The future of VMware public clouds

For those of you who run cloud infrastructures or operate hosted virtual servers there's a good chance you are using VMware. In fact if you read the latest "Cloud Infrastructure as a Service and Web Hosting" Gartner Magic Quadrant, there is criticism for providers who aren't using VMware.

When it comes down to licencing, because VMWare end user licencing agreements do not allow for products to be used in hosting environments, service providers have to enter into a VMware Service Provider Program (VSPP).

The reason for me asking about the future of VMWare public clouds is that the current VSPP which is based on charging per active virtual machine will be defunct by March 2012. The replacement VSPP agreement will be charged on the amount of virtual memory allocated to each virtual machine. This isn't a major issue until you start creating VMs that are allocated over 3GB RAM, for example the cost for a 32GB VM will work out over 13 times more expensive than under the previous scheme (to the provider).

My question though is how this will impact the big public cloud providers such as Navisite, Rackspace & Opsource who run on VMware and charge by actual RAM usage. Surely this will be impossible to maintain as if a user creates a 32GB RAM VM but only draws 2GB RAM, then the provider will be in a position of having to pay VMware for a 32GB VM licence and only receiving customer revenues for 2GB of actual usage.

I'm sure it will come out in the wash, but I wouldn't be surprised to see some major pricing structure changes from the big providers over the next 12 months.