management: Mainframe Software Pricing

It's easy to be confused with mainframe software licensing, particularly from IBM. There are many pricing options such as IPLA, VWLC and zNALC. What's more, the options available may depend on the product, processor, processor usage, or other software being used. This month, we explain mainframe software licensing.

Do you want to buy some IBM mainframe software? Well, you can't. No, you really can't. IBM doesn't sell mainframe software. Instead, it sells licenses to use its mainframe software. Big difference. This gives IBM a lot of control about its software, including who it will sell to, and under what conditions. For example, you're unlikely to get a z/OS license for the mainframe emulation software Hercules.

Because of this distinction, IBM software pricing is a lot different to that of other platforms like Microsoft Windows. There are many different choices to make, and a lot of paperwork to wade through. So let's take a beginner's look at IBM mainframe software licensing.

Monthly Payments

Regardless of the vendor, the chances are that you are paying up regularly, often monthly, for your mainframe software. When first acquiring the software, you may pay an up-front fee. After this, you continue to pay a regular monthly fee called by many names including licensing fee or maintenance fee. This charge gives you the right to use the software, and almost always includes access to vendor software support services. These support services can include free software upgrades, fixes, and access to a help desk. IBM calls this Monthly License Charges, or MLC. But it may not be your only option.

IBM has in the past offered several up-front options: you pay up-front to use a product. These have had names such as One-Time Charge (OTC) and Entry Support License (ESL). Although these are no longer offered, IBM still also offers an up-front option called International Program License Agreement (IPLA). You pay an up-front fee, and can continue to use the product without additional payments. The catch is this: no support. For support, you need to; you guessed it, pay an additional annual fee.

Pay by Size

For as long as I've worked with mainframes, the price of mainframe software has usually been tied to the size of the mainframe. Bigger mainframe, higher software licensing costs. In the early days, IBM published a figure called a Processor Group (or Model Group) for its mainframes, as well as compatible mainframes from competitors Amdahl and Hitachi Data Systems. One group would cover a range of mainframes of similar size. So mainframes in Group 80 mainframe were larger than those in Group 30, with correspondingly higher software costs. IBM called this the Graduated Monthly License Charge (GMLC), or Growth Opportunity License Charge (GOLC) for its smaller Multiprise line. Many other mainframe software vendors jumped on this bandwagon and priced their software according to Processor Group.

In 1995, IBM started using a different system, charging by a processor's MSU (Millions of Service Units) capacity. Smaller mainframes up to Group 80 still used the old GMLC/GOLC, but larger mainframes moved onto the new Indexed Monthly License Charge (IMLC). I've heard some suggest that this was because competitor mainframes at the time were larger than IBMs. Publishing processor group values highlighted this - not a good look for IBM.

IBM still publishes Group numbers for its smaller processors in its licensing section. You can also find this information from Cheryl Watson's CPU charts. Other software vendors may also have their own grouping charts and values.

Using MSUs is in many ways a better way to measure processor size, though it does have some drawbacks. See our article Exactly How Big is Your Mainframe to find out more about MSUs. In particular, it is far better because of PR/SM and z/VM. These features allow multiple operating system images to run on the same processor. So if you have one z/OS and one z/VM running on a processor, you don't want to pay as if each was using the entire processing on its own.

An interesting fact is that, all other things being equal, the price per MSU decreases as the MSU figure increases. IBM often divides the MSU ratings into bands. Lower bands: higher $/MSU. Higher bands, lower $/MSU. For example, at the time of writing this article, IBM had eight bands for its Variable Workload Licensing: Level 0 was 4-45 MSU, Level 7 greater than 1976 MSU. Level 7 pricing was advertised as 20% less than Level 6 per MSU. This no doubt has contributed to data centre centralization and outsourcing projects in the past.

Pay for What You Use

When you think about it, basing software costs on the mainframe size is good for the software vendors, but bad for the hardware vendors. As IBM does both, you can see their dilemma. They want you to buy new processors, but they also want the extra software dollars when you do.

In the end, IBM announced usage-based licensing in the 1990s. These have had several names over the years, including Measured Usage License Charge (MULC), Usage License Charge (ULC), S/390 Usage Charge, and GOLC . Today they are all generally called Sub-Capacity pricing. Regardless of the name, these are priced on the processing power used, not the processing power installed. Initially this wasn't particularly popular, but today Sub-Capacity pricing is the rule, not the exception. IBM has even created a new SMF record used to create usage reports all Sub-Capacity customers send to IBM every month.

