IBM mainframe pricing overhaul inspired by cloud model

IBM has dramatically changed its pricing model for running modern workloads on its z/OS mainframes in hopes of bringing the systems toward the center of corporate users' hybrid cloud strategies.

The new mainframe pricing model, the most significant change involving its mainframes in 20 years, can be adjusted depending on customers usage levels. The model's consumption-based pricing is designed to address the rapid growth of workloads from hybrid clouds, which are much more unpredictable than traditional mainframe workloads.

"There is a fair amount of workload growth being driven to the mainframe as users open up the platform through APIs, making the apps and data more available," said Barry Baker, vice president of IBM Z software. "More customers are shifting to multi- and hybrid clouds and they want those workloads to run with mainframes on premises. We needed to develop a simpler cloud pricing model to help users drive that transformation forward."

IBM's Tailored Fit Pricing model gives users two choices. The Enterprise Capacity model is for users who place a priority on operational simplicity and strict cost predictability but who also expect significant workload growth. The pricing is based on past usage and growth patterns and is based on a consistent monthly rate.

The Enterprise Consumption model is a more flexible container-based consumption and billing model where users make a monthly license charge and million service usage (MSU) baseline commitments. However, built-in annual entitlements and reconciliation processes reduce or completely eliminate seasonal variability issues.

In 1999, IBM introduced its sub-capacity pricing model and the concept of the four-hour rolling average. IBM's mainframe software monthly license charge is based on MSU per month. To establish a fair pricing model, IBM supports the use of sub-capacity licensing and bases the price on the four-hour rolling average of the mainframe's MSU consumption. The company uses that peak four-hour rolling average to determine monthly charges.

What can come back to bite users, however, is if their peak utilization per hour is high during those hours where they are running jobs, such as application development projects, while the mainframe is being used for scheduled high-priority workloads.

One motive [for Tailored Fit Pricing] is to give users a reason to keep the mainframe relevant to what users are doing with hybrid clouds.

"We could see our clients needing to do app development tests, as well as running different cloud workloads that should be priced differently," Baker said. "So we had to come up with a model to help them grow those (nonmainframe workloads) in a controlled way but also leverage the strengths of the (mainframe) platform as opposed to architecting workloads around price."

Traditionally, IBM Global Services annually would look at an IT shop's usage pattern over the previous year and would set a rate based on a time period the user had designated for its four-hour rolling average, said Charles King president and principal analyst at Pund-IT. If users went over that rate they were forced to pay a one-time penalty or pay at a higher rate for the year, he said.

"One motive [for Tailored Fit Pricing] is to give users a reason to keep the mainframe relevant to what users are doing with hybrid clouds," King said. "But another is users were avoiding the overage charges by pushing the modern workloads off the mainframe and over to nonmainframe platforms -- something IBM doesn't want to see."

Broadcom, which bought CA Technologies last year, one of the largest vendors of mainframe software, also delivered a consumption-based pricing model that supports its workloads on mainframes. The company's Mainframe Consumption Licensing (MCL) model is designed to complement its existing MSU-based pricing plan, giving IBM z/OS mainframe users better visibility and predictability into their software spending.

David Stokes, senior director of Broadcom's mainframe division, said the mainframe still provides many worthwhile benefits to corporate users, but the licensing tied to the four-hour rolling average plan serves as an inhibitor for shops looking to do robust cloud-based app development. Users have been asking for the kinds of changes IBM's new program can introduce for years, he said.

"If you can't have a robust test and development platform for creating and destroying dev/test systems, you can't attract developers, which is what we want," Stokes said. "We want to attract them but also retain them by making it easier to build and maintain apps," he said.

Two other prominent mainframe software developers, Compuware and BMC have also come out in support of IBM's mainframe pricing changes and will offer their own respective flexible pricing models.