Mainframe Pricing: Endgame

IBM Simplifying Mainframe Software Pricing

When you hear the words mainframe software pricing, what do you think of? A common reaction is to ignore it unless you are actively negotiating a new contract with IBM. And even then, the general consensus is that it is difficult to understand because there are so many confusing options and decisions that need to be made.

Good news – IBM has taken strides toward making mainframe software pricing easier to understand with its new tailored fit pricing options. In this article, we will take a look at IBM’s new pricing models and contrast them at a high level with existing workload pricing models. And we will examine the use cases where it makes sense to consider switching to a tailored fit pricing model.

Today’s Pricing Pain

The most common pricing model for mainframe software today is based on the capacity of LPARs where the software runs. IBM software is priced according to MSUs (million service units) which is a measurement of hardware performance assigned by IBM. As software runs, it consumes MSUs. Consumption is measured for each LPAR using a rolling four-hour average (R4HA).

Your organization pays IBM monthly based on the peak R4HA achieved for each software product being used. This is referred to as a subcapacity pricing model because you are paying for the peak average usage of each product each month, instead of based on the full capacity of the LPARs on which the software is running.

Of course, there are many details in terms of how the R4HA is calculated, the exact specifications of the subcapacity plan your organization is using, as well as other options and considerations, such as whether you are using soft capping. So, although subcapacity pricing using the R4HA can help to lower cost, it can also be incredibly confusing and difficult to manage. This has caused some organizations to ask for simpler, yet still cost-effective pricing options from IBM.

The Game Changer: Tailored Fit Pricing

Many organizations that use mainframes are also engaged in mainframe modernization, integrating the mainframe with cloud implementation and embracing digital transformation projects where users and applications access the mainframe not just from a terminal, but from websites, smartphones, and other mobile devices.

In mid-May 2019, IBM announced tailored fit pricing with a general availability date of June 21, 2019. The goal of tailored fit pricing is to deliver a simple, flexible, and predictable cloud-like pricing option for IBM z (mainframe) software.

There are two new tailored fit pricing options: the Enterprise Consumption Solution and the Enterprise Capacity Solution.

The Enterprise Consumption Solution (first option) will be familiar to those using the cloud. It is a usage-based licensing model that is measured on the basis of MSUs consumed. However, instead of relying on the computed R4HA metric, MSU consumption is aggregated hourly and software charges are priced according to your annual MSU consumption.

The Enterprise Capacity Solution (second option) is a full-capacity licensing model that provides a simpler option with a predictable monthly cost. In this case, software charges are based on the overall size of your physical hardware environment.  Charges are calculated based on the estimated mix of workloads running, while providing the flexibility to vary actual usage across workloads. Charges include increased capacity for development and test environments and reduced pricing for workload growth.

The intent of the Enterprise Capacity Solution is to provide a simple, predictable charging mechanism that eliminates the need to intricately tune MSU usage with capping and monitoring.

The Enterprise Capacity Solution also works with other pricing solutions that are designed for specific workloads, specifically the Application Development and Test Solution (DevTest) and the New Application Solution. The DevTest solution enables development and testing work to be segregated and priced lower than operational workloads. This removes the need to focus on aggressively controlling development and test workload, such as moving it off of the mainframe. Similarly, the New Application Solution is geared to promote brand new applications being deployed on the mainframe by pricing them lower than your traditional mainframe applications and workload.

Simplification is inevitable…

All of these solutions dramatically simplify pricing and deliver flexible deployment options that are tailored to reflect your environment. Instead of focusing on product and where they are installed and running, pricing is based on total capacity usage.

You might think that moving to a pricing model that measures total capacity would increase your monthly bill but IBM takes that into consideration. When you move to tailored fit pricing, IBM refactors the pricing to match what you paid last year. You then add in the amount you plan to grow year-over-year and your new monthly bill will be 1/12 of your entire yearly capacity consumption plan.

How is this beneficial? First of all, you no longer need to worry about what software is installed on what LPAR. Your bill is based on your total capacity consumption and not product by product as with existing subcapacity models. So you gain flexibility.

Additionally, your monthly bill from IBM will be the same each month, instead of varying up and down based on your consumption and on which products are installed where. This makes it easier to plan, therefore gaining predictability.

It is also important to note that tailored fit pricing does not eliminate any of IBM’s traditional mainframe subcapacity pricing models. Tailored fit pricing is optional. That means if your organization is pleased with the existing pricing plan you are using, you can keep using it. 

