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A Justification for Server CALs? 74

Posted by Cliff
from the buy-software-with-licensing-you-can-cope-with dept.
bourne.again asks: "I'm a bit confused about server client access licenses (CALs). I've looked at it from every angle I can think of, but I'm still stumped. I can't think of any justification for CALs other than greed. If you think about it, requiring CALs means that it is possible to buy a copy of a Windows server OS that can run on a server, but can't actually server anything because it has no CALs. That's a bit ridiculous. The same goes for per-cpu licenses. Shouldn't it just be per machine? An extra CPU doesn't allow you the full capabilities of a second machine. It's still just one server/workstation. Can somebody enlighten me on this, please? Why should we pay for server software, and pay per client too?"
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A Justification for Server CALs?

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  • by wcb4 (75520) on Friday December 16, 2005 @02:28PM (#14273682)
    You pay for it this way because that is how the vendors choose to sell it. You can purhcase other software if this does not suit you.... Why do you pay several thousand dollars for a car, because that is the price. Want something cheaper, buy another model.
    • You can justify the price of a car, at least to some extent. You have to pay for parts, labor, taxes, etc. It's also pretty straightforward. Extra features cost extra money, and there are financing costs. The question you ignored was how do you justify the pricing of software. You don't buy a per-parking-space license for a car, and you don't have to pay more for other people to drive it (except insurance, which doesn't really have an analog here).
      • Perhaps insurance does have an analogy here. Perhaps it's due to the fact that the more clients your system is serving, the more likely you'll need to make a call to their support staff. In a way, support is very much like insurance. Of course, this is assuming that they don't have separate pricing for support of the software.
        • "Perhaps it's due to the fact that the more clients your system is serving, the more likely you'll need to make a call to their support staff. In a way, support is very much like insurance"

          for MS you have to pay to get good server tech support per incedent so that's not and excuse.
          • Ok, so I'm exaggerating a bit... but IRL, I'd guess something like 5%-30% of the call-out frequency, depending up on the application. By that I mean that if I'm supporting an MS-Windows server (rare), I'd average a problem requiring intervention maybe once a month on average; supporting anything else with a similar workload would be circa once a year, average. Some (like the few remaining OpenServer installations) are typically harder to fix than others, but nothing breaks as often as Microsoft stuff.

            For wo
      • You can justify the price of a car, at least to some extent. You can justify the price of a car, at least to some extent.

        Cars and SUVs cost what people are willing to pay. Period. That's the only justification for the price. If you think the price of a vehicle is stronly correlated with the labor and materials that went into making it, then I have a bridge you might be interested in...
      • Well, let's see here.

        Perhaps you are a small business with twenty people and you want to buy and use some enterprise server software. A mailserver or something. Perhaps the pricing is $20 per user per year. The small business would then be paying $400/yr for their license.

        Perhaps there is also a huge corporation with 50,000 users. Before applying any discounts or bulk accounting credits here, that would be $600,000/yr.

        Seems fair to me. The other option would be to charge both companies the same price, which
        • That doesn't seem fair at all. What difference does how the user uses the software make to the manufacturer? Why should the big company have to pay an inflated fee to subsidise the product's use by smaller companies?
          • It's fair because you agree to it fully aware before you hand over your money.

            The big company doesn't have to pay an inflated fee to subsidize; they can choose to not pay any fee and do without.

            Jesus, I don't even like microsoft. I also have no idea why people choose to subsidize..
            • by hackwrench (573697)
              "What is the justification for server CALs?" is just another way of saying "Why do people choose to subsidize?"

              The Hitchhiker's Guide to the Galaxy illustrates neatly the problem of not understanding the question.
          • Let's think of it this way . . .

