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Tailored Fit Pricing – IBM’s Strategy and Objectives

From where we were

Even though Tailored Fit Pricing (TFP) for Software (SW) has been in the marketplace for a 2+ years, I thought it would first be helpful to share some thoughts as a reminder on why we at IBM actually introduced TFP into the mainframe (IBM Z platform) marketplace.

The mainframe commercial model widely used since being developed in the late 1990’s was a sub-capacity model based on the so-called Rolling 4 Hour Average (R4HA). R4HA served our customers extremely well for many years until we started to see and hear from our customers that the model was becoming less optimal and less suited to the workload profiles of today. As well as a lack of price predictability (I’m thinking here of growth of existing workloads as well as new), and the not insignificant costs associated with managing the R4HA (eg people, process, products), our customers were also clearly seeing their existing workloads become increasingly spikey or volatile – a profile not so well suited to a peak capacity pricing model.

Further, the notion of doing more with the mainframe (IBM Z platform), for example, exposing existing assets to new uses, including in new architectures such as hybrid cloud, would frequently mean even more workload profile volatility exacerbating the pressure on the R4HA. Yet, the IBM Z technology is widely acknowledged as being able to deliver excellently on spikes in demand, as well as deliver the highest qualities of service for these existing and many other workloads and architectures.

For some customers, the R4HA was becoming an obstacle and in some cases, even a deterrent, to growth and innovation on what in many ways was the logical platform.

To where we are

So, in May 2019, IBM introduced TFP for Software including the Consumption solution, with by far the highest customer take up, an alternative to the R4HA. A software consumption pricing solution handling both Monthly License Charge (MLC) and One time Charge (OTC) software, that sees billing moved from the highest point reached in the hardware (ie sub-capacity) – see below left (Fig.1) – and to a cloud-like consumption based model – see below right.

tfp blog andrew mead

Fig.1 TFP sees billing moved from the highest point reached in the hardware (ie sub-capacity) – left (- to a cloud-like consumption based model – right.

There’s much content available on the details of how TFP works but for the purposes of this blog, let’s explore what is resonating so well with mainframe customers:

An increased commercial confidence to
- allow their existing workloads to naturally evolve as required whilst delivering the mainframe qualities of service with all available MIPS and without a disproportionate billing impact.
- to expose their existing mainframe assets to new uses and architectures (such as hybrid cloud)
- consider deploying new workloads to the mainframe.
The ability to grow on the mainframe at a very competitive cost per MSU for MLC.
An increased price predictability and cost transparency.
The ability to run their mainframe environment as the machines were designed – with a focus on optimal performance and resiliency rather than cost containment.

- Immediately remove all capping and let all available MIPS be used as and when demand is there. Reduced batch windows, improved online response times etc
- Deploying key software middleware (EG database, transaction server) where they best serve the business.
- The chance to reduce the cost of managing the mainframe environment through the removal of R4HA and the overall simplification introduced.

All this achieved through having a consumption based pricing model and the broader implementation of it through TFP and in many ways, these points capture well some of our core objectives when introducing TFP.

As you might expect with so much resonating with customers, the uptake of TFP for SW has been fantastic. We’ve seen customers of all sizes, from numerous industries from all around the globe adopt TFP for SW.

Looking forward

I foresee this trend to very much continue. The significant amount of customers expressing interest in the model, trialling it, signing up for it all points only to the continued growth of customers on this model. And importantly, this is not because they are obliged to transition across to TFP, but rather because it makes much sense to do so.

We’ve also recently introduced the TFP for IBM Z hardware offering which strengthens further the TFP portfolio and helps us provide the TFP value across the whole stack.

As the global executive for the Tailored Fit Pricing program in IBM, it’s been enormously fulfilling to see customers choosing to transition across to TFP SW as noted above – because it made sense for their business – and to then go on and hear how they indeed were able to access the value that TFP promises, all to the benefit of their business !

Thank you for reading.

Andrew Mead