquestionably prove that this “Enterprise Plus” license is a thinly veiled money grab. And enterprises don’t like those.

Onto point 2, 8 way vSMP. As the number of cores in phsycial hardware increases, it gets tougher and tougher for enterprise IT shops to argue down the business as to why they shouldn’t buy physical kit. It wasn’t so bad when dual core was the standard. We could squarely look the business in the eye and tell them we could give them a VM with the same resources they could get in a small blade, to which the business had no comeback. But now that small blade has 2 quad core CPU’s in it. And unless I fork out another few hundred per socket for “Enterprise Plus”, I’m on the back foot once again.

Point 3, Host Profiles. OK this one is not so bad in of itself – it wouldn’t be overly complicated to code up a small app with the same functionality, as we tried to do with statelesx. If only we had known VMware was going to charge $600 per socket for Host Profiles, we wouldn’t have stopped development on it. Perhaps it’s time we re-open the project. Or of course you could check out Veeam Configurator. But what irks me the most about this is that “Enterprise” includes vShield, which is effectively what VMware acquired when they bought BlueLane. So VMware paid money for a company, and are giving the technology away, yet charging more for a feature that was developed completely in house. Why might that be I wonder… oh yeh, there’s almost zero demand for vShield right now. Host Profiles on the other hand, VirtualCenter should have had from the start as far as I’m concerned. Every enterprise wants this feature. Whether they will pay $600 per socket for it is another matter however.

And finally, vNetwork Distributed Switch. This is where the slap in the face for Cisco is, because the word on the street is that no one even cares about this feature. It is merely seen as an enabler for the Cisco Nexus 1000V. But now, I have to not only pay $600 per socket for the distributed switch, but also pay Cisco for the 1000V!?!?! A large slice of Cisco’s potential market just evaporated. Enterprises have already jumped through the necessary security, audit and operational hoops to allow vSwitches and port groups to be used as standard in the production environment. Putting Cisco into the virtual networking stack is nowhere near a necessity. I wonder what Cisco are going to do now, start rubbishing VMware’s native vSwitches? That will go down well. Oh and yeh, looks like you pretty much have only 1 licensing option for Cisco’s Unified Computing System now. Guess that “20% reduction in capital expense” just flew out the window.

So all in all, VMware will have managed to piss off every large account they have, and put up a signficiant barrier to adoption for Cisco’s Nexus 1000V and Unified Computing System. In the meantime, I have taken pre-emptive action because I know what the people who sign the checks at my place are going to say when they hear about this. What was that pre-emptive action you ask? Re-opening a dialogue with these guys.

VMware are still the market leaders in this segment, no doubt. But with this idiotic grab for cash, they have re-opened the door for the competition. And where I work at least, the only remaining platform in the enterprise that wasn’t subject to a dual vendor strategy, now will be.

UPDATE :forehead slap: I think I just figured out who Advanced is targetted at. Maybe it is time for me to start that software company…

Update 2 Although the link Roger posted in the comments doesn’t actually correct anything I have said here, it does point out yet another feature in “Enterprise Plus” that is not in “Enterprise” – 3rd Party Multipathing. Thx for the heads up Roger!

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33 Responses to “VMware Slaps Enterprise and Cisco In Face, Opens Door For Competitors”

  1. vSphere Linkage » Yellow Bricks Says:

    […] vinternals.com – VMware Slaps Enterprise and Cisco  In Face, Opens Doors For Competitors […]

  2. Ceri Davies Says:

    I completely agree, but would note that Intel have had 6 cores out for months (although not in Nehalem, I agree).