            You have to make money to continue to develop and support that software that you're selling and you can't do that if you sell it for $500 a pop across the board. The more people you have that use it, the more valuable it is to you and the more you pay to continue support and development of the product.
      • Pricing does not need justification. Any normal company prices their products to maximize profit. If Starbucks could charge $100 for a cup of coffee, and get just as many sales as they do now, they'd raise their prices in a heartbeat. The only reason Ford and GM don't charge much more for their cars is because customers will buy from a competitor instead, at a lower cost. If I were running a company, I'd charge as much as possible, because I want the most profit possible for the least work possible. Wh
  • what you're told. That's why. Remember way back twenty years ago when things like a Mac cost $2500? Well, profit margins ain't what they used to be, so new and inventive ways have to be thought up for profit to be made. If people really cared about getting screwed, we wouldn't all be paying "universal access charges" on our phones.
    • Remember way back twenty years ago when things like a Mac cost $2500?

      No. I remember 20 years ago when a Mac Plus with a second floppy drive and a dot-matrix printer cost like $5,000 though.

      I think you could buy a 20 mb hard drive for about $2,500. Maybe that's what you were thinking of.
  • I guess someone could make the argument that it is more fair to the smaller customers. Pay $8000 for a sever license, and $50 for each of 75 clients, rather than pay $5000 for a server license. But yeah, it's probably mostly greed.
  • Microsoft used this strategy to underprice Novel. With Netware, if you had n servers and m clients, then your cost was proportial to n * m. With Microsoft, it was more like n + m, which is weird but cheaper.

    • With Netware, if you had n servers and m clients, then your cost was proportial to n * m.

      Since when did you have to purchase both an NDS license and a NetWare [or SuSE] server license?

      Novell servers have been essentially free since 4.x [circa 1995]. In fact, way before the era of pf/ipfw/ipchains/iptables and whatnot, you could get a really nice low-level switch/router/packet filter/firewall/etc simply by installing a NetWare server and then removing NDS from it.

      As I recall, the way M$FT killed Novel

  • A balance... (Score:5, Insightful)

    by Godeke (32895) * on Friday December 16, 2005 @02:33PM (#14273727)
    Client CALs are an attempt to balance between extremes of licensing. At one end you have Oracle and the infamous "processing units" where every 100 MHz of chip speed present was billable (no matter if it was due to a single fast chip or multiple slow chips). At the other is a license per machine which can be abused by having a high end multi processor machines.

    Microsoft (since you use the term CAL) has given most products the option of either being per processor (a decent compromise in "bang for your buck" at the high end) or per server with CALs (a decent compromise at the low end, while scaling the revenue with usage). Frankly, I don't find it odd at all, unless you want to contrast it with free software.

    • How is a high-end multiprocessor machine abusing per-server licensing? Is the vendor doing any more work than if I'm running it on a 500MHz single processor machine?
      • The amount of work the vendor is doing is irrelevent. Proprietary software can be licensed at any terms the vendor wants. My point is that, as a proprietary vendor who charges for software, the "per machine" model opens up the option of running a 16 processor box and hosting applications for many more "uses" than a single processor box... all for the same license fee. I know I would do some server consolidation in a heartbeat if "per box" was available for some of my tools.

        I'm not saying that Microsoft has
  • That's Capitalism (Score:5, Insightful)

    by Dr. Bent (533421) <ben&int,com> on Friday December 16, 2005 @02:34PM (#14273736) Homepage
    You don't get to dictate their licensing terms any more than they can force you to purchace something. If you don't like it, don't buy it.

    Of course, the argument could be made that since Microsoft is a convicted monopoly [usdoj.gov] you don't really have a choice, but enforcing anti-trust law is part of captialism too.
    • Well antitrust is not always a part of capitalism, and in the US antitrust is a part of the FTC. The administration picks the FTC and they decide who gets investigated. Just look at the Reagan years and you see all kinds of crazy mergers that would have never happened before. The Bushes have been pretty easy on M&A as well.
    • Hey, you won the prize among hundreds of entries on Slashdot for the dumbest use of the incorrect phrase "convicted monopoly". If you actually read the document you linked to you would see at the top the phrase "Civil Action No. 98-1232 (TPJ)". I don't have to explain the definition of "Civil Action", I hope.
    • Just to clarify: Companies aren't convicted of being monopolies. It isn't a crime to be a monopoly. It IS a crime to abuse monopoly powers or engage in anti-competitive behavior. That's what Microsoft was convicted of.
    • He didn't necessarily say that he is buying a Windows server. He used a Windows server as an example. There are tons of people that have crappy licensing besides Microsoft. The main thing you have to ask yourself is do you really require their software, or can other, cheaper, software do just fine.

