It is not entirely altruism that has caused IBM to simplify its complex software licensing structure for the System/390 mainframes and offer a better deal to customers.
The move is also an attempt to ringfence those mainframe users who might contemplate a move to NT or Unix for new applications and provide a System/390 growth path for applications. IBM is to phase out the 10 different methods of software licensing that are currently open to users over the next two years. For decades IBM's pricing policy has been based on the principle that the bigger the engine, the higher the charges, irrespective of the amount of power used by the applications or the number of users.
In place of the 10 different pricing mechanisms, IBM will now offer a usage base pricing policy at the lower end and the existing Parallel Sysplex Licence Charge (PSLC). By 2000, IBM will have done away with Graduated Monthly Licence Charge (GMLC), Distributed Systems Licence Charge (DSLC), One Time Charge (OTC) and other mechanisms. Users who wish to keep their existing licensing mechanism will be given the option to do so.
The new usage-based pricing, Usage Licence Charge (ULC), is aimed at customers with an application that uses less than 25% of the processing power. It is aimed at existing customers rather than at new accounts and in particular at users who are piloting new applications, who might otherwise switch to alternative systems.
PSLC has always been aimed at the large users and offers considerable reductions in pricing for those customers whose machines are enabled for the Sysplex clustering technology. Customers do not have to use Sysplex to qualify for PSLC, but must install Parallel Sysplex Coupling Facility, a layer of systems software that could, if desired, distribute the workload across multiple processors.
Earlier this year the UK consultancy, Xephon, polled 137 large IBM users worldwide on the uptake of Parallel Sysplex. While only 9% of those polled said that they had an active Parallel Sysplex, 75% said that PSLC was their principle software pricing mechanism.
While the changes will be welcomed by many users, IBM has effectively been under pressure to introduce changes. There has been pressure from users, even established and dedicated mainframe customers, who see no reason why they should pay the same licence charge for software used by 10 users and consuming 3Mips as they do for software used by thousands of users and gobbling up hundreds of Mips. Demand for change has also arisen because of the example of Unix and NT systems, where pricing is based on the number of users irrespective of the size of the box. There has also been a tendency for mainframe users to pilot applications on Unix or NT boxes rather than on the mainframe.
All three of these factors have made customers increasingly reluctant to shell out huge sums in licence charges, something now acknowledged by IBM.
What the System/390 division is not owning up to is the threat that it faces internally from the AS/400.
Officially IBM is now one big happy family with its server division salesmen offering customers a S/390, AS/400, RS/6000 or Netfinity server as appropriate.
But the reality is that the AS/400 has steadily been nudging its way into the mainframe space and for many mainframe users wanting to pilot a new application, the midrange machine may seem a natural platform.
The intention of introducing ULC is clearly to keep the S/390 users within the family but there are both advantages and disadvantages for IBM in the changes. While more equitable pricing from IBM may attract users to develop new applications on the mainframe rather than a Unix, NT or AS/400 platform it may not be enough. IBM also has to carry the independent software vendors (ISVs) with it, and many are sticking to the old method of pricing by processor. To have any chance of success IBM must pull the ISVs into its own pricing structure and many of them, especially where IBM has no directly competitive product, will see no reason why they should not continue to charge for their software in the established fashion.
Of course, where IBM does have a competitive product - for instance, in the systems management market, where its Tivoli unit is slugging it out with CA-Unicenter - the new pricing structure will be a positive advantage to IBM. But in other areas the ISVs' pricing policy may actually deter users from sticking with the S/390. "IBM has lost control of the software pricing algorithm and has failed to bring the ISVs into line. Most large sites have software from about 30 ISVs with about 90 products. You only need one of them to consider a site a cash cow and you have a problem," said consultant Phil Payne, director of Isham Research.
Although there has been a revival in the fortunes of the mainframe in the past couple of years there is still a long way to go before IBM, or any other mainframe supplier, can feel totally confident.
The rationalisation of software licensing means that the S/390 division of IBM is beginning the fight back not only against Hitachi but against ISV rivals such as Computer Associates.
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