Brief Notes About Mainframe Software Pricing

We don't think about mainframe software pricing anymore, we just go out buy a server hardware/software "package" from Microsoft, but did you ever tink about how they got their ideas for the usage licence, it all started with IBM and the introduction of Cmos logic technology in 1994, simnce then mainframe software pricing has steadily became disproportion to the comparatively minute hardware costs, which has been stated to be "typically four to five times the hardware cost" in terms of the system budget.

This trend has given rise to growing concerns over the direct results of current software pricing techniques which are leading to problems such as making smaller applications costly to operate on large systems.

A pressing issue is the pricing techniques used by the independent software vendors; Such as:

[a] Negotiating individually (eliminating standard prices).

[b] Using Long term contracts (complicating business planning).

[c] Imposing restrictions (thus dose not aid expiation of IT or business capabilities).

Whilst aiming to address the immediate complexities associated with their polices, based on the Graduated Monthly Licence Charge system, which include significant administration and entry-level costs, IBM have "lost control of the techniques independent software vendors use to calculate their charges".

Such attempts include the parallel sysplex charge (a way of pricing distributed software usage), which allowed more granular pricing, and the usage bases pricing scheme (which is bases on how software is utilised not the sise of the computer) unlike the Monthly Licence Charge.

The above amendments have been stated as being "a series of ad hoc measures rather that a grand holistic rethink" and do not appear to offer sufficient benefits to enough of their costumers.

This pricing problem to take on greater importance as software complexity increases, drastic and rapid change notwithstanding, at this time, IBM systems are no longer competitive compared to Windows NT or Unix based systems.

Tips for keeping software costs down:
[a] Ensure that you are getting business benefit from the software you are paying for.

[b] Study the implications of all software contract restrictions.

[c] Avoid software contracts that cover a longer period that you can sensibly plan for.

[d] Server consolidation is a straightforward way of reducing software changes.

Notes:
1) Software pricing is now disproportionate to the comparatively tiny hardware costs in the mainframe budget. (It is an increasing proportion of the whole cost).

2) Software cost are typically four to five times the hardware cost.

3) This has been happening since the introduction of Cmos logic technology in 1994.

4) Software price increases are the biggest single issue for mainframe users.

4 Software is steadily increasing in cost due to general policies i.e:Contracts are:

[a] Negotiated individually (thus there are no standard prices).

[b] Long term (not helping business planning).

[c] Contain restrictions (eg updating the IT environment).

[d] Contracts must be renegotiated if the terms are exceeded.

5) IBM's pricing polices include:

[a] "Graduated Monthly Licence Charge" (an inflexible mechanism where by prices increase in preset steps as a system grows). Which in 1994 was replaced by;

[b] The "parallel sysplex charge" (a way of charging for operators using software over distributed mainframes which allowed more granular pricing i.e. prices better reflected smaller upgrades).

[c] Usage bases pricing scheme (which is based on how software is utilised not the size of the system). Such pricing systems are not popular because they:

* Require significant administration.
* It is costly at entry-level.
* Worked on peak rather that average use. * Pricing is inconsistent.

6) In September 1998 the usage bases pricing scheme system was revised and renamed Usage Licence Charge which aimed to solve the above problems.

7) The latest changes have not solved the basic problem (bad administration).

8) IBM's entry level costs are high compared to Windows NT or Unix rivals.

9) The overall impression of IBM's pricing changes is that of many on demand amendments to meet short term sales and solve immediate problems.

10) IBM are thus attempting to address the symptoms of the problems they created and are ignoring the causes.

11) This problem is going to grow as the pace of change increases, software continually evolves and thus places greater demands of host systems thus systems must be expanded in parallel.

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