      If you're looking to build a web server with a SQL back-end, can a LAMP setup give you what you need or do you need Windows/IIS/MSSQL? Do you need that SCO server, or can a FreeBSD box do it just as well? Th

  • Just start all free/libre/open stuff to begin with, and you'll never be troubled with this again. Leave the closed guys out of the game. Deny them access to the gene pool. They don't need to be mucking up your systems at all!
  • by TeknoHog (164938) on Friday December 16, 2005 @02:42PM (#14273793) Homepage Journal
    In many cases, a machine with a single more powerful CPU can replace a multiproc machine. Also in many cases, a single more powerful machine can replace many less powerful machines. Moreover, regarding a dual-core CPU as one when it comes to licensing is strange, since it's more or less two CPUs stuck on a single piece of silicon.

    A more sensible licensing scheme might take into account actual computing power, networking capacity, etc. Of course, the pricing of replicatable goods is completely arbitrary. It has nothing to do with economics that deals with the distribution of scarce resources.

  • Since you've pirated your desktop software, you have to pay for it somehow. So you pay for it on the server.

    Yes, I know. Don't even point out the horrid illogic in that concept. I also like how w2k AS would leak CALs forever if the client was reformatted, so you had to buy licences over and over. The only fix was to delete the stuck licences and forcing a re-activation of them with *ahem* third party software

    I also loved how their fix for it in SPwhatever didn't actually fix the broken licences, it only
  • by dreamer-of-rules (794070) on Friday December 16, 2005 @02:56PM (#14273893)
    Why does Server 2003 cost me per server, instead of per media? The theory is that after spending years of programmers salaries without compensation, they have to make back the money they already spent just with licensing fees. It's an art, deciding how to price things so that both the little businesses can afford it and still recoup your costs.

    Server CALs are just another tool in balancing software costs proportional to the usage (customer perceived value) and ability to pay.

    It may be partly greed, but remember that most companies have to use their successes to recoup the costs of software that DIDN'T sell. Remember Infocom? Looking Glass Studios? Pricing is an art. CALs are a tool.
  • Companies price their server software this way for the same reason that airlines charge last minute (i.e. business) travelers more than leisure travelers: price discrimination. In other words, charge more to those who are willing to pay more, less to those who are willing to pay less. Sofware firms are in it for the money, after all.
  • by linuxwrangler (582055) on Friday December 16, 2005 @03:00PM (#14273927)
    ...you're asking a bunch of Open Source fanatics for a justification for client access licenses? Good luck.
  • I don't really find the licensing scheme's that odd - they are just different ways of licensing something that is in the end not a product but intellectual property. The product is the server hardware - the software is just intellectual property of something that uses the product. Sort of like text in a book is simply ideas whereas the book is a product.

    The thing I find really odd is that companies can make 80+% profit margins on intellectual property ("ideas") that are mostly 10-15 years old.
  • by Matt Perry (793115) <perry,matt54&yahoo,com> on Friday December 16, 2005 @03:07PM (#14273974)
    It's what the market will bear. As long as people are willing to pay for it then someone will still be willing to sell it. At some level everything is negotiable. I know at my company we don't have to deal with CALs because we have a global contract with Microsoft for use of their software. I have no idea how much that costs us per year. I'm sure it's a lot.

    One other thing that I've noticed is that the more specialized the software, the fewer copies that are sold. This software usually turns out to be more expensive and far more restrictive than more popular software. For example, at work I use a streaming video package that we spent $10k for. When you install it, you enter a license number, it contacts the company's server over the net and then activates the software. I have two problems with this.

