The Big Blue price tag

IBM is introducing a software licensing model based on processor horsepower, but some resellers say that the added complexity could muddle the sales process and result in end user confusion.

Earlier this week IBM said it plans to move away from licensing its server software based on CPU and replace it with something called “processor value units.” According to the new scheme, a customer will be asked to purchase 100 of these units to run software on a dual-core processor. Two dual cores running the same software would require 200 units. The change will affect all of Big Blue’s middleware products available on Passport Advantage Online licensing program.

Licensing will remain the same as it always has for existing servers, said Jeffrey Tieszen, a spokesperson for Armonk, N.Y.-based IBM, but as new multi-core products enter the market, they will adopt the processor value unit approach.

Tieszen said IBM is currently working with chipmakers like Intel and AMD to determine how the PVMs will be assigned to new processors. “We’ll be measuring them using industry standard benchmarks (and) they’ll be validated by third parties,” he said. “Then we’ll assign them a specific number of processor units and put them into a tier into this new structure. At that point, we’re no longer pricing by the core, we’re pricing by performance.”

The scheme should help IT departments budget more effectively and pay only for what they need, said Tieszen, but others claim that it may take some time before purchasing managers can put that into practice.

“I think the challenge is going to be explaining it to people in a very straightforward way,” said Steve Graham, analyst with IDC Canada Ltd., based in Toronto.

Graham was one of the analysts briefed by IBM on the new pricing structure. He said he was able to grasp the concept quite easily, but IT departments are forced to juggle a variety of licensing plans from different software vendors.

“That’s always the problem. When you have different licensing approaches across vendors you have to consolidate and compare one versus the either. I don’t see that really going away anytime soon,” he said.

“Clearly everyone’s going to wondering what math needs to be applied,” added Joe Valenti, vice-president of sales for Toronto-based DP Consultants, an IBM reseller and ISV. “It’s almost like your licence has to come with a spreadsheet so you can figure out exactly how to be compliant.

“The concern I have is that customers are not going to worry about compliance but just pay for a licence and throw it on there and expect it to work. I can’t say I have a lot of enthusiasm for what they’re doing.”

“For sure, it will make life a lot more difficult,” added Russell Sampson, a corporate sales rep. for Vancouver-based VAR “Any time (customers) are going IBM, they know they’re paying a premium no matter what. For sure, they’ll understand (but) it’s just another annoying step in the sales process,” he said, noting that Microsoft is taking a different approach altogether.

Microsoft announced last week that it would allow up to four instances of Windows on a PC using the same licence. Also, that the data centre edition of Windows Server 2003 can be run an unlimited number of times using virtual machines on the same server.

Microsoft’s approach was designed to take into account the growth of virtualization in the enterprise. While IBM’s performance-based licensing approach isn’t specifically geared towards virtualization, Tieszen said it is taking the company and its products in that direction.

“As things like virtualization and grids become more prevalent, it will only further confuse matters as far as licensing by the core goes,” he said.

Nauman Haque, analyst with the London, Ont.-based Info-Tech Research Group said that radically different approaches to licensing are practically inevitable. “My feeling is that software vendors will have to change their licensing strategies to reflect hardware changes no matter what. Multi-core processors, coupled with virtualization, will rock software vendors’ worlds and they will be forced to react,” said Haque in an e-mail interview.

The problem, then, is one of education. IBM and others will have to go to great lengths to explain new licensing models to end users, said Graham, and their best ally in that undertaking may be the channel. Users are also expecting better documentation and explanation for licenses in order to remain compliant, he said, and licence management tools may have to be part of the software itself.

“I think in some way, shape or form, all software vendors are going to have to address this,” he said.


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Jim Love, Chief Content Officer, IT World Canada

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