  3. vSphere 4 pricing and licensing « UP2V Says:

    […] An this opinion at vinternals.com is not too positive about the new Enterprise Plus license http://vinternals.com/2009/04/vmware-slaps-enterprise-and-cisco-in-face-opens-door-for-competitors/ […]

  4. Adam Says:

    The $600 per socket is actually discounted %50 if you upgrade before December 15, 2009. What confuses me is the description here: http://www.vmware.com/products/vsphere/upgrade-center/upgrade.html at the bottom of the page.
    “VMware Infrastructure 3 Enterprise to VMware vSphere 4 Enterprise Plus: At less than 50% of the upgrade list price, customers can add key features such as dynamic resource allocation, power management, live migration, the distributed switch, and host configuration controls. Suggested US list price: $295 per processor”

    I thought Enterprise already had dynamic resource allocation, power mgmt, and live migration.

    • stu Says:

      @Adam – thx for pointing that out, I wasn’t sure if that was public knowledge yet :). You are right, that wording is confusing. Even with that discount though, even with the discount that enterprises would normally be able to negotiate on top of retail pricing, it’s still a lot of cash to cough up. For example, your average large enterprise probably has 1000 to 2000 sockets worth of ESX deployed. So even if we “only” had to pay $200 per socket, that’s still $200K-$400K in acquisition cost alone (not sure if there are any ongoing maintenance implications). CIO’s are not going to be happy about that in this market!

  5. Tom Says:

    Excellent writeup.
    VMware does not care about the SMB market either, and you have just done a great expose of their ongoing price gouging.
    I work for a SMB and it comes down to Essentials Plus or Advanced for us, and if those turn out to be too expensive, I can easily switch to XenServer, which should be up to Release 5.5 or 6.0 by year-end with enough features and stability to work well in our environment.
    Ron Oglesby has already shown that ESX and XS compare fairly well for performance and other things in environments comparable to those at most SMBs — <10 hosts, <50 VMs, etc.

  6. Louw Says:

    I’m a big fan of VMWare and a VCP but I have to agree on most of these points that it doesn’t make sense in the longer run….

    I can’t believe that the licensing model as it stands now will be viable thru next year.

  7. Raffi Says:

    I was at a launch event today at the local VMWUG in NYC. It was a love fest between Cisco and VMWARE. This is nothing new Citrix has been doing this kind of license play for a while. They drop or merge their lower two tiers and then add a new “Platinum” on top.

  8. Bobsta Says:

    I’ll preface my comment by stating that I’m a VMware employee – however, these thoughts and comments are my own…

    I look at it this way: SMBs and Enterprises alike paid $5750 per two-socket server for Enterprise which was initially licensed for up to 4 cores per socket.
    That licensing has been extended for gratis to 6 cores per socket.

    Now for an extra $600 per server (if purchased during 2009) you can extend that license to supporting up to 12 cores per socket. That’s some pretty AMAZING processing power and seems like great value to me. Oh, and you then get host profiles, vNDS, and 8vCPUs thrown in.

    Would you have preferred VMware to just keep the 4 core (or 6 core) cap in place, and you have to double-up on licenses to support 12 core boxes? I agree that would be a bitter pill to swallow and likely not go down well – but it arguably could’ve been an option.

    My personal view is that a technology company such as VMware cannot expand and invest in its solutions if its products are so good that (by 2010, say) you’re able to run 200+ VMs on a single 2 socket server – unless license revenue reflects that amazing consolidation power.

    • stu Says:

      @bobsta Thanks for the reading, and for the comment! But that’s not my point – my gripe is with this insertion of a layer above the current top layer, and the fact that the current top layer cannot exist in the medium term because hardware advances will mean no one can buy Enterprise anymore. What will happen then – there won’t be an “Enterprise” option, but there will be an “Enterprise Plus” option? “Enterprise Plus” will revert to “Enterprise”, but existing “Enterprise” licensees will be asked to pay more??