    1. If I try to reinstall, the software contacts the company servers and then tells me that the serial number is already used. It then exits. This is a risk for me if the machine with the software needs rebuilding for some reason and I can't get hold of the company to reset the activation.
    2. Related to #1, our SOP is that for new software like this we have to install and test it in a test environment before it's rolled out to production machines. This is to make sure it works properly and that we document the installation and configuration process. We're required by the company to do this. Well, the second time I did the install to double check my docs I ran into the activation error. I had to call the company that we bought the software from to get them to reset the activation. They were afraid that I might be installing it on a second machine, and even said so. They did reset it. Then I had to call the third time to get it reset when we installed it on the production machine. This time they were very upset and I had to get my boss and their CTO involved.

    Anyway, events like this make me really appreciate the "freedom" aspect of free software and open source software. I have little time to dick around with playing games like that with vendors. Not to mention that it leaves you completely at the mercy of the vendor.

    So my point in all this is that eventually companies will learn that it's in their interest to start using software that respects flexibility rather than being node-locked, not allowing reinstalls, charging for extra CPUs & network connections, etc. But it won't make a difference until it starts affecting the bottom line of these companies.

  • Just because ... (Score:3, Insightful)

    by Compulawyer (318018) on Friday December 16, 2005 @03:10PM (#14274004)
    ...it is in the standard license agreement does not mean you have to accept it. These are not EULAs for off-the-[NAME OF FAVORITE RETAILER HERE]-shelf shrinkwrapped software. You'll be surprised at how much you can negotiate - especially at the end of a business quarter (the seller's - not the buyer's).
  • You now understand part of why managers started to appreciate some of the benefits of open source software. The accounting is much simpler. Service agreements are usually based on much simpler metrics (i.e. how many servers do you have running our product).
  • Because you're willing to. They know they can get customers who have more money to pay more. If they didn't have all these price tiers, CALs, and such, Windows for the end user would cost more and Microsoft's total profits would be less. The more they can divide up their licensing to discriminate between specific markets, the better they can optimize the pricing to maximize profit.

    You don't have to buy what you don't want. If you don't need Active Directory, or you feel up to trying another LDAP solution, y
    • It might be a PITa to configure (I just tried too long ago) and there might be features you need that it doesn't have, but it might me worth trying.
      I don't like SuSE, but it I had to admin Windows accounts, Novell SuSE doesn't sound so bad after all.
  • The truth of the matter is, in enterprises of a certain size, the licensing costs aren't much of a consideration at all. tIn fact, they're basically insignificant compared o the costs of administration. I'm not taking a side on that one way or the other. I'm just saying that if a few thousand bucks is a big deal to you, then don't use stuff you have to buy, because obviously you have different priorities.

    In other words, the cost doesn't actually have to be justified. It's obviously acceptable to the mar
  • by metamatic (202216) on Friday December 16, 2005 @03:37PM (#14274213) Homepage Journal
    I see people have already given you the "because people accept it" economic answer. However, there is some logic to server CALs. It goes as follows:

    The value you get from software is proportional to the number of your people using it.

    In the case of software that runs on the client machine, if you have N users you are generally expected to pay for N licenses, so that the amount you pay is proportional to the value you get.

    If I have a server-based web content management system, and have 10 people using it, I'm getting twice as much value from it as if I only had 5 people using it--just like if it was a client-based web editing system. Basically, whether the software resides on the server or the client is a mere technical detail that doesn't really affect the value obtained, and so shouldn't affect the pricing too much.

    So CALs are a way to make server software pricing more like client software pricing--i.e. proportional to value obtained.

    The bit you should be asking about isn't the CAL; it's the initial server software price. The logical reason for an initial per-server fee is to cover the expected distribution and support costs when you purchase the software and try to set up the server. Unfortunately, that lump sum basically makes it disproportionately expensive to set up a server for a small number of users. That's why there has been a trend towards offering cut-down SMB versions of server software with a lower up-front cost.

    Per-CPU and per-MHz licensing is an attempt to shift the expense towards those who can apparently best afford it. Or to look at it from the other side, it's another way to try and make things relatively cheaper for entry-level/low end customers. Like income tax, in other words.

