MORE V4R2 PRICING: IBM WAIVES V4R1 TO V4R2 UPGRADE CHARGES

The following item appeared in NEWSWire/400-03.11.98 today:

MORE V4R2 PRICING: IBM WAIVES V4R1 TO V4R2 UPGRADE CHARGES
In response to complaints from customers hit with unexpected 
charges to upgrade from V4R1 to V4R2, IBM next week will announce 
a special promotion to waive those charges for all customers who 
had V4R1 installed on or before V4R2 shipped February 27. Users 
who've already paid the additional V4R1-to-V4R2 charges will get 
a refund.

The widespread user complaints on this issue are the latest 
development in IBM's continued difficulties transitioning OS/400 
pricing from periodic user-based version upgrade fees to a 
software subscription model that essentially requires users to 
pay a monthly fee in exchange for free future releases. (Previous 
stories covering this issue can be accessed at 
http://www.news400.com/redir/redirDB.cfm?ID=86 and 
http://www.news400.com/redir/redir.cfm?story=/features/
nwn/archives/sep0397/sep0397.htm .)

The unexpected V4R1-to-V4R2 charges, which ran into tens of 
thousands of dollars per machine in many cases, arose from 
licensed program products that IBM didn't upgrade to Version 4 at 
the same time it upgraded the operating system. The list of 
program products that didn't get upgraded with V4R1 includes 
compilers, Application Development ToolSet (ADTS), and utilities. 
Those products all got reversioned with V4R2, so the move from 
4.1 to 4.2 meant paying transition charges for those products 
that had "skip-shipped," and for which customers had not actually 
paid transition charges when they moved to V4R1. (For a complete 
list of program products affected, see IBM announcement letters 
298-035 and 298-031.)

The release of Version 4 marks the first time that IBM didn't 
upgrade all licensed programs along with the operating system. 
According to Dave Chorba, AS/400 brand program manager, that only 
caused a problem because the AS/400 Software Maintenance and 
Support Offering (SMSO) IBM previewed with V4R1 last August 
wasn't activated with V4R2 as originally planned. V4R1 users who 
signed up for the intended SMSO would have gotten V4R2 
automatically. When SMSO floundered in internal logistical 
problems, IBM decided to charge transition fees for the products 
that weren't upgraded with V4R1 but were with V4R2.

"These skip-ship charges became part of Release 2, which was a 
surprise to a lot of people," says Chorba. "The V4R1 people were 
expecting some dollar prices when they went Release 2 if they 
were planning on taking the Software Maintenance and Support 
Offering we previewed in August, but it was unfair to hit them 
with these charges and not have something like SMSO available."

The promotion to waive V4R1-to-V4R2 transition charges is welcome 
news to many customers who tried to order V4R2 under the old "new 
releases are free" concept only to discover they had to pay 
significantly more, depending on their processor group and the 
number of skip-shipped licensed programs installed.

"We were shocked to hear there was an upgrade charge," says Bob 
Romanko, lead computer center engineer at the University of 
Virginia's Department of Human Resources, which had just 
completed an upgrade in December 1997 from a V3R1 CISC box to a 
model 620 RISC machine on V4R1. "To move to V4R2 would have cost 
more than we paid for the software in our RISC upgrade, and the 
additional money wasn't in our budget. We're relieved that IBM is 
making V4R1 to V4R2 a no-charge upgrade. I'm doing a lot with 
Java on the 400, and I'm pushing Net.Data to the max. To take all 
this to the next level, we really were counting on V4R2."

"We want to reward customers who aggressively got to V4R1 because 
they wanted the features they knew were coming in V4R2, like 
Java, Domino, e-business and NT on the IPCS," says Chorba. "We're 
taking corrective action to make sure those people can get where 
they wanted to get as soon as they wanted to get there."

V4R1 customers may be relieved to learn they're off the hook, but 
some V3R7 customers still face a higher price to get to Version 4 
than they expected because they didn't count on the additional 
fees for skip-shipped products.

"Wow, what a shocker," says John Borgne, senior AS/400 
development analyst with Chrysler Insurance Company, who recently 
learned it will cost him $47,000 more than he expected to upgrade 
from V3R7 to Version 4. Chrysler Insurance spent $180,000 in 
September 1997 to upgrade from a model 310 at V3R2 to a model 510 
at V3R7. Borgne says he considered waiting for V4R1, but his IBM 
marketing rep urged him to go ahead with V3R7. The rep gave 
Borgne a price of $33,000 to upgrade to V4R1, for which he 
budgeted this year.

"Now, to go to V4R2, it's almost $80,000," Borgne says. "To go 
back and ask management for $47,000 more is impossible. We want 
the new functionality of V4R2 and were planning to upgrade by the 
end of the second quarter. Now it looks like we'll have to wait 
until next year to see if this amount will be approved by upper 
management. I'm very disappointed at the pricing structure to get 
to V4R2. There are some really nice enhancements, but IBM has 
made them unaffordable."

Budgetary confusion and uncertainty is exactly what IBM was 
trying to avoid by moving to a new mandatory software upgrade 
protection plan with Version 4. However, the Software Maintenance 
and Support Offering previewed with V4R1 last August wouldn't fly 
either internally or among Business Partners, and IBM was forced 
to revamp its strategy. The company now plans to announce just 
the update protection portion of the plan in mid- or late April 
and has recently changed the planned name from AS/400 Software 
Maintenance to AS/400 Software Subscription. Another offering 
combining subscription update protection and support, which is 
expected to be called Software Upgrade and Remote Support (SURS), 
will be offered late this year.
-- Pam Jones, NEWS/400 Industry Editor

Al Barsa, Jr.
Barsa Consulting, LLC
400 > 390

Phone:  914-251-9400
Fax:    914-251-9406

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