Important facts about vSphere 5's new pricing model

VMware is charging based on a pool of memory in virtualized servers that can be shared as well as on the number of CPU cores.

The newly announced VMware vSphere 5 has a new "pooled" pricing model that charges customers based on the virtual memory configured in a virtual server. The model does away with limitations on the amount of RAM and number of cores, and it is the only way to buy the new vSphere version.

Announced on Tuesday, July 12 at the VMware Cloud Infrastructure event in San Francisco, vSphere 5 also sports numerous new features including storage distributed resource scheduler (SDRS), auto-deploy, a Linux-based virtual appliance option for vCenter and a Web-based vSphere client.

All of these features are beneficial and powerful (full disclosure: I was a beta-tester of vSphere 5), but of particular interest to many customers are the pricing changes because of the potential financial or administrative impact.

What is vRAM pooled pricing?

The per-virtual-machine (VM) pricing model has become standard for VMware products including vCenter Operations and vCloud Director. But some VMware shops don't like this pricing system, because it uses a flat price across all VMs, no matter the size of the VM -- and of course not all VMs are created equal. There was some speculation that the next version of vSphere would also be based on this model. Instead, VMware has added an entirely new variable to its pricing lineup, one that I don't believe has previously been used for software licensing.

VMware resources

Where to learn more about the pricing changes and how they might affect you:

VMware's vSphere 5 white paper (PDF)

A VMware blog entry that explains more about the vendor's thinking behind the pricing changes and how it works

VMware's video explaining the pricing changes

With vSphere 4, for each socket license you purchased, there were restrictions on the number of CPU cores per CPU socket (6 cores for the Enterprise, Essentials and Essentials Plus versions of vSphere 4, and 12 cores for Advanced and Enterprise Plus). There was also a physical RAM limitation per host (256GB for Standard, Advanced, Enterprise, Essentials and Essentials Plus, and unlimited for Enterprise Plus).

This setup didn't work for some customers or for VMware. Sometimes customers would hit the core limits and couldn't easily grow their infrastructure.

On the other side of the issue, the Enterprise Plus edition of vSphere, in particular, meant that VMware didn't get any additional revenue even as the customer increased the number of sockets, or the amount of physical RAM on a host.

With vSphere 5, these core and memory limitations have been completely removed and customers now can use an unlimited number of cores and RAM. Besides the traditional licensing per CPU socket, the new variable that VMware added is that customers will now be charged based on the amount of virtual RAM (vRAM) the admin has configured for the VMs.

vSphere 4 vs vSphere 5 licensing

vSphere 5 will now be sold based on a per-CPU-socket price (as vSphere was before) but with each level of vSphere offering a certain amount of vRAM entitlement (see chart). These vRAM entitlements will be automatically pooled by vCenter to license a specific amount of configured vRAM across all similarly licensed servers.

Breaking down the numbers of entitlements

vSphere 5 edition

vRAM entitlement per license

Average # of VMs entitled

Average # of VMs entitled on 2-way server

Average # of VMs entitled on 4-way server

Standard

24GB

6-12

12-24

24-48

Enterprise

32GB

8-16

16-32

32-64

Enterprise Plus

48GB

12-24

24-48

48-96

Source: VMware

There are some very important points that I want to stress:

Every vSphere socket license you buy has an entitlement for vRAM, and the amount of that entitlement varies by vSphere edition.

The entitled vRAM from all the licenses you own will be pooled (added up) on the vCenter server. So if you have multiple vCenter servers, you can use linked mode to pool all entitled vRAM across all your sites.

From that shared vRAM pool, every powered-on virtual machine's configured memory will be subtracted. In other words, vRAM pools are not based on active memory but on configured memory of VMs that are powered on.

Other important information:

There is a pool for each edition of vSphere 5 that you have licensed. Thus, if you own vSphere Standard and Enterprise Plus, there is a vRAM pool for each, and servers using different licenses can't share the vRAM from a pool that they are not part of.

vSphere Standard, Enterprise and Enterprise Plus won't keep you from powering on a virtual machine if you exceed your pool amount, and will just give you a warning. (Your end-user license agreement does, however, specify that you purchase licenses before you exceed your vRAM pool, not after.) vSphere Essentials and Essentials Plus will, however, prevent you from exceeding the pool by not allowing you to power on the virtual machine that would put you over the pool amount.

Once you have upgraded to vSphere 5, at any time, you can report on the utilization of your vRAM pool in the vSphere 5 client by going to the new licensing report tab.

The controversies of pooled pricing

Some customers are complaining that the vRAM entitlements are too low. But VMware responds that the entitlements were calculated based on average customer data. On average, according to VMware, customers have a 5:1 consolidation ratio on their hosts (five virtual machines for every physical CPU socket) and, on average, customers configure 3GB of memory per virtual machine.