      On the general point of licensing cores and server consolidation, VMware is not obligated to follow this path at all. Hardware prices always seem to stay the same. We’re not going to see HP start charging DL585 prices for a 385 when you can 2 x 8 core CPUs in the 385 are we? Microsoft don’t charge per core and have no intention to (although they have other inane licensing charges like VECD), Citrix dropped their licensing model back to “per server”, but VMware have taken the route of Oracle are going for an increase with additional cores. But again, I’m not complaining about VMware increasing their prices per core – the main point is this new layer above the current top tier. The small increase in revenue that VMware may get from milking their existing large customers will be far outwieghed by the negative sentiment and implementation of a dual vendor strategy for the virtual platform within those large organisations. Nobody wins in this scenario. Especially when the people who call the shots at the end of the day are accountants.

  9. Packetboy Says:

    Stu thats why I love your blog so much.. You always say it like it is!

    Keep up the good work man!!

  10. Dingo Says:

    Well to think that this was supposed to be the route that everyone should take, to move to Nexus…..

    It does seem rather removed from reality, to at this juncture at another level of licenseing, however if you think that EMC have done this before it does make sense.

  11. Roger Lund Says:

    Look at the comparison here

    http://www.vmware.com/products/vsphere/buy/editions_comparison.html

    Looks like you have the cores facts wrong.

  12. Justin Says:

    Another dick move was not providing a damn table with checkmarks showing all the different features. I had to make one myself.

    But the biggest dick move is – if you have VI Foundation? You get vSphere Standard! Have VI Standard? You get…… vSphere Standard! Huh??
    At first I was confused, then I figured it out. There is no free upgrade to vSphere Advanced or Enterprise Plus – all the upgrade paths dump you out at Standard or Advanced.
    WHICH MEANS: If you want 8+ core CPUs, you have to pay for some kind of upgrade (because incongruously, Advanced allows up to 12 cores per socket, whereas Enterprise doesn’t).
    Sneaky, huh?

  13. gorto Says:

    Oops – misfire on a product launch.

    Shame VMWare wasted the opportunity of a (long anticipated) new product launch to confuse (and annoy) users over licensing levels.
    What about the new features and benefits? Who is discussing these aspects?

    Can I have April 21st again with simple, inexpensive licensing and heaps of useful features making the upgrade worthwhile, please?

  14. VMware vSphere and Enterprise Plus | ForwardOrReverse Says:

    […] Here is a good write up of some other ramifications of this policy. VMware Slaps Enterprise and Cisco In Face, Opens Door For Competitors […]

  15. Alberto Says:

    Disclaimer I’m a VMware employee – however, I don’t think it really matters for the nature of my comment…

    Stu, what happened to you? Are you the same guy that wrote the “VMware “Cost Per Application” – A Swing, and A Miss…” on this same blog or did you have an identity crisis? http://vinternals.com/2009/03/vmware-cost-per-application-a-swing-and-a-miss

    Using your own words:
    “There are a number of issues I have with this kind of thing [referring to VMware Cost Per Application Calculator], but first and foremost is that does anybody actually think acquisition cost really matters? Because in the grand scheme of TCO, acquisition cost is pretty much insignificant. It may cost a few grand for a 2 socket box, but it will cost 20 times that or more to support and run it over the lifespan of the box. Even bigger picture, how about that new datacenter you didn’t have to build / move into because you virtualised everything and chopped your existing rackspace in half.”

    When I read that post of yours I thought: “This guy gets it! Acquisition cost doesn’t matter. Too bad that others are not this far ahead of the curve”, but now I am not sure any more. I don’t pretend to change your opinion about vSphere pricing, but to make you aware that:

    1) You are complaining about acquisition cost which in your words doesn’t matter
    2) You look at acquisition cost using the wrong metric, software price

    I am starting to feel as if the VMware Cost Per Application Calculator is more like a nice double off the Green Monster – I am a Red Sox fan 🙂

    Anyway, jokes aside, you should evaluate the features we added to vSphere and determine if they are worth the investment. Only do it with the right approach that you have suggested in the first place. Oh… and by the way, when you look at Citrix remember to account for how much it’ll cost NOT to have those features.

