Tivoli Portfolio Consolidation: Enhanced Value-Based Pricing

1. Tivoli Spring LaunchEnhanced Value-Based Pricingfor the Tivoli Portfolio ConsolidationDavid Harakal, IBM Tivoli Pricing April 2002 David Harakal/Austin/IBM dharakal@us.ibm.com

2. Topics to cover • Portfolio Consolidation Goals and results • Timeline • Enhancements to Value-Based Pricing • Migrations • Pillar-specific packaging & pricing models • Channel-specific information Note: Presentation does not address MLC-based offerings Page 2

3. Goals • For Sales / Business Partners • Marketable prices for each product • New pricing aligned to value propositions and to new technologies • Easier to close sales & gain access to more accounts • More deals closed without special bids • Greater consistency with SWG for easier cross-brand sales • Passport Advantage benefits • For customers • Fewer decisions required • More flexible licensing • Better leverage of Passport Advantage Page 3

4. Launch Highlights • 60% Fewer Offerings • Consolidation, NOT abandonment • Per Processor pricing for servers • Price per processor varies by offering • Consistent with the SWG Strategy • TMP conversions not required for most products • Dramatically simpler pricing for Storage • Steeper Passport Advantage discount slope • Simplified route to market • Most products (except Storage) are orderable under PA only • Most products (except Storage) are in open distribution Page 4

5. Change Summary Page 5

6. What’s NOT Changing? • Environment-managed licensing model • Licensing is product specific • Maintenance included with the license • z-Series part numbers for revenue tracking • IBM Tivoli Price Estimator available for deal estimation Page 6

7. Impact and Timing of Portfolio Consolidation NOTE: Products consolidated, NOT abandoned Page 7

8. Product Families C&O Configuration Management Workload Scheduling Remote Control P&A Business Impact Management Event Correlation & Automation Monitoring Security Access Management Risk Management Identity Management Privacy Management Storage Storage Management Storage Resource Mgmt (3Q) Page 8

9. Timeline • 9th April–Launch - Orders for new offerings accepted • 9th May - Prior offerings no longer available • Prior storage model extended through end of 2002 • Products consolidated into new offerings, not abandoned • No more licenses available for 5697-xxx, 5698-xxx, and prior Passport offerings • July 1- Prior support offerings modified • Existing support for 5697-xxx and 5698-xxx terms modified to PA Maintenance terms and relative price levels Page 9

10. Tivoli Pricing History • June 1996 - Tivoli announces Tivoli-Flex pricing • First implementation of the environment-managed concept • 5697-xxx PID numbers with bundled support • Single server price - only scalability was client vs. server • February 2000 - Tivoli Value-Based Pricing announced • 5698-xxx PID numbers, added Tivoli Select Support • Introduced 3-tiered server model for better scalability • Reinforced and extended the environment-managed licensing model • September 2001 - Tivoli joins Passport Advantage • Very Shallow discount slopes • Maintained pricing parity with non-PA offerings • Channel partners enabled to resell PA Maintenance • April 2002- Tivoli Portfolio Consolidation • Simplify the portfolio by consolidating similar products • Reset pricing where needed to bring street prices in line with published PA pricing, including moving to a steeper PA discount slope Page 10

11. Enhanced Value-Based Pricing

12. Tivoli’s Environment-Managed Pricing model • Environment managed model is a Tivoli differentiator. • In competitor's models, pricing depends on architecture. • With Tivoli, only systems in the environment managed require licenses. • Applies to most products Page 12

13. Pricing metrics for Enhanced Value-Based Pricing • Servers • Managed processors (Most products) • Executing (Managing) processors(NetView, Switch Analyzer) • MSUs(via Tivoli Management Points - TBSM for z/OS, Access Mgr for Bus. Integration, Workload Scheduler, NPM and NPM/IP) • Clients managed • Network Nodes managed(NetView, Risk Manager) • Ports managed(Switch Analyzer) • Registered user accounts (Scalable-Usage model) Some products remain on prior model for the time being Note: Production and test environments require licensing. Page 13

14. How to price servers • Distributed versus z-Series server licensing • “zrev”, “Host Edition” and “for z-Series” indicate pricing for the host component of an end-to-end solution • "zrev" part numbers are priced the same on host and distributed, and the processor licenses are interchangeable • Products with "Host Edition" or "for z-Series“ are priced per MSU • For z-Series offerings, a no-charge Custom Build Registration part number enables CBPDO, ServerPac and other media deliverables • Pricing is for the hardware platform, not the OS • LINUX on z-Series is priced per MSU for products with an MSU pricing metric on the host • LINUX on distributed servers is priced per installed processor Page 14

