Big Blue Raises IBM i Software Maintenance Fees Modestly

March 2, 2020 Timothy Prickett Morgan

Back in the AS/400 days when software was a much smaller part of the overall cost of a system, there were relatively frequent prices changes for both OS/400 and related systems software as well as for the software maintenance applied to OS/400 and those related systems programs.

It has been a long time since IBM increased the license or IBM i Group Software Maintenance, or SWMA as we often call it as shorthand (pronounced Swammah). I can’t even remember the last time IBM i license prices were increased, but I know there was an attempt to raise SWMA prices in February 2013 – we wrote about it here – and it did not stick. Those price increases were reverse a month later in March 2013, which we covered there. And I had predicted that software maintenance would get an increase in 2013 because in March 2011 hardware maintenance fees had already been increased.

Back then, in 2013, the price increases, which were ultimately reversed, were pretty big, on the order of 23 percent to 30 percent, as you can see below:

The price increases that were announced on February 28 and that go into effect on April 2 are as follows below. This information is from a presentation that Alison Butterill, the IBM i offering manager, put together to explain the price increases to us all. Take a look at this and we will have a chat:

Like all commercial software suppliers, IBM thinks of its Software Maintenance prices in relation to the perpetual license price, and according to Butterill, the industry standard for enterprise-class software is to charge somewhere around 20 percent – and sometimes as high as 25 percent – of the license cost each year as the maintenance. So over the course of four or five years, the maintenance cost is equal to the license cost for enterprise software.

I knew about the SWMA price increase attempt in 2013, but somehow missed (or forgot) about whatever price increase took effect sometime between 2015 and today. But obviously there was one in there somewhere, as you can see from the table above from Butterill. As we go to press, it is unclear what price increase for SWMA was going to be for the P10 and P20 software tiers. We will clear it up as soon as we know. We are assuming that IBM will be going with the higher price for the P10 and P20 software tiers for the IBM i Group Software Maintenance. Here is the situation over the years:

In the chart that Butterill had, the P05 tier had to have its 90 days of SWMA backed out of its license price, which drops it to $1,995 per core; and then there is a $250 per user fee on top of that, which across 24 users (Butterill picked that as an average number of users for the P05 tier, we didn’t) adds up to a total of $7,995 using 2020 IBM i tiered perpetual licensing pricing. The P10 tier also has per user fees in addition to the core license, and it looks like Butterill added 79 users at $250 a pop to the $14,995 per core charge to get $34,745.

In our chart below, we backcast the pricing in 2013 and 2016 for comparison (we are not sure when that price change took effect, but it was after 2015 for sure) and put in the then-current SWMA fees as well.

There are two ways to look at this. If you are a glass is half full person, then IBM is getting the relative cost of SWMA back into whack with the industry by charging 15 percent to 20 percent. (I would argue that the relative value of IBM i and the relative cost of SWMA should be such that the percent of the license that represents SWMA would be the same – 20 percent of a smaller number for the license. If you are a glass is half empty person, the P10 tier is getting a 29 percent increase and the P20 tier is getting a 43 percent increase, while the P05 tier is getting a 7 percent increase.

Now, there is one important thing to consider in all of this, which Butterill reminded us about when talking about the SWMA price increase. Depending on the release level, the OS/400, i5/OS, and IBM i stack includes a whole bunch of adjacent programs that customers buy, such as compilers, printing functions and fonts, client/server middleware, application servers, performance tools, database query tools, and so on. These are commonly called Licensed Program Products or LPPs for short. Back in the AS/400 days and into the iSeries days of the early 2000s, all of these tools were licensed separately and also had their own maintenance agreements. But in 2004, IBM decided to bundle all of the maintenance for these key LPPs into the IBM i maintenance, which is the “Group” part of the “Group IBM i SWMA” name. This SWMA is calculated only on the license for the base IBM i license, which includes the core operating system and relational database management system, and the SWMA for those 40 or so programs is: Zero, Zed, Zilch. Here is the list of these LPPs for IBM i 7.4, the most current release:

Butterill adds that some recent IBM i products do in fact have their own SWMA fees, so don’t think everything is covered. But a lot of the core stuff is. Which makes us wonder: If this is the integrated system, why isn’t everything that gets licensed bundled into the single license, and why is it not available on a monthly subscription that is compatible with cloud pricing? More on that next week.

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