What impact does IBM’s Tailored Fit Pricing Model have on VirtualZ?

Mar 6, 2020

IBM’s Tailored Fit (TF) pricing, announced in May 2019, is a notable advancement of IBM’s monthly license charge model. However, it is important that customers understand the conditions of moving into the model and why you want to be to have your Monthly License Charge (MLC) costs and Rolling Four Hour Average (R4HA) minimized and with as little volatility as possible before moving to TF pricing.

About Tailored Fit (TF) pricing:

  • Those versed in the MLC models know that R4HA is not a true sub-capacity license and cost model.
  • TF pricing replaces R4HA with MSU consumption over a one-year period and is still reported by SCRT to produce your MLC charges.
  • The MSU consumption level is a “floor” and is based on a twelve-month lookback in the SCRT reports. This is a longer lookback than other prior offerings, which were as short as a three-month baseline. We believe customers will want their R4HA to be as low as possible and for a longer period going in, or negotiate a shorter reference period to set their baseline. This is where our offerings continue to help the customer.
  • The baseline plus committed growth consumption is measured over a year period and reconciled at your MLC anniversary date.

  • Unconsumed MSUs in your MLC year are rolled over to your next MSU year.

  • Consumption is based on containers, and you can have different containers to account for different software stack mixes.

  • Test/Dev is a separate container under the umbrella of the Tailored Fit offering.

  • Old container pricing models are essentially rolled into TF pricing.

  • The Enterprise Capacity TF model is a full capacity model like PSLC.

  • Some of this change is a rebranding exercise from the confusion caused by labeling zNALC and Test/Dev containers as containers that have nothing to do with containers such as docker. These prior programs are still available but are now part of the umbrella TF program.

  • Only z14 generation hardware is eligible, and you must run the most current version of SCRT. This will eliminate many customers altogether or limit the systems available for the container.

  • It is important to note that if your IBM software is provided through your outsourcing relationship, TF is not yet available to outsourcers. In this case, you will want to continue focus on managing to R4HA if you are in a workload license charge MLC model.

  • For MSU growth beyond the baseline consumed in the MSU consumption year, IBM is targeting 50% savings over comparable growth in something like the Advanced Workload License Charge.

  • The historical MLC spend and the go-forward product mix make up the incremental per-MSU price. This per-MSU price is subject to product price increases so customers should be aware of that.

  • Products may be dropped and adjust the MSU consumption rate and the incremental per MSU price but customers should negotiate the impact to the MSU price upfront.

  • Customers may come out of the model and go into any other eligible MLC model at the end of the MSU year. Customers cannot re-enter TF for those systems for six months after exit.

In terms of VirtualZ, we believe customers would benefit most from implementing VirtualZ before moving to TF pricing. Customers will see greater advantages when they have normalized their month-over-month MLC charges to their lowest levels and minimum volatility in the R4HA before entering into this new model with its new baseline. Additionally VirtualZ software can help reduce your ongoing MSU consumption or what products are priced into your TF container.