IBM Gives Software Discounts to Spur zSeries Mainframe Upgrades

by Timothy Prickett Morgan

If there is one thing any server vendor wants, it is for a large installed base of users to upgrade to the latest-greatest technology. This doesn't happen overnight, of course, and in the case of extremely reliable computers like old mainframes, old AS/400s, and old Unix kit that just sits there doing the same work it always did, upgrading is not something that companies are focused on. But if some of these companies don't upgrade, then a server maker can't keep modernizing their platforms.

That's why IBM is greasing the skids a little with discounts on software fees that are associated with the move from 31-bit mainframes from itself and former rivals Hitachi and Amdahl (which is now merged into Fujitsu) to its 64-bit zSeries 800, 900, and 990 machines. IBM is not cutting the price on its hardware to encourage people to upgrade, but rather on its software, which is in many cases more expensive than the hardware.

Under a deal announced this week, IBM is offering substantial discounts on the cost of moving from the OS/390 operating system to the most modern z/OS operating system. Specifically, IBM is cutting the price on the upgrade from OS/390 to z/OS for customers moving off its own ES/9000 9221 entry, 9121 midrange, and 9021 mainframes, which date from the early 1990s and are based on bipolar MCM technology. IBM is also offering the software discounts on its System/390 Multiprise 2000 and 3000 entry servers as well as the System/390 9762 parallel enterprise servers. The software discount can also be applied to upgrades from Amdahl Millennium 5, 7, and 2000 series mainframes as well as on Hitachi's Pilot 5, 7, 8, and 9 entry machines and its Skyline 5 and 7 and Trinium series of enterprise mainframes.

Neither Amdahl nor Hitachi are actively selling midrange or high-end mainframes against IBM any more, although they are servicing their installed bases. IBM clearly is targeting those bases of these former rivals, and is, based on the discount levels, targeting the smaller machines which are more numerous around the world. It is hard to say for sure, but there is somewhere between 10,000 and 20,000 customers using IBM or plug-compatible mainframes of all makes and models in the world today. This may not sound like a lot, but these customers rack up billions of dollars a year in monthly software license fees.

IBM is offering the discount to customers who move to the zSeries 800, 900, or 990 and who acquire the z/OS software under a Workload License Charge (WLC) or a Parallel Sysplex License Charge (PSLC) pricing scheme.

WLC charges are based on the total amount of Measured Service Units that an operating system and its workloads use on a given mainframe, which can be partitioned to run OS/390, z/OS, VM, VSE, or Linux on modern zSeries machines. To you old-timers out there, an MSU is a unit of processing power roughly equivalent to six mainframe MIPS.

The PLSC charges are based on the aggregate full processing power in MSUs of all machines that are linked using IBM's Parallel Sysplex clustering technology, which allows many mainframes to run the same work under a scale-out parallel architecture. IBM offers other lower-cost z/OS schemes, including the zSeries Entry License Charge (zELC) for its tiniest mainframes and its Growth Opportunity License Charge (GOLC) for a number of its Multiprise machines.

The amount of the discount IBM is giving depends on the MSUs in the standalone or sysplexed machines that companies buy as part of an upgrade. A standalone or sysplexed zSeries machine acquired must have between 41 and 247 MSUs, or between 239 MIPS and 1,447 MIPS of power. This is the power range spanned by the zSeries 900 line with between one and seven active processors. The resulting discounts for z/OS on new standalone machines range from 50 percent on smaller zSeries 900 machines to only 3 percent on larger zSeries 900 machines; they range from 36 percent on smaller zSeries 990s to 10 percent on larger models. The zSeries 800 cannot be acquired as a standalone machine in this deal, only as part of a Parallel Sysplex cluster. Discounts on z/OS for Parallel Sysplex clusters range from 50 percent on a cluster with between 41 and 46 MSUs (between 250 and 275 MIPS, roughly) to 3 percent on a cluster with between 236 and 247 MSUs (between 1,415 and 1,447 MIPS). The discount covers a 36-month range for the monthly WLC or PSLC software rental fees on the z/OS base elements and any other optional features that bear their own prices that are acquired at the same time. This deal is in effect until December 31.

What is obvious from this is that IBM wants customers with many small mainframes, regardless of make or model, to either move them to new small mainframes or consolidate their workloads on a number of small mainframes. In many cases, even the smallest zSeries 800 has a lot more oomph than the machines IBM wants to replace. The economics just do not make a lot of sense for bigger machines.

IBM may also be dealing with a glut of zSeries 800 and possibly smaller zSeries 900 machines. According to mainframe watcher Hesh Wiener of Technology News of America, earlier this year mainframe dealers were telling him that there were about 100 unsold zSeries 800 "Raptor" mainframes in its channel against an installed base worldwide of only about 1,000 units. Initially, IBM had been selling the machines at the rate of about 100 per month, but that rate seems to have come down a little.

With used zSeries 900 iron--where it is available--selling for less than new zSeries 800 iron of equivalent power, IBM may be trying to get rid of new zSeries 800 and entry zSeries 900 iron without cutting hardware prices. Once IBM chops the price of MIPS, it is hard to raise it. Cutting related software prices, which are less commonly known across the base, is a crafty way to get the same deal done.