The catch is that only a small subset of IBMs products are eligible for Sub-Capacity licensing, though these live at the high end of the pricing spectrum. This list includes flagship products such as z/OS itself, IMS, CICS, DB2 and Websphere MQ. You can see the list from IBMs website. Other products, including older utilities and compilers, will use Full-Capacity licensing (based on the installed capacity), or Flat Workload Licensing Charges (FWLC - a fixed price regardless of the size of the machine). So you'll have different products on different pricing systems.

Again, this provides mainframe users with opportunities to reduce their software licensing costs by tuning their mainframes. There are other opportunities that we will talk about next week.

Many customers happily choose Sub-Capacity licensing, and assume that the cost is a fixed amount per measured MSU. And in many cases this may be correct. However read your contract closely. I've seen customers with a tiered pricing structure - where the cost per MSU changes as the total MSU figure changes.

IBM Branding

As a long-time observer of IBM, I'd expect to see several different pricing options. And IBM doesn't disappoint.

Monthly License Charges

• Flat Workload License Charge (FWLC) - a flat fee per server, regardless of the size. This is used for software such as older compilers and utilities.
• Variable Workload License Charge (VWLC) - cost depends on the size of the processor or workload.

VWLC workloads can be Sub-Capacity WLC (usage based) or Full-Capacity WLC (server capacity based). IBM isn't afraid to entice users to more modern hardware or software, and so offer some interesting alternatives to these options. For example, Advanced WLC (AWLC) offers reduced pricing for z/OS and z/TPF on zEnterprise systems. This is further enhanced by Technology Update Pricing, adding extra incentives to use newer hardware. Midrange WLC (MWLC) is another option for z/VSE, and zSeries Entry License Charges (zELC) give a favourable fixed price for small sites. Finally, Select Application License Charges (SALC) is another option for Websphere MQ only.

IBM is also happy to use pricing to lure customers. For example, while traditional customers pay hefty software licensing fees, customers only using " new" workloads like Java and Websphere Application Server get better prices from the System z New Application License Charges (zNALC); IBMs z/OS.e replacement.

IBMs MLC groups also include Parallel Sysplex License Charges (PSLC), where the CPU usage of every system in a Parallel Sysplex is added together. Finally, other licensing options are available to extend support for out of service products (such as z/OS 1.8).

IBM Program License Agreement (IPLA)

IBMs IPLA is for customers paying a one-time charge, and then optionally paying an annual Subscription and Service (S&S) charge. The most common IPLA pricing is called Value Unit pricing. Customers purchase the required number of Value Units to use a product. Like MLC, Value Units are usually based on the MSU rating of the machine, but can also be dependent on the number of users, central processors, bytes or event messages. IBM provides a calculator to calculate Value Units. Value Units can also in some situations be sub-capacity based.

An interesting note about IPLA is that some sub-capacity IPLA users may be eligible for Getting Started Sub-Capacity Pricing (GSSP). This means that the product is charged on a reduced usage rate.

Different Pricing for Different Products

Not every product can use every pricing option. IBM states available pricing for each product in its announcement documents. This means that different software will fit into a different pricing structure. So you may pay for z/OS on a PSLC, CICS and DB2 on a Sub-Capacity AWLC, and Enterprise COBOL on a FWLC.

Conclusion

IBM has succeeded in making mainframe software pricing complicated. There are several different options for different software and hardware, and in many cases there are several options for the customer. What's more, prices and conditions may change from customer to customer, and region to region. There are no hard or fast rules.

However providing a choice of pricing options can provide an opportunity for software licensing savings. We'll look more into this in our second article in this series next issue.

David Stephens

LongEx Quarterly is a quarterly eZine produced by Longpela Expertise. It provides Mainframe articles for management and technical experts. It is published every November, February, May and August.

The opinions in this article are solely those of the author, and do not necessarily represent the opinions of any other person or organisation. All trademarks, trade names, service marks and logos referenced in these articles belong to their respective companies.

Although Longpela Expertise may be paid by organisations reprinting our articles, all articles are independent. Longpela Expertise has not been paid money by any vendor or company to write any articles appearing in our e-zine.