Drilling Down Into New IBM i Perpetual And Subscription Pricing

April 15, 2024 Timothy Prickett Morgan

As we reported in last week’s issue, Big Blue increased pricing on its pricing for per-core perpetual software licenses, per user licensing fees, Software Maintenace, and subscription prices back on January 1. We missed the change – again, apologies for that – and let you know about the basics of these and other hardware and software price changes. This week we are going to look at the effect of these changes on the cost of the base IBM i systems software stack.

To review: On September 9 last year, IBM announced the price increases that went into effect as 2024 began. There was a 6 percent increase in per-core perpetual licenses and user fees, a 10 percent increase in SWMA, and a 10 percent increase in per core annual subscription prices. After May 7, you won’t be able to buy new perpetual licenses for the IBM i stack for machines in the P05 and P10 operating systems tiers, so you best shake a leg if you want to buy your last perpetual license and you also best expect a 10 percent price increase in SWMA each year from here on out because IBM doesn’t want you to stay on perpetual licenses but move to annual subscriptions that shift you from capital budgets to operating budgets and that make it more money starting in year five and on through year seven (the typical life of an OS/400 and IBM i server has been between five and seven years for as long as we can remember).

At some point, machines in the P20 and P30 software tiers will also shift to subscription-only licensing, and back in February 2023 IBM even announced per-core subscription pricing for these machines. It has not decided what to charge for 5250 Enterprise Enablement on machines in these tiers – this is included in the base IBM i licenses in the P05 and P10 tiers – and we estimated these back then. We are updating these estimated prices, too, so you can prepare for the inevitable.

IBM can’t shock the user base all at once with a 1.5X increase in software licensing costs, which is warranted given the cumulative inflation rate from 2020 through 2024. So the company is going to try to move everyone it can to subscriptions on current Power9 and Power10 machines, and those who can’t move are eventually going to be stuck on unsupported iron and unsupported operating system releases with a very dangerous future. As we have shown time and again, the technical debt in hardware and software is truly enormous in the OS/400 and IBM i installed base, and hopefully you work at a company that has invested steadily and kept applications current or supported by third party software vendors.

For now, we just wanted to give you a reference point for where IBM i perpetual and subscription pricing is as you put together you plans within the next few weeks as perpetual licenses are going to expire for machines in the P05 and P10 tiers.

Our best advice is to try to downshift to a lower IBM i software tier with new software on Power10 iron and bite the subscription bullet. The prices IBM sets are per core, not per system. And a Power10 core does around 4X the work of a Power8 core and around 8X that of a Power7 core, so if you can upgrade your systems and radically reduce your core count, you can potentially lower your IBM i costs by an enormous amount; and if you can downshift tiers, you can save even more. You will see in these charts why this is a good strategy, and if IBM or software vendors don’t let you do it, then let us know and as a group we can raise holy hell together.

Let’s dive in. Here is the updated pricing for the P05 tier after the January 1 price hike:

As you can see, if you have more than 50 users on the P05 machine – the cross-over point where you can then add more users for free with an unlimited user license, the price increase for subscriptions versus perpetual licenses is not so bad. A mere 13.2 percent over seven years.

Considering that the installed base is dominated by P05-class machines, this is pretty good and it is far, far lower than the 48.2 percent premium that IBM had last year when the unlimited user bar was set at 75 users.

The price increase of subscription over perpetual for the 25 users is 30.3 percent, and it was 30.2 percent before the January 1 price increase.

Here is what the new P10 pricing looks like for perpetual and subscription license and support costs at 75 users and unlimited users:

At 75 users, once again, the price delta of perpetual versus subscription is essentially unchanged at around 22 percent, but because the unlimited user point is the same at 200 users, the relative prices are the same at unlimited users, too.

With the P20 tier, we have to guess what IBM will charge for a partial and a full 5250 enterprise enablement, which is a big part of the cost of perpetual license and an ongoing subscription license. We guessed the crossover is going to be four years for this part of the P20 license, which is consistent with how the base IBM i license is priced. So after the January 1 price hikes, here is how the perpetual versus subscription charges stacks up over seven years:

We had an error in last year’s chart in the unlimited user section, accidentally putting in $7,400 versus the actual $9,000 per core SWMA price. After the 10 percent price hike, that per core SWMA now costs $9,900 per year. And the premium for unlimited 5250 Enterprise Enablement added to subscriptions will be 26.5 percent over seven years. This is lower than the P10 tier, which we think IBM’s customers are telling it that it needs to be. We shall see how this plays out when IBM finally moves to subscription pricing for P20 tier and the P30 tier (the latter of which is the same as the P50 tier for many years).

Remember: There are no per user fees for the P20, P30, or P50 tiers.

That brings us to the P30 tier, which is outlined here:

We had a think about 5250 enablement pricing, and we think because this is a much bigger part of the overall cost in the P30 tier and P50 tier, instead of a four year crossover, IBM will set this at around six years. In this way, the biggest IBM i customers get the lowest delta between perpetual and subscription pricing. But this is admittedly just a guess.

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