15. How per-processor works for servers (continued) • Physical partitions– price per processor in the physical partition • IFL on the host • SP, Ultra 10K, HP SuperDome • Virtual/Logical partitions– price per processor or per MSU for the entire system • No LPAR pricing • z/OS, MVS, etc - No workload pricing for IPLA • Regatta, Ultra 15K Firebird • Tivoli will assess SWG model for virtual partitions for distributed servers when announced Page 15

16. MSU ratings for LINUX on z-Series servers Page 16

17. Environment Managed model example Page 17

18. Environment-Managed Model – generic example • Server processors managed • Total – 20 • Mail/Messaging & Collaboration – 4 • Databases – 4 • Applications – 2 • Web Servers - 2 • Clients – 7(includes technical workstations) Page 18

19. What happens when a customer adds processors? • Example (independent from prior slide) • Customer has 20 (twenty) 2-way servers to manage • Adds 2 processors to each server 1½ years later • Transaction 1 – Acquire 40 processor entitlements • 1st anniversary – Renew maintenance for 40 entitlements • Transaction 2 – Acquire additional 40 processor entitlements • 2nd Anniversary – Renew maintenance for all 80 processor entitlements Page 19

20. New Passport Advantage Discounting Tivoli moving to the same Passport Advantage discount slope as Websphere & MQSeries No changes to channel margins or transactional discounting rules in Passport Advantage. Page 20

21. Pillar Specifics Performance & AvailabilityConfiguration & OperationsEnd-to-End

22. Before and After Packaging Page 22

23. Products available April 9th (P&A) & Pricing Models Page 23

24. Before and After Packaging (Cont’d) Page 24

25. Pricing Models Page 25

26. Before and After Packaging – C&O Pricing Models Page 26

27. Additional notes • Monitoring "PACs" pre-req IBM Tivoli Monitoring • E.g., a database server would require licenses for IBM Tivoli Monitoring AND IBM Tivoli Monitoring for Databases • Monitoring for <software> is per server, not per server per PAC • TBSM • Separate S/390 (per MSU) and distributed products (per processor) • No separately chargeable features • Scheduler for Applications • Pre-req IBM Tivoli Workload Scheduler for the servers in the environment for licensing and deployment Page 27

28. Monitoring Example (with TEC and Service Level Advisor) • Customer wants to monitor the following servers: • 50 Intel 2-way servers (file and print servers) • 5 Intel 4-way servers with Exchange • 5 4-way p-Series servers with Oracle • They want to use TEC and manage the service levels of all servers Tivoli Manager for Oracle not yet re-priced – 5 Tier 2 servers – order 1,100 Tivoli Management Points 50 2-way Intel -> 100 5 4-way for Exchange -> 20 + 5 4-way for Oracle -> 20 Total processors 140 5 x 4-Way for Exchange = 20 Processors

29. Workload Scheduling Example • Customer wants to schedule the following servers • z-Series server (z-800-003, 84 MSUs) • 5 LINUX images in an IFL on a 7060 (20 MSUs, 1 processor) • 8-way p-Series server (with SAP/R3) • SAP specific scheduling on the IFL (1 processor) and the 8-way p-Series server 8 processors for the p-Series 8 processors for the p-Series plus 1 for the IFL 84 MSUs for the z-800 plus 20 for the IFL

30. Pillar Specifics Security

31. Before and After Packaging Page 31

32. Pricing Models Page 32

33. Additional notes • Risk Manager • No client charge • Only Cisco routers currently supported • ISS RealSecure Network Sensor (server) priced per processor • For Anti-Virus only servers and aggregating servers require licensing • No separately chargeable options • Identity Manager / Access Mgr for e-Business • Per-user licensing (scalable usage) OR per-processor for the managing (infrastructure) server (10 processor minimum initial order qty) • Access Manager products • Products are stand-alone offerings • No pre-reqs • Access Manager for Operating Systems • Per-processor charge/license applies to UNIX systems - servers and clients Page 33

34. Risk Manager Example • Customer wants to secure the following systems: • 2 ISS RealSecure UNIX Network Engine (4-way) • 8 NT Web Servers (1-way) • 2 UNIX CheckPoint FW-1 Firewalls (2-way) • 4 Host IDS running on AIX Servers (2-way) • 200 Cisco Routers 2 ISS 4-ways -> 8 8 NT uniprocessor -> 8 2 CheckPoint 2-way -> 4 + 4 Host IDS 2-way -> 8 Total processors 28