    • stu Says:

      Thanks for reading and the comment Alberto!

      But I have not made myself clear, or you have misread my post (or a little bit of both has happened :-). As i said in the post, I’m _not_ complaining about the cost of anything, or about VMware wanting to charge more for higher core density – I’m complaining about a principle, and the fact that the feature set in Enterprise vs Enterprise Plus is clearly designed to milk cash from existing Enterprise licensees. Because no enterprise will actually be able to buy Enterprise 12 months from now, because we won’t be buying hardware with 6 or less cores in it in that kind of timeframe. So what happens then – we all get forced into this new top tier, an “Enterprise Plus” that 12 months from now won’t actually have an “Enterprise” to “Plus” onto. What a joke.

      When we in the enterprise sign multi-million, multi-year deals with software vendors, there’s a certain level of ‘fairness’ that comes into play. It’s impossible for both sides to know what products or features will be available during the course of a multi-year deal, and so we go in at the very top level with the understanding that during the life of the contract, we will remain on the uppermost tier whatever that may be.

      Now, In the 6 or so months preceding this new licensing structure, (ie Q4 2008 + Q1 2009) VMware booked well over half a _billion_ in license revenue. Half a BILLION.

      So, imagine if your company signed one of these deals with VMware sometime during that period. And there was absolutely _no_ indication from VMware about a potential new upper tier. Imagine you even asked them if any of these new features would attract additional charges, and were told “we don’t know, but you’re on the Enterprise license so you don’t need to worry”. And then this happens. Without a single fucking word to indicate that what you were signing up for sometime in the last 6 months would no longer be the top tier during the lifetime of the agreement. Let alone be knocked from the top 6 months or less into the agreement.

      It’s not about the money, as an architect I don’t give a shit about that side of things – I just make technical recommendations on products and design the most bulletproof virtual infrastructure I can within the confines of the software and infrastructure available to me. It’s not like it’s my money anyway. It’s about principles. Without those, the rest just doesn’t matter.

  16. Craig Says:

    8 virtual SMP is not available for enterprise users, and you force to upgrade to enterprise plus, which you may not need the host profiles and etc. Another pose from Technodrone, show that the enterprise will be EOL soon. Absolutely not fair to the existing enterprise users, who use to pay the most for the top end pricing to entitle everything from VMware Infrastructure, and now been automatic down graded to 2nd class and force to pay more to make your environment survive.

    http://technodrone.blogspot.com/2009/04/will-we-be-forced-to-pay-more.html

  17. smooter Says:

    Yeah, I have to admit that product launches nowadays are the stuff of marketing and sales dreams!

    We techie guys could care LESS about licensing (folks are going to pay for it or they aren’t….), partners, Obama and his Blackberry, etc. We want to know how it works, who its for, how to install it, how to get “there” from “here”!

    So is vSphere “Cloud” really an ESX “cluster”? Do I now have access to the ability to add resources (in this context another server) to the “Cloud” and now have access to more performance? Is that it? That is kinda what the slides referenced by having the new layer, but I couldn’t confirm…

    Always wondered why (given the fact that ESX started out based on Linux) from the giddyup we didn’t have a “Wolfpack” cluster to run virtual machines on. Makes more sense to me…

    Just sayin’

  18. Pablo Says:

    Forget the content debate, this is a childish rant. This site usually does better but dropping F bombs and presenting opinions as facts and then adding “worth” to them with vulgarity…

    Step away from the keyboard for a day or two and get some perspective. Go see a action movie or something.

    Once you’ve calmed down you’ll be worth talking to.

  19. emcleod Says:

    First I would like to point out; we are supposed to be professionals. Using curse words greatly reduces credibility. With that said, I would like to think that with economic times the way they are VMware would be more accommodating to SMB. I am a firm believer that IT in SMB is constantly being chocked. The large companies are able to get cutting edge, while SMB has to typically settle for what they can afford. I think that if someone would implement some drastic changes to pricing, it would open the doors for many. I think that the best solution would have maintenance and licensing be priced on some sort of percentage. Say x% of income or something similar. So basically the price will scale based on the company.