VMware also says that for most customers, upgrading to vSphere 5 will have no negative financial impact because customers won't have to increase the number of licenses they already own. According to the VMware white paper, "Although it is impossible to predict the effects of the new model in every type of environment, the licensing model has been designed to minimize the risk of potential impacts in existing environments while also providing room for growth."

However, the reality is that every customer is different. Some customers may have extra vRAM capacity after upgrading, some may break even and some will need additional licenses.

VMware will offer a free tool that can be used to determine if your vSphere 4 infrastructure will be able to upgrade to vSphere 5 without purchasing any additional licenses. The tool will be ready with the general release of vSphere 5, although the vendor won't commit for when vSphere will become widely available. (That's likely to be before the VMworld show in late August.)

In my opinion, there are three factors that may cause you to be over your vRAM entitlement:

Multiple overprovisioned virtual machines

Not using high availability (meaning you don't have idle servers with vSphere licenses that can contribute to the vRAM pool)

Using the "scale up" model (for example, using servers with relatively few sockets and a high amount of RAM)

Customers who have been using (or are planning to use) the "scale up" model will be hardest hit by this vRAM pooled licensing. For example, say that you use servers with 2 sockets and 256GB of RAM. Even if you bought two vSphere Enterprise Plus licenses, you are entitled to only 96GB of RAM (48GB x 2). Likely, you use overprovisioning but even if all you did was to configure 85 virtual machines up to the physical server RAM (using the VMware average of 3GB per VM), you would need to buy 6 vSphere Enterprise licenses (to meet your 256GB need) instead of 2 licenses under the current pricing scheme.

This simple example gets progressively worse the more servers you have and the higher density the RAM on each server.

Customers respond

Customers took to the airwaves to express their opinions about the new pricing scheme. A VMware administrator named Bob Plankers wrote in his blog, "I don't like that the change penalizes those using the 'fewer, bigger machines' model, which is a giant time and money saver." However, he goes on to say, "I do like the new licensing because I can now assign direct values for chargeback for VMs, based on size."

Commenters on Plankers' blog entry -- over 40 as of this writing -- also raised a combination of good and negative points about the changes.

Another blogger, Gabrie van Zanten, had a more positive spin. He did the math for five different licensing scenarios. "I was surprised to learn that NONE of them will require more licenses when upgrading to vSphere 5," he writes.

More customer feedback, generally negative, can be seen on the VMware communities blog and on another VMware blog, here. Many of the posters are complaining about the additional licensing costs this change will incur for them.

Other opinions, including those from industry analysts and other experts, can be seen on Wikibon.

My perspective

VMware does admit in its vSphere 5 Pricing and Licensing document (PDF) that the new pricing model is meant to "align virtualization costs with value received" and "lay the foundation for a pay-per-consumption model." Thus, if this is an alignment then it makes sense that some customers will be "mis-aligned" and will have to be "re-aligned."

Also, it makes sense that if the new pricing is pay per consumption, then some customers -- especially those with servers that have large amounts of RAM -- will have to pay more because they are consuming more. This is like customers who have cellular data plans that have had to change from unlimited plans to capped and per-megabyte plans over the past few years.

VMware Enterprise Plus customers are also having to change to the pay-per-consumption model. While this transition may be painful to some, these changes may not have any effect on others.

Still, VMware vSphere is the leading virtualization platform for a good reason. It offers unparalleled features that, in my opinion, the competition can't get close to. (For a great overview of vSphere 5's features, check out this video of VMware CTO Steve Herrod.) I would bet that most admins who talk about moving to another hypervisor just haven't used those hypervisors. If they did try them, they would find that VMware vSphere is worth the extra cost. At least, this is the way I felt when I used some other hypervisors.

Your next moves

There are some steps you can take to make sure you're not overpaying. Most important, make sure to do the math. Enterprise virtual infrastructures are complex and, when combined with the variables presented by the new vSphere licenses, there are many permutations that can and should be considered to ensure that your company doesn't pay any more than necessary.

Spend time making sure that your virtual machines aren't vastly overprovisioned (third-party tools can help). Use the upcoming vSphere 5 tool to analyze your vSphere 4 infrastructure and find out if you need additional licenses. And finally, if you do have to pay more than you think you should, make sure that you take that up with your local VMware representatives and at your local VMware user group meeting. There might be some other configuration for your application needs they can help with.

David Davis is the author of the best-selling VMware vSphere video-training library from Train Signal. He has written hundreds of virtualization articles on the Web and is a vExpert, VCP, VCAP-DCA and CCIE #9369 with more than 18 years of enterprise IT experience. His personal website is VMwareVideos.com.

This story, "Important facts about vSphere 5's new pricing model" was originally published by Computerworld.

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