35. Access Management Family Example • Customer wants to do the following: • Secure all of their distributed servers with MQSeries installed (20 Uniprocessor, 65 2-way, 12 4-way, one 8-way, one 14-way, & one 24-way) • Secure all systems with UNIX operating systems (one 8-way, one 14-way, one 24-way, and 50 clients (technical workstations, each with 2 processors) ) • Secure access for 150,000 users 20 Uniprocessor -> 20 65 2-way -> 130 12 4-way -> 48 1 8-way -> 8 1 14-way -> 14 + 1 24-way -> 24 Total processors 244 1 8-way -> 8 1 14-way -> 14 + 1 24-way -> 24 + 50 2-way workstations -> 100 Total processors 146

36. Pillar Specifics Storage

37. Before and After Packaging Note: Customers with ONLY the Library feature will be grand fathered into the base offering. Page 37

38. Vendor-Logo Products not changing Page 38

39. What you need to know to configure a bid TODAY • Which servers are managing and which are managed? • Which servers and clients are backed up over a lan vs. a san? • Which servers need Disaster Recover? Space Management? • How many servers are sharing a tape library? How big are they? • Which database am I going to backup (Informix, Oracle, SQL)? What if I don’t know yet? • Which ESS or EMC boxes am I backing up for which applications? Page 39

40. TMP Calculator today Page 40

41. What to know to configure a bid from APRIL • How many server processors are in the storage network? Clients (technical workstations, desktops, etc.)? • Do I want to do basic backup/recovery over a lan, or do I need an enterprise offering? • Enterprise offering includes Disaster Recovery, San Support, Space Management, & large library support • How many Database server processors are there? • How many ESS/EMC server processors are there? Page 41

42. New Pricing Model Page 42

43. Additional notes: • No differentiation between managed and managing servers • All servers in the storage network require licensing – managed and managing • S/390 and distributed per-processor pricing the same • Separate part numbers for clients • No separately charged components • Base product includes library support for up to 2 drives/40 slots • Storage Manager or Enterprise Edition are pre-reqs for any of the extensions • Trade up part numbers from TSM to TSM Enterprise • Can't mix and match TSM and TSM Enterprise • Prior model also available through 2002 Page 43

44. Environment-Managed Model for Storage • Server processors managed • Total – 20 • Mail – 4 • Databases – 4 • Hardware - 4 • R/3 – 2 • Clients – 7 (Includes technical wkstns) Page 44

45. Migrations

46. Migration Principles • KEEP THE CUSTOMER WHOLE! • Customers current on support/maintenance will receive new code when available • Customers with one component will have access to all of the components of the replacement offering • There will be a charge for trading up to IBM Tivoli Storage Manager Enterprise Edition for most systems in the storage network • Customers are limited to the use set out in their current (pre-migration) licensing until licenses are migrated. • Non-PA standard support reset to Passport Advantage terms and price levels • Renew maintenance under new model in Passport Advantage Page 46

47. Migration Principles (Continued) • Entitlements > deployed • Example: Customer has 10% more TMPs entitled than deployed • In migration, customer would be entitled to migrate to 10% more processors, clients, etc. than deployed • If customer chooses to migrate to just what is deployed, growth would require additional purchases • ELAs • The fundamental is that we honor our contracts • ELA terms often override the standard terms anyway, so holding to contract terms under Enhanced Value-Based pricing isn’t any different than under any other model • Customers who are entitled to a fixed price for additional purchases will receive that price under the new metrics via special bid • ELAs should NOT be extended under any models other than the Enhanced Value-Based Pricing models. Page 47

48. Migration Process • Ensure customer is properly entitled under current model • Assess current entitlements (e.g., servers, MSUs, etc.) in light of new licensing Note: Migration is for like environment to like environment (e.g., 10 servers -> 10 servers). • Assess the OVERALL financial impact • Steps 1 & 2 look at entitlements, not cost or price • Customer will be entitled to their current environment when migrated to the new model • If OVERALL maintenance renewal bill increases • Work with the customer to minimize impact to their current-year billings Page 48

49. Send T&C transition letter to all customers Build address list Mass mailing Identify for each customer person responsible to migrate Gather customer environment due to licensing model Process TMT Propose Renewal quote, negotiate, close This may include SBO for special discount and/or PA contract amendments Submit deal within TMT record Send signed purchase order to Dublin Migration Tasks Page 49

50. Migration Aid – Processor estimates These are mathematical averages, and are valid for estimation purposes only. Customers are required to have licensing valid for their actual deployment (Tier 3 servers should be individually identified.) Page 50