    One thing you didn't bring up is the difference between workstation CALs and (concurrent) user CALs. Personally, I think workstation CALs are a bit of a rip-off, and licensing should always be based on users, whether the software is server-based or client-based. If I use 5 computers in various locations, I'm not getting 5x the value of a server-based CMS--there's only one of me, and the fact that I use 5 machines instead of carrying 1 laptop everywhere should (again) be a mere detail that doesn't affect the value obtained, and so shouldn't affect the price.

    Disclaimer: Opinions mine, not IBMs.
  • Would you rather.... (Score:3, Interesting)

    by Joe5678 (135227) on Friday December 16, 2005 @03:38PM (#14274235)
    If they charged a flat price, they'd need to charge a lot more to make the same amount of revenue. So somebody using it with 5 clients would pay $10,000 as would the person using it with 500 clients.

    Does that seem like a better system to you? Well, probably if you're the guy using the 500 clients.

    An important point to note about Microsoft Server CAL's, as long as each user (or device) has a CAL, you can add as many servers as you want (for the base cost of a server). So if you have one server and 20 CAL's, and you need to purchase a second server, you only need to pay the ~$600 for the Server software, all the clients are covered by CAL's already.
  • CAL's allow you to license the software based on your number of computers rather than users. If you have 50 users who share 5 computers, then you only need to have 5 CALs. On the other hand, in development organizations 5 users can end up using 10 computers if users need to work on multiple computers. In this case the per user model would be less expensive.

    I think you already understand the economics of per user licensing. It allows Microsoft to have different price points depending on the size of the orga

  • What's the alternative to a CAL arrangement? The vendor could charge a flat rate per server or even per company, but that rate would be a lot higher than a per-seat license in order to keep the revenue the same. Should companies that only have five employees using an application pay as much as a company with 500?

    Also, CALs actually make sense if the license fees include support. Generally speaking, more users results in more support calls.

  • Uh (Score:5, Insightful)

    by Dr. Sp0ng (24354) <mspong@@@gmail...com> on Friday December 16, 2005 @04:23PM (#14274827) Homepage
    Because it's their product, and they can charge whatever the hell they want?

    Anyway, it's not a bad setup - that way the large companies that use it for thousands of clients get to foot a lot more of the R&D and support costs than the small companies using it for 10 clients. I don't really see the problem here.
  • I think it makes more sense from a business point of view. You're pricing based on the number of users verses the number of servers. You know that for every employee/managers/client/whatever that you need a cal. 50 empoyees? You just need 50 CAL's and you're covered. It also lets the vendor charge more money to bigger companies then small companies. Assuming that a CAL gets assigned to a person, it's a fixed cost per employee to a company, just like the empoyee's salary. As you can afford to pay more
  • The idea is that you legitimately can charge people based on their ability to pay. A small company gets the service much cheaper than a larger company because there are fewer seats.

    Economicly there's nothing wrong with it.. A larger company can afford to pay more for the same service that a smaller company can; you're just normally allowed to discrimiate pricing.

    Another justification is that w/ client-installed software, you can charge per seat.. But w/ server software there is only ever one seat.. Imagin
  • You could either charge some average pricing from everybody or try to charge more from those with higher demand in your product and less from those with lower demand. With the fixed average price you might completely lose the sales to the potential clients with lower demand while at the same time getting less money from those with high demand, so the average price is not what you want.

    The problem is to find some rule or measurement for "how much demand for my product does potential customer x have?", ideall
  • They will do it the way that generates the most revenue. Our (the market's) behavior dictates the terms. Apparently this arrangement leads to the best bottom line. Why? General social conditions and perceptions would seem to indicate that a majority of consumers accept this notion as a reliable and predictable measure of the product's value. When one is confronted with the expense of an enterprise of elaborate dynamic scale, it is logical to break that system down in terms of units, like the bricks in
  • I can't think of any justification for CALs other than greed.

    Well, that one's good enough for most money grubbing s/w companies. Why do you need more?

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