How to Cut the (Not So) High Cost of Mainframe Software

If you do your homework, Big-Iron cost cutters argue, you can realize substantial mainframe software savings.

If mainframe technologists have a favorite gripe, it's what many say is the high cost of software licensing. Mainframe software keeps getting more expensive, they claim, even as the price of Big-Iron hardware continues to fall.

It's so often repeated it’s become a truism for many mainframe technologists.

The irony, some argue, is that it simply isn't true. They aren't just talking about comparatively inexpensive zLinux, Java, or some z/OS database processing workloads, either. They're talking about venerable CICS, mainframe DB2, and other traditional z/OS workloads. If you do your homework, Big-Iron cost cutters argue, you can realize substantial mainframe software savings.

In fact, you could pay substantially less for your mainframe software today than you did several years ago.

As Bob Richards, a vice-president and enterprise technologist with a prominent financial institution based in the southeastern U.S., notes, "It's really funny what's going on with licensing. I talk to my IBM pricer and he tells me there are still companies that are on parallel sysplex licensing charge. That's about a decade or so old, and they haven't converted to other more profitable or better licensing metrics. Meanwhile, they're costing their company millions of dollars depending on the size of the ship. Then there are other shops that have bothered to take a look at these announcements." Richards says he's been able to reduce his company's mainframe licensing costs: not by means of trickery or via clever licensing arrangements, but by taking advantage of price breaks that IBM itself introduced.

"If you look at my software bill six years ago versus where it's at now, I'm paying [substantially] less than I was paying six years ago," says Richards, who declined to specify the size of his savings. "That's what smart software asset management ... has enabled me to do. The old mindset of 'increased MIPS equals increased software costs' is just stupid."

Ditto for user kvetching that IBM itself tends to turn a deaf ear to the issue of mainframe software licensing. "They are trying to be a good citizen. They are making money at this, but compared to what their competitors are doing, they're being responsible. I can prove where my software costs for IBM software have gone down dramatically where my MIPS have gone up. It's as simple as that."

Gaming the System?

Companies have traditionally employed a number of strategies to help cut their mainframe software bills, including enterprise licensing agreements (ELA), tiered pricing, and the use of IBM’s expanding line-up of mainframe tools (which are competitive with third-party solutions).

Phil Knight, an independent mainframe contractor who’s currently working for an institution of higher education based in the Northeast, says he’s seen a lot of different cost-cutting strategies over the course of his career. ELs are among the most common, he indicates, "particularly with large ISV's such as CA. Once a large MIPS cap is set, all competing ISV products are immediately replaced. If a new need arises, the [college] is given choices only from the EL, which has a large enough MIPS buffer to reach in without extra cost."

There’s an obvious benefit here to the ISV—which gets to both displace competitive products and lock in customers at a fixed rate—and there are some cost savings for customers, too. Still another strategy, Knight says, is to use IBM replacement products, which—because of Big Blue’s cheaper and more flexible licensing terms—comprise attractive alternatives to third-party solutions.

"IBM has historically left the value-added products to the ISV's. This is not so true today. IBM products such as File Analyzer are now offered as alternatives. These are very attractive—not only for out-of-pocket costs, but [because] maintenance and enhancements are rolled out with normal IBM maintenance," Knight explains. "This saves on manpower as well. In addition, it is just one more contract with an ISV that can be torn up, saving on administrative costs and authorization code headaches."

Elsewhere, Knight doubts whether some of the cost-saving methods of the past (such as ISV tiered pricing) are still as applicable as they once were. "In the past, ISVs … typically used incremental pricing following IBM model groups. This was the norm at one time and IBM and the plug-compatible … manufacturers used to publish comparable charts for this. Now that IBM is currently the only mainframe manufacturer, I don't know how valid it is today, but I imagine that some measure of it is still in play," he comments.

The MSU Technology Dividend

According to Knight, "Some of my past employers used to scrutinize these charts before selecting a processor upgrade to estimate the impact on software costs. By doing so, you could sometimes find a PC processor that was rated lower in the tier than the benchmark testing would seemingly indicate. In other cases, care was simply taken to move up but not cross the model group boundary. I've seen plenty of upgrades where a more powerful processor is installed, software licensing re-qualified, with no change to software costs."

The salient point, says mainframe veteran Richards, is that hardware upgrades simply shouldn’t lead to higher software costs.

"I can show people a graph where I have increased the processing capacity of this company and … I can show you that software costs have gone down as drastically as my MIPS have gone up," he says. "Part of this is due to IBM itself. When [the company] came out with the z990, they announced a technology pricing break. They set the software MSUs 10 percent lower than they could have. When they came out with the z9 Enterprise and Business Class machines, they announced another 10 percent break on the billing. With those two things alone, it absorbed all of my natural growth on usage and it’s sub-capacity, so I increased capacity and my price went down."

This is what some mainframe watchers call Big Blue’s MSU technology dividend—the capacity freebie IBM throws in to help encourage adoption of new mainframe hardware (see

Beyond MSU dividends, Richards says shops can realize significant cost savings by taking advantage of IBM’s Workload License Charge (WLC), which—theoretically, anyway—lets them pay only for the capacity they use. Big Blue introduced WLC nearly seven years ago, yet thanks in part to the complexity of its pricing books (which count more than 100,000 software cost items), many customers still don't completely understand it. By using WLC and taking advantage of Big Blue’s support for sub-capacity license charging, customers can realize substantial savings, Richards indicates.

"The vast majority of shops are on z/OS, so the terms and conditions for WLC have probably already been met. Maybe a lot of people might have converted to WLC, but they haven’t converted to sub-capacity, because that requires a little effort. It’s not that much. Whether I have two or 52 LPARs, I need to collect two record types from SMF and run them through the report. Is it worth that time? Yes. Even if it’s saving us just $5,000 a month, that’s somebody’s salary," he argues.

"You only have to do this extensive work of setting up the data once, then you run the report once a month, and they give you seven days to run the report from where they close."

There are other potential pricing breaks as well, Richards indicates. "If you’re like my data center and you have two machines and you qualify for other things, you can qualify for SysPlex Pricing Aggregation. Does all of this involve a little homework upfront to set up? Yes, but it easily saves a person’s salary. Even in a smaller shop, it will save money, and these are real dollars you’re saving here.

There are a host of other ways to reduce your software pricing. Join us next week as we explore several licensing dos and don’ts.

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