Dual-Core Chips May Raise Software CostsDual-Core Chips May Raise Software Costs

Faced with weak demand for PCs and technical limits on the speed of its products, Intel is betting on a future in which every chip it makes contains what amounts to two computers. The dual-core technology could bring big performance gains to business computing. But there's a potential roadblock to adoption of the chips--will customers have to pay twice for the software that runs on them?

Intel, the world's largest maker of computer chips, said at its Developer Forum in San Francisco last week that it will begin delivering the dual-core chips next year. The company has shifted its research and development spending toward products that contain two processors on each chip, which can deliver the sharp performance increases the IT industry depends on for sales and profits. Clock-speed increases can't do that anymore, as power-efficiency problems sap chips' performance and generate too much heat. By 2006, Intel expects 40% of its chips for desktop PCs, 85% of those for servers, and 70% for notebooks will use dual-core technology. Intel rival Advanced Micro Devices Inc. plans dual-core chips by next year as well.

But there's a debate under way between Intel, AMD, and IT departments on one side and big software makers on the other. "We don't believe it's fair to the customer to penalize them because we or Intel has turned one knob to increase performance," AMD VP Ben Williams says. Customers running PCs and servers with dual-core chips should pay once for the operating system and apps that run on them, AMD and Intel say. "Delivering multicore in a package is just delivering performance," says Intel VP and general manager Anand Chandrasekher.

IBM, Oracle, and other business-software companies, many of which base software licenses on the number of CPUs running the software, say two cores means two processors and customers should pay for both. "It really is the power of two processors," says Oracle president Safra Catz. "At this point, dual-core is licensed as two different processors." Customers who don't like the arrangement can choose to license Oracle's database and application server by named users or buy an enterprise license that covers all their computing needs. "We're not trying to block the advancement of dual-core," Catz says. But "in reality, at the customer site, many times these boxes replace two processors."

A spokesman for IBM says if two processors reside on a single piece of silicon, DB2 and WebSphere customers will need licenses for both CPUs. BEA Systems Inc. plans to charge a 25% premium for software that runs on dual-core chips.

Meanwhile, everyone's waiting for Microsoft to decide. The company declined to comment but said in a statement that "the performance customers can achieve from adding an additional core in the near future will be very similar" to the boost they'd get "if they added an additional processor today." Microsoft also says it's working with customers to develop "flexible licensing models" for multicore chips.

That's not good enough for some users. "We're not interested in paying for two processors," says John Thomas, VP for global infrastructure at Perot Systems Corp. "Our view is you have one PC, it should be one price." Perot also manages more than 10,000 Windows servers for its customers and is "trying to reduce costs" for them, Thomas says.

Customers are especially sensitive to anything that sounds like a price increase, as software licensing costs make up a growing percentage of relatively flat IT budgets, says Deborah Conrad, an Intel VP who works closely with Oracle, SAP, and other large software companies. Chief technology officers "are putting pressure on the vendors to figure out a licensing model that's sustainable," she says. "They're all struggling with it."