IBM Tweaks Integration Software Pricing

Rallying around its “on-demand computing” cry, IBM Tuesday said it was
retooling its integration software pricing scheme to make it more attractive
to mid-sized companies.

The Armonk, N.Y. firm’s WebSphere infrastructure software, or middleware,
is designed to help firms integrate different silos or
stacks of data, including customer relationship management (CRM) or supply
chain management (SCM).

Normally priced per central processing unit (CPU), IBM has decided it would
do better by its customers, and in the long run for itself, to price its new WebSphere-Express at $25 per user. IBM’s
previous price point was $2,000 per CPU.

Based on Java and Web services standards, WebSphere-Express is software that
serves to tie the front-end software to the back-end (think database to Web server), making it easier for
businesses to operate and use Web services, business integration,
transaction processing, data management, data storage, collaboration,
messaging, security and infrastructure management.

The goal of firms who make integration software, including Oracle and BEA,
is to provide a “real-time” enterprise environment where customers are
served on the fly in the face of fluctuating market conditions. IBM calls
this strategy “on-demand computing.” Chief Executive Sam Palmisano detailed
late last month.

IBM’s point is that mid-market firms, which usually number 100 to 1,000
workers, find themselves squeezed by capital and are unwilling to take
risks. This is why, IBM said, a less costly pricing scheme will appeal to

Amy Wohl, president of consulting firm Wohl Associates, said the WebSphere Express pricing scheme is “very cheap.”

“It’s designed to appeal to a smaller business,” Wohl explained. “It can help some firms get up and running quicker. You can accomodate 80 users before you’ve paid for a CPU license.” Wohl said other attractive features of WebSphere-Express include its scalability — certain facets of Express include compatiblity with higher-end, standard and enterprise versions.

“I was pleasantly surpised,” Wohl said, noting that the scheme is not the first interesting pricing move IBM has made. “IBM is standing back and looking at the economy to scale and saying that it is better to have a lot of customers using our software at a lower price than a few customers using it at a higher price.”

As for IBM’s “on-demand computing” scheme, Wohl said she has seen attempts like this before in some form or another by a number of companies.

“To me, it’s kind of back to the future,” Wohl said. IBM calls it ‘by the drink’, as opposed to firms buying all the hardware and software and implementing it. This just comes at a suitable time period in the economy. IT managers are faced with flat or reduced budgets so some, but not all firms will employ this — maybe not in its entirety, but in some form or another.”

IBM said it will also deliver new DB2-Express software to customers in the
first quarter of 2003. The software will start at $1,000 and will feature
new remote database administrator (DBA) technology will allow customers to
eliminate on-site DBA support.

WebSphere-Express consists of:

  • WebSphere Application Server – Express, available on December 13, 2002, at $25 per intranet user; $2,000 per processor for unlimited users on intranet, Internet or extranet web sites, and $400 for additional copies for developer use only
  • WebSphere Portal – Express, enabling mid-market businesses and departments within larger companies to more easily deploy employee, business partner, and customer portals. This product is currently available at $77 per intranet user, or $30,000 per processor for an unlimited number of users in an extranet environment. A Plus version of IBM WebSphere Portal Server – Express is currently available at $122 per intranet user, or $47,820 per processor for an unlimited number of users in an extranet environment
  • WebSphere Business Connection – Express, an entry-level edition of IBM WebSphere Business Connection software for business-to-business process integration and data sharing among trading partners of all types. Available at $5,000 per processor which includes the ability to connect to 10 trading partners.

    Big Blue also pledged new services and support, including a new managed
    service hosted by VeriSign and based on IBM Tivoli Access Manager that
    delivers security for portals, extranets and other business applications.

    Because business partners constitute a large part of IBM’s software
    division, IBM also unveiled new training and support programs that help
    partners resell, install, integrate and finance the new “Express” software.

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