IT Management

IBM Software Pricing for the New zEnterprise

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With the zEnterprise, IBM has created an integrated hardware platform that brings mainframe and distributed systems together. This new system consists of the zEnterprise 196, the IBM zEnterprise Unified Resource Manager, and the IBM zEnterprise BladeCenter Extension (zBX). The z196 introduced a new pricing metric, Advanced Workload License Charges (AWLC), which offer reduced price points compared to Variable Workload License Charges (VWLC) for all Million Service Unit (MSU) levels with more than three MSUs. This article examines the new pricing metric and its impact.

Where Is the Technology Dividend?

Before August 2003, IBM mainframes were delivered with a specific size. With z/OS and the z900, each machine’s size was measured in MSUs. IBM changed this in August 2003 with its mainframe charter, which, among other things, announced a new MSU size for z990 machines that was used for software pricing. IBM’s z990 now had two sizes; I coined what have become industry-standard terms: “hardware MSUs,” which represented the hardware’s capacity to run workload with specific levels of performance, and “software MSUs,” which were used for IBM software pricing.

With the z9s and z10s, IBM continued this separation of hardware’s ability to run workloads from the MSU sizes announced for those machines.

One thousand MSUs of work on a z900 required approximately 900 announced MSUs on a z990. We often refer to the announced MSUs as software MSUs and the MSUs calculated from the System Resource Management (SRM) constant as the hardware MSUs. It’s now the software MSUs that IBM announces for new machines, including the zEnterprise 196.

One thousand hardware MSUs of work required approximately 770 announced MSUs on a z9 EC and approximately 680 announced MSUs on a z10 EC. The effect of this technology dividend was that it lowered the Total Cost of Ownership (TCO) for these machines, for IBM software and for any Independent Software Vendor (ISV) software that was charged based on IBM’s announced MSUs. Also, for IBM International Program License Agreement (IPLA) software, this technology dividend lowered the MSUs for Logical Partitions (LPARs) and software products executing in those LPARs. This in turn lowered the required value units for IBM IPLA products. Previously, if a customer had the appropriate number of required value units on a z9, when that customer moved to a z10, they likely found their required number of value units to be smaller, yielding excess value units. This allowed sites to defer acquiring additional value units for some time, as they could use the now excess value units to meet their workload and business growth requirements.

For the z196, the difference between the hardware’s ability to provide MSUs and the announced software MSUs is only slightly different from the z10 EC, providing about 2 percent additional separation. This 2 percent is in the customer’s favor, meaning a z196 has about 2 percent more hardware MSUs with a specific number of z196 announced software MSUs than the same number of z10 announced software MSUs.

To provide a technology dividend beyond this 2 percent as expected by its customers, IBM offers a new pricing metric, AWLC, only for z196 machines. This is a significant change in software pricing. Previously, some ISVs were offering software charges based on the IBM announced MSU values for the hardware. A site moving from z9 to z10 technology either achieved a reduction in software charges or some period of no growth in their software charges due to the approximately 10 percent difference in software MSUs. This was also true for IBM’s System z IPLA products, whether a site was using sub-capacity or full-capacity IPLA.

AWLC will lower your IBM Monthly License Charges (MLC) with little or no impact on your ISV or IPLA software pricing. One would expect that the ISVs who allow software MSUs to be used as the basis for software pricing will be pleased with IBM’s change in the method of delivering a technology dividend.

The separation of hardware and software MSUs of about 10 percent reduction for each new hardware technology probably couldn’t persist much longer. On z10s, the separation was about 68 percent. Now on the z196s, the separation remains at 68 percent. The hardware technology dividend was providing the separation of hardware and software MSUs, and the increased software charges with new versions of CICS, DB2, IMS, and WebSphere MQ were taking back some of the savings. The result of keeping up with new hardware models and new software versions is a savings closer to 4 percent per year when viewed as IBM MLC per software MSU (see Figure 1).  

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