When to Consider Tailored Fit Pricing

First off, tailored fit pricing is available starting in IBM mainframe z/OS version z14 and is a nice option to consider moving forward. But, as with most things, it is not the best option for everybody. The first thing to consider is how well your organization can plan for mainframe growth. Tailored fit pricing is designed for organizations with expanding mainframe workloads because it delivers a lower cost for that growth. The typical Enterprise Capacity Solution contract will be for higher MSU than you consumed in the past year.

What happens if you use more capacity than you have contracted for? At the end of the year, you will be required to pay for any additional capacity consumed that was not in the plan. If you use less than planned, of course, you do not get a refund. Instead, that excess capacity can roll over to the next year. If you do not use everything by the end of your contractual period, the amount is lost.

For this reason, tailored fit pricing is best-suited for organizations with growing mainframe workloads. You can plan for growth and pay for it incrementally over the year instead of all at once when you consume more.

Before moving to tailored fit pricing, you should also be comfortable with the accuracy of your growth planning. By baking your planned growth into the contract, you are paying for that growth incrementally over the course of the year. If you do not plan well, it is possible that you will have a large bill at the end of the year, essentially migrating your unpredictable monthly bills to an unpredictable annual bill.

Another viable use case for tailored fit pricing suits organizations with a mainframe workload that is based on seasonal fluctuations. For example, retail businesses typically experience their largest workloads during the holidays at the end of the year, such as on Black Friday and Cyber Monday. Although retail shopping fluctuation is the most common cause for seasonal workload, there are others. If your business experiences workload that is light one month and heavy the next, tailored fit pricing can be used to smooth out the fluctuations. Instead of unknown monthly bills because of changing workloads, you can pay the same amount each month with tailored fit pricing.

The final common use case for tailored fit pricing is to achieve flexibility for your mainframe environment and workloads. With traditional pricing models you can significantly impact your monthly bills if you move your system software around. For example, perhaps you want to move your CICS and Db2 subsystems from one LPAR to another for a business or technical reason. With a traditional subcapacity pricing model, if the new LPAR is busier than the previous LPAR, you are likely to experience a higher monthly bill. But with tailored fit pricing, the bill is based on overall capacity which should not change significantly by moving the workload around.

I keep telling everybody they should move on.

Finally, what if you’re not ready to move to z14 yet? Does that mean you can just forget about saving on your growing workloads until that happens? The answer is that there’s good news and there’s bad news. The bad news is that you can’t get tailored fit pricing until you move on to z14 – there’s no way around that. The good news is that there are ways to save on the cost of growing workloads regardless of which z/OS release you’re running.

Some mainframe shops take years to move from one release of z/OS to another and for good reason – an upgrade like that can have wide-ranging impacts on everything you do on the mainframe. It doesn’t just happen overnight. However, high-performance mainframe in-memory technology can help you save on growing mainframe workload costs now, on any z/OS release.

High-performance mainframe in-memory technology is a low-risk, high-reward performance enhancement and cost saving solution suitable for any organization running intensive mainframe-based transaction processing. Its implementation requires no changes to your OS, no changes to your database, and no changes to your application logic.

Basically, you copy your most often accessed read-only reference data into high-performance in-memory tables and access it from there. That amounts to two percent of your data (often much less) – data that is accessed many times as part of every transaction. High-performance mainframe in-memory technology helps your transaction processing applications use far less CPU and run much faster –resulting in reduced and controlled mainframe operations costs.

And even better, when you do upgrade to z14 and implement tailored fit pricing, your high-performance mainframe in-memory technology implementation is forward-compatible. It will augment the cost savings that tailored fit pricing will bring you.

This is gonna work, ’cause I don’t know what I’m gonna do if it doesn’t.

Forbes recently published an article about Tailored Fit Pricing – and they hardly ever pay attention to the mainframe. Further, IBM says this will be the pricing standard for the next 20 years. That means that it will be, for most of us anyway, the mainframe pricing End Game™.

Tailored fit pricing is going to make our lives much simpler by making our software bills more predictable, and it’s likely going to save us some mainframe IT operational spend at the same time. This is particularly true for organizations that are experiencing growing mainframe workloads and expect that trend to continue.  For large organizations with growing workloads, it just doesn’t make sense to stay the course with today’s legacy pricing – the smart play is to look into a tailored fit pricing and in-memory technology One-Two Punch to exceed your goals.

For more information on how in-memory technology works, check out this video to learn more.