When your customers pay millions of dollars for your machines and then spend many tens to hundreds of thousands of dollars per month – and sometimes much more – on monthly license fees for your software, you can't just spring a price increase on them one day. You have to give fair warning so they can budget for the price increase.
IBM has always been good about these things, and generally gives customers the heads up on software or maintenance price hikes. But with the uncertainty of the global economy and with the System z mainframe currently in transition from to a new set of processors, Big Blue is giving its mainframe shops a little more warning that a price increase is coming by next summer.
As you can see in this announcement, IBM is raising prices for operating systems, various system software add-ons, and other tools that run on System z machines and that are sold under its Flat Workload License Charge (FWLC) pricing. IBM sells a lot of its software under a metered pricing scheme based loosely on a relative performance scheme called Metered Service Units (MSUs).
IBM has a wide variety of monthly software pricing schemes for its System z mainframes, but the FLMC scheme is interesting in that it applies to all machines regardless of size or vintage equally and as you increase the capacity of the mainframe, the software fees stay flat.
The bad thing about the FWLC scheme is that it does not have what IBM calls sub-capacity pricing, where customers use virtualization to isolate capacity on a particular mainframe and then only get charged for that software based on the MSUs consumed in that logical partition.
Nearly 1,100 different SKUs of mainframe software will be affected by the price hike that is set to take place on July 1, 2013. The price increase ranges from a low of 6.7 per cent to a high of 11.8 per cent, with the average across all SKUs being around 10 per cent.
Significantly, the price increase covers older releases of VM/ESA as well as a slew of compilers, development tools, databases, and transaction monitors that are used on old mainframes running VSE, VM, and MVS operating systems, which is going to be a pain in the neck and checkbook for public institutions that are generally perfectly happy to run older kit if it is working properly.
But Software Group has to make its numbers somehow and have a stick with which to help encourage customers to get more modern System z iron. This is the stick, and no doubt there are entry mainframes sporting the new z12 engines.
IBM is pretty generous with the MSU ratings as it rolls out new machines, setting the MSUs about 10 per cent low than you would expect based on the performance of the new machine compared to the prior generation.
If this pattern holds with future entry and midrange zEnterprise, customers who buy MSU-priced software who are willing to buy new iron will be able to get a lot more oomph for the software dollar. But those customers that have FWLC system-based software won't see anything but a price increase come July.
Now might be a good time for mainframe shops to talk to IBM about future System z machines and take a hard look at all the different software pricing options. And don't forget the ibuprofen. You're gonna need it. ®