Mainframe Software Pricing

Posted by Jon Henderson

Jun 20, 2013 1:33:59 PM

I have the dubious honor of being what some people may refer to as a mainframe pricing expert. In one fashion or another, I have supported or developed mainframe software pricing programs to support various generations of IBM hardware over the last twenty-five years.

Mainframe software pricing is one area that has lagged behind the many innovative improvements that we have seen on the mainframe. How can this be true when the mainframe is touted as being the best price/performance technology on the planet? Has the performance of mainframe hardware improved to the point that it offsets any deficiencies in software pricing models? Have we reached a point where the majority of software expenditures on the mainframe are for ongoing maintenance? If you are in maintenance mode, who is monitoring the cost and effectiveness of your software stack? Here are a few things that are holding back innovation in mainframe software pricing:


  1. Software vendors do not publish their prices.

  2. Pricing models (for example, sub-capacity pricing) die on the vine unless all major vendors actively support the models.

  3. Customers have become accustomed to receiving steep discounts from vendors that may be having difficult times, so they rationalize that all mainframe software is overpriced, regardless of its origin.

  4. Once locked in to the mainframe (good or bad), customers are forced to weigh the cost of converting from Vendor A to Vendor B to receive what they believe to be fair pricing. If a case cannot be made for converting, the customer typically tolerates the higher pricing on current products but commits to doing future business with other vendors (or platforms).


Software pricing innovations must occur for the mainframe just as they are occurring for the PC. For example, I found myself purchasing my first subscription license for a very large vendor’s PC office suite of products last week. The terms were simple, the pricing incredible; and I was guaranteed to be running the latest releases for the duration of the license. Ten years ago, this vendor had a virtual monopoly in the market and would not have considered this type of pricing model.

I see innovation and new mainframe workloads driving major changes in mainframe software pricing models. Have you noticed how the specialty engines continue to increase in popularity? New workloads are being created on the specialty engines, and that reduces the processing power needed for the traditional engines. It is not uncommon to see a customer upgrade to a new machine with the same or fewer traditional MSUs while adding 2-3 IFLs for new Linux workloads. The pricing on the specialty engines will become more sophisticated as vendors play catch-up to the technology. Initially, the specialty engine model has been to price on a per-engine or full-capacity basis.

When it comes to mainframe software pricing, there is no single silver bullet. However, a good start is to make sure that you develop a relationship with a prospective vendor as the first step. If the relationship works, doing business can be totally transparent and you will receive an excellent return on your mainframe investment. If a vendor doesn’t have a clear understanding of your business and what you are attempting to accomplish, it is virtually impossible for them to position solutions for moving your business forward.

Do you have an interesting pricing experience to share?

Best Regards,

Jon

Topics: Executive Suite

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