Wave good-bye to VMware’s unloved vSphere vRAM ‘vTax’

After what may be considered a failed, year-long licensing experiment, EMC VMware is ready to tear down a virtual wall it created for itself with the institution of a new licensing model introduced with VMware vSphere 5.0 in July 2011. The new licensing scheme took into account both the number of physical processors on the host server and the amount of VRAM allocated and used by the virtual machines on that same host, pushing up prices and reducing IT’s deployment flexibility.

With its upcoming release of VMware vSphere 5.1, VMware is removing the vRAM licensing requirements and returning to its previous CPU-based licensing model, which customers preferred. The simplified licensing may make life easier for everyone involved: VMware’s salespeople, customers, and VMware partners.

[ Also on InfoWorld: Get the big picture on the new vSphere 5.1 family from Ted Samson, an analysis of its key features from Matt Prigge, and a look at how it changes network administration forever from Paul Venezia. | Keep up on virtualization by signing up for InfoWorld’s Virtualization newsletter. ]

In case you’ve been living somewhere in the clouds for the past year and missed the news, here’s how things went down with VMware’s vSphere licensing changes.

In July 2011, VMware launched a major update to its server virtualization flagship product, VMware vSphere 5.0. But with the release came a new licensing model — one that added a penalty of sorts based on the amount of memory allocated and used by the virtual machines.

Immediately, industry pundits went after the new model and posed the question of whether the change would significantly increase prices or not. VMware customers were asked how the new pricing would affect each of their organizations, and if they would consider using an open source or alternative hypervisor to save costs.

In response, VMware came out quickly to try and get in front of the situation by explaining the licensing changes. The company said it was evolving its product licensing to give customers a “pay for consumption” approach to IT. It seemed to make sense as the company progressed from a private virtual data center player into a key cloud provider.

VMware also claimed the change in the vSphere licensing model would only affect less than 5 percent of its users. However, what it didn’t count on was that a small minority of its users would also be the most vocal — and not in a good way. Whether directly affected by the new pricing scheme or not, there was an unexpected outcry in VMware’s own public forums and on well-respected virtualization community blogs. As time rolled on, more and more of these users began crying foul.

Microsoft jumped all over the negative bandwagon and began using VMware’s new licensing changes against it in a series of marketing campaigns in the hopes of luring away VMware customers to Hyper-V. As part of those campaigns, the Redmond giant helped coin the negative rallying cry of “the vRAM tax,” or “vTax.”

Weeks later, in August, VMware changed the vSphere 5.0 pricing by increasing vRAM entitlements for all vSphere editions, including the doubling of the entitlements for vSphere Enterprise and Enterprise Plus; capping the amount of vRAM counted in any given virtual machine; and adjusting the model to be much more flexible around transient workloads and short-term spikes typically found in test and development environments.

That change seemed to quiet the talking heads in the community, but frustrated VMware shops were already exploring alternative hypervisor products such as Citrix XenServer, KVM, and Microsoft Hyper-V. Those products didn’t charge by how much memory was being consumed, so they appeared to be cheaper.

Fast-forward 12 months, and VMware is finally ready to put an end to its vSphere licensing experiment.

For those of you around in the mid- to late 1980s, this brouhaha may remind you a bit of the Coca-Cola company’s “New Coke” debacle. Remember, Coke decided to change its flagship soft drink formula, making it sweeter to appeal to a broader audience. But the public’s reaction wasn’t quite what the company had hoped for. The change caused a backlash from the consumer, and New Coke became a major marketing failure. But when Coke rebranded and reintroduced “Coca-Cola Classic” — the original formula — to the market, it saw a significant gain in sales for its product.

Can VMware expect the same result with this backtrack to the previous licensing model? With only a minor dot release of its flagship vSphere product announced at VMworld today, VMware should expect to get a lot more attention for this release than it normally would have because of the licensing change. And all those vSphere 4.x users who’ve been hanging on the fence waiting to upgrade to 5.0 may now finally make the move, happy now that the “vSphere classic” licensing back.

I consider VMware’s licensing model change last year to have been a bold move, and one that it probably needed to make to increase licensing revenue and to fund its cloud vision. But it was done with ill-conceived timing. It will be interesting to see how VMware handles the additional CPU licenses already purchased by VMware customers that tried to stay in compliance of the dreaded vRAM tax.

This article, “Wave good-bye to VMware’s unloved vSphere vRAM ‘vTax’,” was originally published at InfoWorld.com. Follow the latest developments in virtualization and cloud computing at InfoWorld.com.