In the rush to roll out servers with multiple processors on a single chip, IBM, Intel, Sun and others are inadvertently raising software costs for users.

Software vendors such as Oracle and Microsoft license software on a per-CPU basis and are likely to consider each processor a separate CPU - something that in practice will double licensing costs for companies deploying new dual-core servers.

With four-core servers and more on the horizon, the issue likely will become amplified as vendors try to figure out how to price software and companies work to manage IT budgets. At the same time, other technologies - such as server virtualization and grid computing - are also causing some tricky software licensing issues.

The trend toward multi-core systems is an effort by server chip makers to drive up performance, while reining in system power requirements and heat generation. By using these architectures, vendors can use more lower-power cores - which generate less heat - instead of ramping up the frequency on single cores to boost performance. IBM has had a dual-core chip since 2001, and Sun and HP rolled out dual-core processors earlier this year. Intel and AMD recently announced that they would move to dual-core designs in 2005.

"Multi-core is a symptom of a bigger issue," says Al Gillen, research director of system software at IDC. "The bigger issue is that we have changing technologies that are making historical licensing models no longer directly compatible with the way people are buying and deploying their equipment today."

WL Gore, best known for its Gore-tex fabric, negotiated a software license with Oracle late last year and then began updating its Sun hardware. In the process of bringing in servers based on Sun's first dual-core chip, UltraSparc IV, the company discovered that Oracle considered each dual-core UltraSparc IV to be two processors for licensing purposes. It was faced with paying double what it originally expected to pay for licensing - amounting to $100,000 per server in additional costs.

"When we first heard this, we weren't happy, of course," says Richard Sun, network systems engineer at WL Gore. "In all of our initial conversations with Oracle, before we purchased the licensing, we had said we were going to buy the [Sun] hardware when we were ready to implement, so we felt going to UltraSparc IV was no issue."

Analysts say WL Gore is not alone when it comes to being surprised by the increased software costs when updating to multiprocessor systems. "In fact, I have spoken with clients who have been told exactly the opposite from the server vendors," says Jane Disbrow, a research director with Gartner. "They've been told, 'No, you don't have to pay double licenses. This is going to save you money in software.' I'm the one that has to give them the bad news."

While most software vendors still are feeling their way around the multi-processor issue, Oracle recently made changes in its contract language to ensure that there is no confusion. In April, the vendor changed its licence agreement to redefine its processor metric to explicitly state: "For the purposes of counting the number of processors which require licensing, a multi-core chip with 'n' processors shall be counted as 'n' processors."

One reason for the confusion is that software vendors have not regarded chips with simultaneous multi-threading (SMT) or Intel's Hyper-Threading technology, which make single processors work as though they were two processors, as more than a single processor. "The reason for that is pragmatic, and that is that those two threads per core don't do anything like double the performance. It may be 10 percent to 25 percent to 30 percent performance improvement, but essentially SMT is a performance-enhancing technique to increase utilisation of a processor core," says Gordon Haff, an analyst with Illuminata.

What isn't so obvious, some industry observers say, is what kind of performance boost users will see against comparable single-core systems. In addition, licensing costs associated with multi-core architectures might complicate other issues, such as buying processors for redundancy, users say.

Despite user concerns, most industry observers seem to agree that it's not unreasonable for software vendors to consider dual-core CPUs as two processors. Bigger issues are likely to emerge, however, as architectures move into four cores and beyond. Sun, for example, plans to release systems in 2006 based on a next-generation chip codenamed Niagara, which will have processors with eight cores, each capable of running four simultaneous threads, or software instructions. Intel, which plans to release a dual-core Itanium chip next year, reportedly expects to increase the number of cores to eight and then 16 in the years ahead.

"By the time it gets beyond dual-core, the software vendors are truly going to have to think about a different way to license their products," Disbrow says. "Eventually, people won't be able to live with the software costs. The software vendors are definitely going to have to look at how they're charging for this."

Analysts and users expect software vendors to change licensing plans to make them more flexible. Sun last year began using subscription pricing for its Java Enterprise stack of middleware software, letting users pay for applications based on the number of employees, regardless of what systems the software runs on and how many services and customers it serves.

John Fowler, executive vice president of network systems at Sun, says the trend toward multi-core processors, and dynamic computing environments, in which workloads are moved among systems according to application demands, prompted the licensing change. "What drove the change for us was the fact that customers really need to be able to move around workloads and respond to different application needs," he says. "A dynamic computing environment is not eight weeks of lawyers every time you have to renegotiate a license."