The Subscription Pricing For The IBM i Stack So Far
September 18, 2023 Timothy Prickett Morgan
We have been following the transformation of the pricing and packaging of the IBM i operating system, its integrated database, and the suite of Licensed Program Products, or LPPs, that are commonly installed alongside of the operating system to create a mostly complete system software suite. Last week, we talked about how the machines in the P05 and P10 software tiers would be moving to all-subscription pricing, and this week we are following up with the pricing information we have been able to gather to date as well as talking to Big Blue about the changes.
IBM has been clear that it was going to be offering subscription pricing for the IBM i stack since last year, but what was not so clear is that Big Blue would be phasing out the sale of perpetual software licenses plus Software Maintenance that has been the way of buying this software for many years. As we pointed out last week, we have seen some complaints that it will be more costly to pay for subscriptions than for perpetual licenses, and for two reasons. First, it is more expensive because there is no way to get out of paying software maintenance since it is built into a subscription. And second, the crossover point for where the IBM i subscription price is essentially the same as the perpetual license plus SWMA price is four years, give or take, which means for a five, six, seven, or eight year upgrade cycle, the software subscription price will be higher. Those numbers are significant because a lot of shops hold onto their iron and software for a lot longer than four years.
We did a thorough pricing analysis for IBM i subscription pricing for the P05, P10, P20, and P30 tiers back in February when IBM announced such pricing for Power9 and Power10 systems. Steve Sibley, vice president and global offering manager, and Alison Butterill, IBM i product manager, supplied us with this chart that showed the underlying thinking of how to make the per core pricing for IBM i balance at the four year crossover with a certain number of users for the P05 and P10 tiers:
That’s pretty close to being the same, no question about it. And for those customers who are used to stretching their machines over a longer term than four years, the subscriptions will be more expensive. We did our modeling back in February at terms of one to seven years and with a small number of users or an unlimited number of users. Our math showed that for unlimited users at seven years, the delta in the subscription price over perpetual licenses plus SWMA was 48.5 percent for the P05 tier, 39.1 percent for the P10 tier, 41.8 percent for the P20 tier, and 55.1 percent for the P30 tier. For lower numbers of users on the P05 and P10 machines, the gap closes quite a bit (30.2 percent for the P05 machines set at 25 users and 22.2 percent for the P10 set at 75 users), and we assumed also that for the P20 and P30 tiers, where IBM does not have per-user charges but rather charges for 5250 enablement, that it would offer a partial 5250 enablement to lower the cost. We shall see what happens.
But here is the thing that is important for customers to consider, particularly those who have P30, P20, and P10 systems – and something we did not discuss with IBM as part of our briefings because we had not fully formed our thoughts here. When customers do their next system upgrade, to perhaps a Power10 or Power11 machine, that machine will probably have twice the CPUs per core and that means it will take half as many cores to do the same work. Which means it is very likely that customers will be able to downshift a software tier as they move to that new machine, moving from P30 to P20, or P20 to P10, or P10 to P05. Those at the P05 tier, which is the lowest tier at the moment (there used to be a P02 tier, you will remember), will not be able to downshift tiers to save money on future IBM i software subscriptions as iron gets more powerful. Unless IBM revives the P02 tier, of course. (Hint, hint.)
Now, let’s talk about the LPPs.
Back in May 2022, IBM simplified the LPP stack from 20 separately charged or separately ordered features down to eight unique LPPs, like this:
The Merlin web-based application development tool, which is distinct from the Rational tools for IBM i, was added into the mix as well.
In any event, Rational Developer for i, Rational Development Studio for i, and Merlin now all have subscription pricing, and have actually had them since earlier this year, like this:
Rational Developer for i had a perpetual license per user plus maintenance per programmer seat (we don’t know what it was), but we can tell you that the new subscription is $560 per seat per year.
Rational Development Studio for i had three separate orderable parts, each with their own prices per programmer seat. Again, we do not know what that old perpetual license plus maintenance fee was, but what we can tell you is that with the move to subscription pricing, Rational Development Studio for i will cost $650 per seat per year in the P05 tier if you take a three year subscription; $1,950 per seat per year for the P10 tier for a three year subscription; $2,600 per seat per year for the P20 tier for a three year subscription; and $6,500 per seat per year for the P30 tier for a three year subscription. Presumably it is more expensive per seat for contracts with shorter terms and less expensive for contracts with longer terms – IBM did not say.
Remember: The maintenance for the software subscriptions is built into the subscription price.
Pricing on Merlin is charged based on a virtual processor core, or VPC, or what the cloud industry often calls a vCPU, and the perpetual license for Merlin was originally $4,500 per VPC, as shown in this document. Under the subscription model, now a VPC subscription to the Merlin development tool is priced at $162 per seat per month, which works out to $1,944 per year.
The remaining five LPPs will get their subscription pricing by the end of the year. We will keep you posted when these become available.
Update: This story originally reported that a Merlin license cost $45,000 per VPC. It is actually $4,500 per VPC, and we need to get out eyes checked. Seriously.