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New XenServer pricing to help Citrix, partners compete in virtualization

Citrix and partners can now sell XenServer on a per-server basis, rather than per socket.

The new XenServer pricing model will make Citrix Systems Inc. more competitive in the server virtualization market, but Citrix partners differ on just how significant the move is.

On March 31, Citrix released XenServer 4.1 and announced a per-server pricing model. Previously, Citrix and its partners determined XenServer pricing on a per-socket basis. Chris Wolf, senior analyst for the Burton Group, said the new model gives Citrix a leg up on VMware and a head start against Microsoft, which expects to ship its Hyper-V hypervisor later this year.

Server virtualization vendors typically charge incremental fees based on the number of CPU sockets on each server. That can increase overall cost and complicate calculations for customers who must track the number of deployed CPU sockets in their entire data center. Microsoft has said Hyper-V will cost $28 per physical host but will be priced on a per-processor basis in the high-end Windows Server 2008 Data Center Edition. VMware charges per processor and defines a processor as a single physical chip containing no more than four processor cores.

"From the Citrix perspective, the time is now," Wolf said of this pricing move. "XenServer 4.1 is enterprise-ready. They need to be aggressive in getting it in their clients' hands before there's additional competition."

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XenServer pricing is "substantially" lower than that of market leader VMware, Wolf said. Microsoft Hyper-V is due later this year, but Wolf does not expect mainstream adoption of Hyper-V until late this year or early next year.

"Hyper-V is a really interesting discussion, because you're getting the hypervisor with the server operating system," he said. "That is a very cost-effective solution."

Francis Poeta, president of Citrix partner P & M Computers Inc. in Cliffside Park, N.J., called the new XenServer pricing model "a competitive shot across the bow of VMware."

"VMware's going to have to respond," he said. "They can't not respond, and it will be interesting to see what the response is. Two products that are relatively on par can't coexist with one costing twice as much as the other."

The move will cut down on paperwork for Citrix partners, Poeta said, but he questioned the need to change the XenServer pricing model.

"I don't see it as a bad thing, but I don't think it was necessary," he said. "I've never had a customer balk at [per-socket pricing]."

But Sameer Dholakia, CEO of VMLogix, a Citrix partner in Palo Alto, Calif., said his customers have been asking Citrix for this change.

"It's great to see folks are listening to customers, and that's what's driving this decision," he said. "Simplicity is better than complexity."

The new XenServer pricing model will shorten the sales cycle and free up time for Citrix partners to make more sales, according to Dholakia. When a partner sells on a per-socket basis, the customer has to take inventory of all of its servers and their configurations. That process typically takes a few hours, but waiting for the customer to get around to doing it can stall the sale for much longer, Dholakia said.

"This will solve that problem considerably," he said.

The XenServer pricing should also create more services opportunities for Citrix partners. Customers who save money under the new model will have more to spend on services, and the open architecture makes it easier for partners to integrate with other products, Wolf said. Selling XenServer on a per-server basis could also boost the virtualization hardware market.

"It's giving them an incentive to buy bigger and faster hardware," Wolf said.

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