Wednesday, December 11, 2013

IBM provides a new view (VUE) on charging for software

By Bill Moran

IBM is offering a new way to charge for software on the mainframe. For specific software, customers will have the choice to either pay a monthly license charge or to pay a one-time charge. The idea behind the new charging methodology is to give customers a choice to move software costs for certain types of projects from the operating budget to the capital budget. The plan is not mainly to cut customer costs for IBM software, as we will see, but in some cases that could very well be the result.

IBM is trying to encourage several new workload types on the mainframe by making them eligible for this charging approach. The desired workloads include the following:
·                 mobile support
·                 analytics
·                 business rules
·                 integration
·                 new batch work usually implemented in Java.

The workloads will use one or more of the following IBM software products:
·                 CICS Transaction Server for z/OS Value Unit Edition V5.1
·                 IMS Database Value Unit Edition V13
·                 Websphere MQ for z/OS Value Unit Edition V7.1
·                 DB2 for z/OS Value Unit Edition

The DB2 Value Edition has been around for a considerable time; IBM says that they have 100 customers using the product.

When implemented, these products will run in a special LPAR called zNALC. Before you ask, the NALC stands for New Application License Charge. However, IBM says that the software code for the value unit editions is identical to the code in the monthly license versions. This means that if, for example, the staff is trained in the normal version of CICS, there is no training or adjustment period needed to use the VUE edition. It also should be no difficulty integrating the two versions even though they run in different LPARs.

Let’s discuss some of the rules surrounding this new offering. IBM says that the OTC for these new products will be approximately equal to 50 months of monthly charge. The customer will also pay a software subscription fee and a maintenance fee. The subscription fee entitles the customer to get any new product releases. The customer will need to estimate the maximum resource utilization of the products. The OTC is based on this estimate. If, when the application reaches production status it exceeds this resource limit, the OTC will need to be renegotiated. This license will be reviewed by IBM on a yearly basis.

However, there is another condition that is potentially financially beneficial to the customer. There is a reduced price for the z/OS that runs in the special zNALC LPAR. IBM has not provided an indication of the size of the reduction.

The process to apply for IBM approval for the one-time charge license appears to quite simple; therefore little is lost by making the effort. We think that most customers will keep new projects in production for more than 50 months. Therefore they may really save the long term. However, it is necessary to consider a number of other factors to be sure. For example, review the cost of capital, tax impact, etc. to determine potential saving. Still, the mere flexibility of moving software cost off the operations budget and to the capital budget might be worthwhile in itself.