The notion of an individual computer disappears with the infrastructure as a service cloud computing model as does the decades old approach linking software sales to physical computers. The early attempts at software pricing in a cloud environment do not look promising. Amazon EC2 scales the fee for Windows in direct proportion to the instance price in an arrangement that gets very expensive very quickly. The Windows option for the Amazon Extra Large High CPU instance costs $350 per month or $12,600 over the three year useful life of an on-premise server.
Software pricing always followed the usual economic rules of supply and demand, but the sale of a one time license on a computer by computer basis proved a successful distribution model. Software prices did not necessarily decline along with hardware prices, but the cost relative to processing power declined as hardware capabilities improved. Software offered more features and functionality over time even given a relatively fixed price. This cycle of improvement triggered a upgrade cycle that produced recurring revenues of software companies.
Microsoft always offered enterprise and consumer versions of licenses for the same basic functionality given differences in willingness and ability to pay, and maximizing sales always meant preventing software from getting loaded on more than one computer. The per computer model started to show its age wiht the emergence of multi-core chips and the expanding share of multi-processor computers. Linking licenses to the physical computer gets problematic when the capability of individual computers diverge. The elimination of the one time license in an on-premise context demands an entirely different approach.
Microsoft adapted to changes in the number of processers per computer by assigning licenses as a function of processor count. Some companies have linked licenses to core count. These changes do not necessarily reflect an increasing utility of software from an end user perspective, so these escalating costs contribute to the growing interest in open source offers in a number of categories. The lack of a standard unit of compute resources noted previously contributes to the chaos, but settling on a standard compute unit does not solve the problem software pricing. Software pricing needs to obtain a direct relationship with the associated value proposition.
Salesforce charges license fees as a function of the number of users. The fees may go up and down as a function of the volume or contract duration, but the fees do not have a direct relation to the underlying compute resources consumed. The cost of implementation almost certainly go down over time for each Salesforce user, but the pricing reflects the existence of competitive offers more than direct costs. The same applies in the case of Windows or any other software offer in the need to demonstrate value independent of the cost performance improvements of underlying hardware.
VMWare pricing links to the number of virtual machines rather than the underlying hardware. Oracle licenses remained tied to hardware. The Oracle approach means deployments get less expensive with each subsequent generation of processors from Intel and AMD. The absence of debate about pricing represents additional evidence of the relatively modest degree of deployment momentum, but a cloud deployment model charging $12,600 for a Windows license seems unlikely to `displace on-premise options offering the same functionality for 5% or so the of cost.