April 2002 David Harakal/Austin/IBM dharakal@us.ibm

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 • Make it easier to close sales • Gain access to more accounts • Close more deals without special bids • Ensure pricing positions us favorably against competition • Greater consistency with SWG for easier cross-brand sales • 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 • Dual Pipe for only about 1/3 of our offerings • Down from 100% today 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 • Quick Quoter 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 • 23rd May for Storage • 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) 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 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 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 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. 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 49

50. Code shipments prior to license migration • Autoships ONLY when NEW code is available • E.g., not just the existing code in a new package • Emergency code needs will be met using existing infrastructure • We will include a document with all of these autoshipped packages that includes: • Use Entitlement • A migration table (old offering to new offering) Page 50