IBM Kills Optional Software Subscription, Requires Software Maintenance

by Timothy Prickett Morgan

About a year ago, after six months of advanced notice, IBM debuted a new way of packaging technical support and software support into a single offering called Software Maintenance, an alternative to the existing Software Subscription offering. With the latest iSeries announcements, Software Maintenance has replaced Software Subscription, and perhaps more significantly, all customers who buy a new iSeries machine will have to buy one year of Software Maintenance.

From here on out with the iSeries, you will have to be on Software Maintenance if you want to stay current with OS/400 V5R1, V5R2, and future releases and versions, and you will not have the option of trying it out later. You buy a new machine, and Software Maintenance is on the bill, just like any other prerequisite component of a base system. This is going to seem unfair to a lot of OS/400 shops that don't like to be force-fed any product or service. But, even though this move by IBM effectively increases the cost of acquiring a new iSeries, it is probably good for customers as well as a boon for IBM's iSeries fortunes. IBM will, of course, honor existing Software Subscription contracts, and it even has a means of upgrading those contracts to Software Maintenance for those customers who want the whole shebang on their machines even if, at this moment, they are not in a situation where it is required--namely, they have an installed a machine running OS/400 V5R1 or V5R2 and have declined Software Subscription up to this point. IBM is also offering discounts ranging from 10 percent to 70 percent to customers with AS/400 and first-generation iSeries machines covered under Software Subscription who move to a second-generation iSeries machine with Software Maintenance. The amount of the discount depends on how many months of a Software Subscription contract are left.

Software Maintenance is the combination of Support Line technical support services and Software Subscription update and currency services for OS/400 and its related system programs. (We explained Software Maintenance in detail in the February 25, 2002 edition of The Four Hundred. In February 2002, when Software Maintenance debuted, IBM told me that about 85 percent of the new AS/400 and iSeries machines IBM sold went out with Software Subscription services, and that 120,000 Software Subscriptions on various AS/400 and iSeries machines were active worldwide. IBM wants to spread out its tech support and software support costs over the largest number of customers possible (and make money if it can on this operation), and the adoption rate for Software Subscription and the initial uptake of Software Maintenance last year undoubtedly made IBM think that, despite some complaining about being forced to take Software Maintenance, this requirement would not kill a deal. IBM wants to simplify the level of service and support it offers, and says the iSeries channel is spending too much time explaining the differences between the seven price points for Software Subscription and the 20 price points for Support Line. Software Maintenance is the way IBM will charge across all of its platforms. The iSeries is not being singled out so much as leading the way. Finally, through IBM's own surveys of iSeries customers, it has quantified that customers who get software support from IBM are happier than those who get the software support through third parties. IBM wants iSeries customers to be happy--even if they end up paying for that happiness.

The new Software Maintenance offering for OS/400 V5R1 and V5R2 is available as of January 24. It comes in one-year and three-year prepay terms. Software updates are not automatically sent to customers; they have to be proactive about getting them once they have been notified of updates. A complete listing of the iSeries programs covered under software maintenance is available at http://www-1.ibm.com/servers/eserver/iseries/sftsol/subscript2.htm. This file also includes the programs that are covered under Software Subscription and Software Maintenance. What is not clear is how the programs covered under Software Subscription will be moved into the Software Maintenance scheme. They are not the same programs, as our story from a year ago showed.

IBM says the price of Software Maintenance will be comparable to the cost of Software Subscription plus Support Line, which implies that IBM will eventually tell us what programs are covered under the Software Maintenance scheme. This may mean that all OS/400 programs are covered under Software Maintenance. Then again, it may not. I'm looking into it. What I do know is what IBM will be charging for Software Maintenance. Click here for a table that shows Software Maintenance pricing. The one-year pre-pay option ranges from $1,200 on a P05-class iSeries to $55,690 on a P50-class machine. (IBM has also given pricing for P60-class machines, for those few customers who bought Model 890s this year and last year.) The three-year prepay Software Maintenance option offers a 6 percent to 7 percent discount compared to buying three one-year contracts. IBM says the Software Maintenance component of a complete system acquisition will represent from 2 percent to 7 percent of the total cost of that system.

Software Subscription and Support Line for OS/400 products will both be withdrawn from marketing on July 31. Customers who, for whatever reason, want either Support Line or Software Subscription separately (because they are individually less expensive than Software Maintenance) had better get on the stick and order them quick. But before you do that, there's one thing to consider. If you get Support Line only, when and if you do have to make the jump to Software Maintenance, you are going to have to pay a Maintenance After License fee to get them on the current version and release level IBM is at. The table I built shows these fees, and they are not small fees. That is no accident.

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