  20. Cisco releases a trial of Nexus 1000V | בניית אתרים טכנו-ביסים (techno-bites) | בניית אתרים Says:

    […] that it’s only available in the new vSphere Enterprise Plus license. Some VMware customers are arguing that the current packaging and price may negatively impact the sales of Nexus 1000V, which becomes […]

  21. Cisco propose le Nexus 1000v en version d’évaluation - Le Blog de Julien Mousqueton Says:

    […] that it’s only available in the new vSphere Enterprise Plus license. Some VMware customers are arguing that the current packaging and price may negatively impact the sales of Nexus 1000V, which becomes […]

  22. Rational Survivability » VMware’s Licensing - A “Slap In The Face For Cisco?” Hey Moe! Says:

    […] switch, is also a for-pay item.  Without the vNDS, the 1000v no workee: Some VMware customers are arguing that the current packaging and price may negatively impact the sales of Nexus 1000V, which becomes […]

  23. Thomas Says:

    The idea that cursing lowers the value of discourse is absurd. Cursing indicates strong feelings and strong feelings are the results of inappropriate dealings in regards to relationships. Stu may be pissed because he has strongly supported VMWare as a strategic platform in his company and may have helped VMWare sign a strategic sale. In return, the company is using “plausible deniability” by separating soft commits by its salespeople from roadmap knowledge in the Product Management & Executive ranks. This is a game that is eating itself and is the reason why other avenues such as Open Source flourishes.
    Now this being said, if Stu or his company really is signing the size and type of deals he says they’re signing, then he should get access to any higher-order feature layers included for no additional cost *in writing*. If you’re a multi-million dollar buyer, you can do it. You just need a smart procurement department.

    • stu Says:

      Thanks Thomas, much more eloquently put than I could have done :-). And you’re not wrong about the procurement smarts, although I’m not complaining about being kept at arms length from that side of deals 🙂

  24. ZenIT Blog : Perché sceglie Microsoft invece di VMWare Says:

    […] VMware Slaps Enterprise and Cisco In Face, Opens Door For Competitors (ah, a volte usa un linguaggio un po’ “colorito” 🙂 ) […]

  25. AC Says:

    To Pablo and emcleod:

    Vulgarity and curse words? What was vulgar about this post? Can you definie “curse words” for us? I don’t get it. Should he replace an “F-bomb” with “frickin” instead? Is that acceptable? How exactly is that word any different? Slang is slang. Nothing was vulgar about this post. You might be able to argue the professional aspect of the article, but I’d disagree with that. His points were based on his professional opinion and this is his personal web site. Let him be… It is nice to see someone not take things so seriously, yet do an excellent job, I think.

  26. Welcome to vSphere-land! » News Links Says:

    […] a reality The Real Impact of vSphere VMware Takes on the Data Center With New Cloud Technology VMware Slaps Enterprise and Cisco In Face, Opens Door For Competitors VMware’s vSphere of influence vSphere Announced. Now What For VMware Customers? VMware announces […]

  27. VM-Net » Blog Archive » Cisco Nexus 1000v Trial Says:

    […] socket is actually discounted by %50 if you upgrade before December 15, 2009 some VMware customers are arguing that the current pricing and licencing tiers  may negatively impact sales, not only of  […]

  28. Kyle Weir Says:

    I’d just like to chime in on the Host profiles. First of all yes, it is handy to be able to apply a bunch of settings onto a dozen servers or so. But well I’m a powershell guy, and I can do pretty much and of the settings in my sleep to any/all of the servers I want to. But what I do appreciate is what brugh came up with, his EDA appliance lets me deploy my hosts with all of the settings I want. And heck it’s nice to do a clean install every so often with the # of patches vmware puts out.

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