Processor Value Unit Pricing and Licensing Education July 25, 2006

1. Processor Value Unit Licensing for MiddlewareEvolving the Structure to Provide a Foundation for the Future Processor Value Unit Pricing and Licensing Education July 25, 2006

2. Pricing and Licensing Education Agenda • Per Processor Licensing Background • Middleware Vendors Differentiate For Multi-core • Transition to Processor Value Unit Licensing • Prices Unchanged • Assign Processor Value Units to New Processors • Focus on Bottom Line Price vs Competitors • Summary

3. Historical Per Processor Middleware Licensing • One per processor license for each activated processor core in the server (full-capacity) • For sub-capacity - one license for each activated processor core in the partition • A significant number of SWG distributed products use per processor licensing • Products which use per processor licensing are deployed on various processor technologies across multiple hardware platforms . . . Middleware licensing was simple Server 1 Core 1 Core 1 Core 1 Core 4 Entitlements Required

4. X86 Dual-core RISC Dual-core Single-core Sun Octi-core Middleware Vendors Differentiate for Multi-core . . . Adding complexity to middleware licensing Middleware vendors have different per processor core license entitlement levels today • (Result: fractional licenses) * Microsoft per core entitlements are derived from their per chip licensing.

5. Current Per Processor Licensing Environment Multi-core technology has created a number of challenges for customers • More complex licensing structures • Different levels to address differing performance • Fractional licensing to provide necessary granularity • Uncertainty for licensing of next generation of multi-core technologies • Lack of licensing clarity • Licensing is more difficult to predict The Current Structure is Not Sustainable

6. Processor Value Unit Licensing Structure • Middleware will be licensed in processor value units • Each processor core assigned a specific number of processor value units • Acquire the appropriate number of value units for each processor core • Each middleware program has a unique price per value unit • Value units are transferable among systems by product within the enterprise • Benefits to customer • Clarifies licensing for existing processors • More licensing flexibility and granularity for: • Multi-core chips • Sub-capacity • Grid and virtualization • Simplicity - avoids fractional licenses

7. Current per Processor Entitlements x 100 = Processor Value Unit Entitlements Current per Processor Price / 100 = Processor Value Unit Price * * T1 entitlements per core adjusted with the elimination of fractional licenses Transition to Processor Value Unit License Entitlements Transition to Prices per Processor Value Unit

8. Current per Processor Price /100 = New Processor Value Unit Price Middleware Prices Do NotChange For Existing Processors* • Consistent conversion factor to create product prices • Customer price = # entitlements X price per entitlement . . . UNCHANGED!* * There may be slight changes due to rounding with the implementation of processor value units in some countries

9. New Processors Will Be Assigned Processor Value Units • Deliver price performance improvement • Over time, new processors will be differentiated based on relative performance • Overall framework balances precision and simplicity

10. License requirements are only part of the effective price Customer focus should be on bottom line price per core Price per Core = License quantity x Product price per License * * Suggested Retail Price Price per Core is the Lowest Common Denominator

11. Processor Value Unit Part Pricing • Established Processor Value Unit Part Numbers • Replacing 1300+ Per Processor Parts • Each Per Processor Part has a New Processor Value Unit Part • License plus Maintenance, Maintenance Renewal, Reinstatement, & Trade-Ups • Price and Passport Advantage Point Rounding • U.S. Dollars and Passport Advantage Points were rounded to nearest two decimals • Some country prices may be impacted +/- 1% by currency or country rounding • PPA Point rounding should not impact customer band level • Created packs of 10 processor value units as the minimum order quantity for lower priced programs • Program Offerings where Per Processor License Plus Maintenance Price was less than US$1250.00 and Maintenance was less than US$250 are only orderable in groups of 10 Processor Value Units • Avoided creation of unreasonably low prices • For example, US$100/100 = US$1.00 and when discounted would be in cents

12. New Part Numbers, but No change to Part Number Structure • Part number structure unchanged • License + 12 months of Maintenance • Maintenance Renewal • Maintenance Reinstatement Part Number Structure Unchanged WAS ND Value Units WAS ND Processor Note: Example above assumes processor value unit assignment = 100 (eg. single-core chip type)

13. Summary • Per processor fractional licensing exists today • Transition to processor value unit licensing to avoid fractions • Transition to price per processor value unit with no price changes • New processors will be assigned processor value units • Deliver price performance improvement • Over time, new processors will be differentiated based on relative performance • Customers should focus on effective price per core

14. Backup

15. Reference Material • See the PVU Q&A for IBM Sales for more details. This, and other education material, will be available on the Passport Advantage web site • Questions should be directed through the normal software support structure. If they are unable to answer a question, they will have access to the Processor Value Unit licensing project office.