The Negative Impact Of Software Pricing On The IBM i Community
October 17, 2016 Pete Massiello
Here is an important question: Are some independent software vendors having a negative impact on IBM i? You are probably thinking that this question is a little harsh. But time and time again, I continue to get questions from customers on this issue. As such, I feel compelled to address it and take a look at what is currently going on.
Starting with a little history will help. Back–and I mean way back when the AS/400 was first announced nearly 30 years ago–remember what the AS in AS/400 stood for: Application Systems. Without a doubt, the success of the AS/400 came from all the applications it ran. ISVs had ERP packages, and there were third party utilities for adding functionality missing from either the operating system or those ISV offerings. I would say the success of the platform was the many ERP companies and their great applications used by companies to run their businesses. On top of that, industry needed add-ons such as emailing, faxing, replication, program-to-file references for programmers, address verification, shipping, and electronic data interchange. Eventually, modernization vendors came to the party.
Now that we understand the players in the market, let’s look at some of the practices impacting our community. As most people know, my company, iTech Solutions Group, is a hardware reseller. A core practice of my business is working with customers moving to a new server. Customers buying new hardware understand the costs of the new machine just as they clearly know the costs for upgrading to the latest version of the IBM i operating system. Additional IBM software or peripheral hardware and maintenance costs for all of the above are equally transparent.
The harder part comes when I have to direct my customers to every ISV supplier and have them ask, “Is there a charge to move from Model XXX with processor feature QQQ to Model YYY with processor feature RRR?” When we are changing the release of the operating system, we also need to ask about compatibility between the version currently in use and the update. It wouldn’t surprise anyone to know, at this point, the ISVs add their charges to the equation. What’s unsettling to me is that there are times when an ISV wants to charge more than the cost of the new IBM product to migrate its ERP or utility package.
Let’s put a few items in perspective. If the company is not under a software maintenance contract with the ISV, then I agree there should be a charge. Software maintenance provides enhancements, bug fixes, and support. However, if a customer is under a software maintenance contract with the ISV, I believe same P-level server migrations (keeping the same number of processors of course) should be included. Meaning, if the customer is currently running an IBM i P10 software tier on its existing server and the new Power Systems server is also in a P10 tier, then there should be no charge in my opinion. To be clear, there aren’t charges (usually) when the exact same version of the software can run on the IBM i operating system the customer is choosing to run.
Many ISVs want to charge several thousands of dollars for the customer to move software from one machine to another, even when in the same IBM i software tier. Yes, the machine might have more CPWs of performance, but essentially the workload is comparable. Additionally, the business already paid a license to use the software on the server and continues to pay a premium to do so every year. Maintenance fees are not an insignificant amount of the revenue that ISVs generate. I certainly understand that some companies charge a small license transfer fee (that is, an administrative or paperwork fee). I am fine with that and so are most of the people who I have spoken to for this article. I also respect a company’s right to make money. However, the combination of the initial purchase price, training and consultation fees, and the ongoing maintenance should adequately cover the use of the software by the ISV’s customer.
What dismays me is a practice by some ISVs to use this situation to compel customers to pay more. This pricing model deters modernization! Just at a time when one would think ISVs would welcome a customer’s commitment to the IBM i platform and investment in its future on Power Systems, the symbiotic nature of the relationship changes.
We all understand the value for companies using IBM’s Power Systems to run their businesses. Yes, there are cost savings and value-added justifications in the new server like ongoing maintenance cost reduction, consolidation of machines, enhancement of services, improved performance, etc. However, in the worst-case scenarios I have seen, the customer has already purchased the new server and ends up with no other alternative than to pay the additional fees to its ISV. I don’t want to name the ISVs that many customers mentioned during data collection for this article, but I will note that there are some ISVs who aren’t charging. I know of one that has never charged for server upgrades, and another has recently seen the light and is no longer charging for server upgrades on its software. These companies are helping the community. I keep hearing customers say, “I can’t afford to purchase all the software, so the CIO is looking at getting off the platform.” This is the same software they already paid for and continue to pay maintenance on yearly.
These practices are what I am referring to when I say some ISVs can have a negative impact on the IBM i community.
For my customers, some say they pay the additional charges and then start looking for another vendor to replace the product. Unfortunately, some companies will continue to use these costs as a reason to move off the platform. Then, of course, they often blame IBM as being too expensive. As a businessman, I would think these ISVs are being terribly short sighted, maybe even penny-wise and dollar foolish. Unfortunately, I wonder if the ISV owners just don’t want the IBM i business and are trying to exit that product line?
In the end, what can be done if you don’t agree with these ISV’s charging practices? Make your concerns known.
I started this article far more negatively than I usually would, and it was a difficult decision to make. I respect many professionals in the ISV community, have a lot of friends in same, and I believe in a lot of the products my customers rely on. However, if I don’t talk about what I see every day–firsthand–who will? I see these practices, I see the impact on the companies who are dedicated to our platform, and I know it isn’t unique to a single ERP or utility provider. It is endemic. It is a disease weakening our businesses and companies.
Pete Massiello has been working with the IBM i platform since 1989, focusing on systems management and technical support. He has held numerous technical positions throughout his career and is currently the president of iTech Solutions Group, an IBM Premier Business Partner. He has also been president of the COMMON midrange user group several times and has served on its board for many years off and on. And, of course, he is an IBM i Champion.