IBM plans a price cut for OS/390 software products

“Our plan depends on higher
volumes at competitive rates.”

IBM Corp. plans to cut prices for its OS/390 mainframe software products by more than
20 percent a year.

The company’s nine OS/390 pricing models will shrink to two as IBM moves away from
traditional capacity pricing and adopts use pricing.

“Our plan depends on higher volumes at competitive rates,” said David
Carlucci, general manager of the IBM S/390 division.

Beginning in January, IBM will reduce its Parallel Sysplex Level C prices by 25 percent
for nearly 80 OS/390 software products, including the current releases of DB2, CICS
Transaction Server, MQSeries, IMS, NetCommerce, compilers, application development tools
and system management products.

The reduced prices apply to each million instructions per second of capacity exceeding
1,000 MIPS on single and clustered OS/390 servers, Carlucci said. Since May, IBM has been
shipping S/390 Parallel Enterprise Generation 5 servers rated at 1,069 MIPS.

Under the older price calculations, Carlucci said, OS/390’s price-performance
benefits dropped off when user sites expanded beyond 1,000-MIPS capacity.

For organizations that prefer use pricing, IBM will provide a set of tools to measure
and report on use. It also will extend the use measurement period to one year to help
sites budget for software costs and align their use reporting periods with their annual
licensing agreements.

“All our customers with current versions will be able to choose capacity or usage
pricing options or a combination of the two,” Carlucci said.

IBM also intends to compete on price with Unix platform vendors by lowering its prices
as much as 75 percent for specific enterprise applications running on dedicated S/390
servers, Carlucci said.

The qualifying applications include Lotus Domino; SAP R/3 from SAP America Inc. of
Wayne, Pa.; BaanERP from Baan Co. of Menlo Park, Calif.; Oracle Corp.’s Oracle
Applications; applications from PeopleSoft Inc. of Pleasanton, Calif.; IBM’s
Intelligent Miner and Net.Commerce; and file and print server workloads consolidated from
Unix and Microsoft Windows NT servers onto dedicated S/390 servers.

In 1994, a two-processor S/390 server cost $520 per MIPS per month, said Steve Mills,
general manager of the IBM Software Solutions Division. In 1996, the per-MIPS price came
down to $317 per month, he said, and “with the G5 processor, we’re down to just
a little over $200 per MIPS per month.”

Mills said the price cuts for OS/390 software will add up to a four-year annual price
reduction of 21 percent.  

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