IBM Software Licensing

Originally published: Fall 1998

IBM recently summarized their new approach to software licensing in the S/390 Software Pricing Reference Guide (G326-0594-03) and as discussed in their IBM Revamps S/390 Software Pricing announcement. We feel this evolution in the pricing model will help set license fees at appropriate levels for a larger percentage of S/390 customers. Unfortunately, for systems on older processors the only effective change may be in the licensing name (surprise!)

Consistency is the Key

IBM made several changes to their licensing procedures, but basically they now plan to compute fees with a consistent set of pricing "models" based on Millions of Service Units (MSU). The MSU rating, along with "Usage Pricing", promise to more accurately match the license fee to the software's potential benefit for the customer. Hopefully, this will provide a more unified form of licensing with a higher level of granularity than the former "Model Group" licensing. (If this really is IBM's intention, we salute them).

As we understand it and have applied it to our NRS licenses, IBM will offer three licensing approaches:

1. S/390 Traditional Environment

The "traditional environment" licensing bases fees on the potential processor capacity. This will include the Graduated Monthly License Charge (GMLC) for non-MSU processors or processor's of no more than 80 MSUs and the Indexed Monthly License Charge (IMLC) for single system processors rated at 80 or more MSUs.

The GMLC and its derivations, the Basic and DSLO licenses, will continue as the basic licensing mechanism for VM, VSE, MVS, and some OS/390 systems. The IMLC will be the primary mechanism for licensing software to large systems who do not choose to use or who are not eligible for Parallel Sysplex licensing.

IBM will also support an "Entry Support License" mechanism for P/390, R/390, and the Integrated Server.

2. Usage Pricing

IBM is replacing Measured Usage License Charge (MULC) with something called "S/390 Usage Pricing". Usage Pricing should improve price performance for systems operating with peak usage below 25% of the measured capacity. Essentially, Usage Pricing provides an effective licensing alternative for software operating on only a small portion of the overall system.

For example, Usage Pricing may benefit an installation whose usage of a particular software product is not increasing in proportion to that of other subsystems. This could also be beneficial if a data center's usage of a software product "stabilizes" but the system continues to grow to service other aspects of operation.

Unfortunately, Usage Pricing requires that the customer runs periodic reports (typically, annual) and forwards them to the vendor for billing.

3. Parallel Sysplex

The Parallel Sysplex License Charge (PSLC) approach is based on the total processor capacity in MSUs of all processors actively coupled together to make up a single Parallel Sysplex cluster.

We interpret this as meaning that an installation identifies the sum of all the processors that might operate a licensed product within the Parallel Sysplex, and the fee is the sum of the applicable MSUs. This will permit the installation to operate the software on multiple processors with a single license. Installations may also add processors without necessarily changing the license fees for software that will not operate on the additional processors.

Additionally, the PSLC option provides an improved price performance break for Parallel Sysplex configurations that reach certain levels of throughput. IBM currently identifies these price/break points as 3-45 MSUs (Level A), 45 - 175 MSUs (Level B), and over 175 MSUs (Level C).

Wishful Thinking

We wish that IBM had moved licensing for all software products and all operating systems to a single mechanism (Most new options such as PSLC only apply to the newest processors and OS/390). We also wish that VM, VSE, and MVS systems on older processors were eligible for the PSLC approach. Finally, we wish the IMLC approach wasn't needed and that all licensing could be accomplished through the highly granular PSLC model or Usage Pricing.

However, we recognize that IBM constantly revises their pricing models to fit the market's requirements and the installed base of systems. And while we might wish other things were happening, we accept that their initiative is generally healthy for the industry

The Licensing Future at North Ridge

Over the years, our policy has been to keep North Ridge's licensing similar to IBM's whenever possible. Consequently, we intend to adopt PSLC and IMLC licensing policies by January 1, 1999 for all new software licenses on eligible configurations (as defined by IBM).

To sum it up: PSLC licensing will require customers to identify all the processors within a Parallel Sysplex that operate the NRS product. When Usage Pricing is announced, it will require Network Director 4.2 or Network Center 1.8 or higher releases. We will use the current NRS licensing model to license processors or installations that do not meet the new Parallel Sysplex requirements (i.e. Model Group licensing or what IBM now calls "Traditional Licensing").

We will also continue to honor arrangements with current customers. Of course, those of you who prefer to "convert" your license to one of the new models may do so at no chargeeither on or after January 1, 1999, whichever you feel is most beneficial. Simply write in your request to North Ridge and we'll be happy to take care of it.

For more information on the upcoming licensing for The Network Center and The Network Director, please check our Web site at http://www.north-ridge.com in December 1998.