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IDC: Multi-core chips to disrupt software pricing by 2007

Matt Stansberry

As if software pricing schemes weren't confusing enough, the widespread adoption of multi-core chips will likely disrupt software pricing across the entire IT ecosystem, according to a new report from Framingham, Mass.-based research firm IDC.

Multi-core chips

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-- originally introduced by IBM in 2001 on Power, and then on Sun's Sparc -- are now in production by chipmaker giants Advanced Micro Devices, Inc. and Intel Corp.

The ability to put multiple cores on a single piece of silicon has given some hardware a boost, allowing companies to get more bang for their buck at a lower form factor. And while some software companies are calling themselves "core neutral" and charging customers per socket (i.e., per chip), others, most notably Oracle Corp., are charging for this extra performance. For dual-cores, Oracle treats each core as three quarters of a chip.

Companies that are "core neutral" include giants like Microsoft, VMware and Red Hat, while IBM splits the difference, charging per core for its larger Power-based systems like the mainframe, and charging per socket (per chip, regardless of the number of cores) on its smaller boxes, such as the xSeries.

More multi-core processor news:

AMD releases dual-core Opteron processors

Chip makers move to boost virtual machines
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More multi-core processor news:

AMD releases dual-core Opteron processors

Chip makers move to boost virtual machines

According to the author of the report, Matt Eastwood, vice president of enterprise server research at IDC, software isn't optimized for multi-core yet. It needs to take a stronger foothold in the market. The performance of multi-core chips varies based on the type of workload, and in some cases you'll get an 80% boost from the extra core, and on other applications it might only be 30%.

But despite this inequity, the technology will mature with each iteration and lead to increased workloads on smaller servers. Eastwood said next year will be the watershed for multi-core processors.

"In 2006, most of the servers being shipped will be multi-core," Eastwood said. "ISVs [independent software vendors] are taking a deliberate approach to understand the impact of this. We're suggesting that the first rollout will not have much of an impact, but in the second and third wave there will be. Processors turn on an 18-month cycle, so by 2007 you'll be on that second wave."

And while experts agree that multi-core chips are going to reach critical mass in the next few years -- changing the way IT organizations buy software -- they don't have a consensus view of where it's going to go.

"We're almost at a tipping point. Microsoft and Red Hat have embraced per-socket pricing as the way to go, but Oracle has been slow to change. Multi-cores will enter the market very rapidly and Oracle will feel a lot more pressure to switch to per-socket pricing as more customers have multi-core processors," Eastwood said.

Others disagree, and say software companies won't be able to resist raking it in for that extra power users are getting. But software companies might have to switch metrics altogether to avoid chafing users.@13239

Joe Clabby, vice president and practice director with Boston-based Summit Strategies, predicts the likely scenario will be a shift to a service or per-user based model.

"Right now, if you buy a server with two sockets [or chips], with two cores per socket, you essentially have a four-way server. But when you get to four, eight or 16 cores per socket, companies like Microsoft and VMware [that are not charging for the extra cores] aren't going to be able to look the other way," Clabby said.

Clabby cited San Francisco-based CRM vendor Salesforce.com as a good example of a company using software as a service.

"It's about charging people on a usage basis and that's where the market has to go. Price based on an amount of time or on the number of users," Clabby said. "Oracle introduced power-based pricing in 2000 and it flopped. They had to go back to per CPU. People don't like power-based pricing."

And others said the report ignores the real 800 lb. gorilla facing software pricing -- virtualization.

"Is multi-core disruptive? Yes. For a long time now, a lot of processor pricing has been per-processor," said Gordon Haff, analyst with Nashua N.H.-based Illuminata. "But far more disruptive, in my opinion, is virtualization, which divorces the logical or virtual system from the physical server and can do it in a very dynamic way. Virtualization and its cousins [grid, utility computing, etc.] will make pricing that's tied to physical components of any type increasingly an anachronism."

Let us know what you think about the story; e-mail: Matt Stansberry, News Editor


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