Oracle has admitted it is "too complicated" to develop a licensing model that accounts for software running on virtual servers, despite the growing adoption of virtualised environments at many large enterprises.

Speaking yesterday, Oracle president Charles Phillips said that customers remained happy with Oracle's current licensing model, which is predominantly based on physical machines running the software.

"We license by the physical partition as there is no way we can know what [customers] are doing with [the machine]," Phillips said. "It is too complicated to do it any other way."

Phillips insisted the current model remained valid regardless of the growing popularity of virtual machines and suggested it would prove all but impossible to develop a system that accounted for the flexibility delivered by virtualised systems. "If there are 4 CPUs that is what we license for," he explained. "If you have a TV subscription and you don’t watch the TV one day you still pay the subscription".

Last year, Oracle modified its licensing to account for rising adoption of multicore chips, but Phillips suggested changes to deliver "virtualisation pricing" are unlikely.

The news is likely to be welcomed by customers using virtualisation software to drive up utilisation rates and reduce the number of physical processors they run. However, some experts predict vendors will ultimately have to develop licensing models to account for virtual servers in order to protect their revenue streams.

Controversial technology writer Nicholas Carr has called for a major overhaul of pricing models, describing Oracle's shift on multicore licensing as evidence "the traditional software pricing model is coming apart at the seams" as it tries to cope with the emergence of multicore chips, virtualisation and open-source software.

Roy Illsley of analyst Butler Group said that Oracle's current stance is und erstandable on the grounds that virtualisation of database apps is less advanced than in other areas, but he too predicted that all major software vendors would eventually have to develop new licensing models to account for the growing deployment of virtual machines in production environments.

"It is difficult [to develop virtualisation pricing], but vendors are not putting enough effort into it," Illsley said. "Eventually, if they don’t come up with something they will lose out… as virtualisation takes off it will create a licensing headache and customers will pressurise vendors to simplify it for them."

But Phillips dismissed calls from Carr and others for a new approach, arguing that people are guilty of taking "huge leaps of logic from small changes [in the market]".

Separately, Phillips hinted Oracle's long-running acquisition spree would continue, joking that it "remains to be seen" whether or not the company can " buy everyone", and insisting its Surround SAP strategy of acquiring vendors with a strong presence in SAP accounts is bearing dividends.

SAP's Léo Apotheker recently dismissed the strategy as Oracle's "latest brainstorms", adding that Oracle's M&A strategy is resulting in technology that is "not very readable".

But Phillips countered that SAP "can dream if they want to", arguing that Oracle could not have delivered its recent growth without increasing its activity in SAP accounts. He added that the acquisition of vendors such as Hyperion and Stellent means that Oracle is now an important supplier for many SAP customers "who didn’t call me three years ago".

Phillips also dismissed the suggestion that the acquisition spree has undermined Oracle's reputation as an innovative company. He insisted that the development of a portfolio that delivers best-of-breed software while tackling traditional integration projects represented innovation. "We view buying [companies] as successful R&D," he said. "That's R&D without risk… we only have to buy it if it works."

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