Y'all,

A BEEN THERE, DONE THAT, GUIDE TO MANAGING PRICE CHANGES

First, ITSM is a great product backed by a great company--it is the
clear choice for doing real backup in an enterprise way--it works very
well for a lot of really smart folks.

(Credentials:  I started out in IBM products almost 10 years ago at
Tivoli, I was a principal engineer in sales, then a sales guy, and have
now owned an IBM reseller for four years, etc.  I have won sales awards
at both IBM and as a reseller, have lots of good folks as clients, etc.
I have also been through several of these price changes.)

This is a cycle--every couple of years IBM goes through a pricing
change.  While at IBM and as a reseller, I have only seen the best of
intentions towards the customers during this process.  This takes months
to do, is done at very high levels, and is a painful process for the
folks at IBM who do this.  The problem they face is the changing nature
or the hardware platforms, the rise of virtualization, changing of the
media, networks, capacities, you name it.  They have to counter this
with the cost of support, product development, some profit (they have
share holders), market capacity and differences world-wide--all very
hard things to understand, much less model.  So they finally come up
with what they think is the best approach.  This, like all compromises,
generally is a choice of lesser of evils.  This new pricing program is
then promulgated down to the sales reps and sales engineers and
resellers.  Pricing changes always result in more work for everyone
downstream.

Clients, always dislike changes in pricing--as they too have significant
investments in time, budgets, and planning.  Many now have to reopen the
very tough internal process of getting funds allocated.  There has been
one consistent message that I have heard from CFOs at large and small
companies--they do not like "surprises" in fund requests--and software
pricing changes often create such surprises.  That is the nature of things.

IBM has not helped themselves in this process: in the past, they run the
existing customers through a spreadsheet (or other model) adjust their
bills--then mail them.  These price changes will show up in the mail,
without someone to explain them in person--with the privacy rules, it is
often hard for resellers to know what IBM sends you, so they too may be
unaware until after the mail arrives.

Here is the been there done that:

A.  IBM goes to great lengths to train reps on all of the pricing
programs and strategies.  IBM reps now are usually responsible for a
wide variety of products, customers, etc.  Given the pressure that they
are under, it is very hard for them to know every program, every nuance
of pricing, every possible outcome.  But rest assured, each IBM rep will
want to move earth and moon to keep you as a customer.  This gives the
first two lessons:  1) Do not panic when your rep tells you anything
about price, 2) Listen to what the rep says, they have a lot of say in
your pricing--but recognize that there is often more than one way to do
it.  Do not hang up the phone and tell yourself "well now they have
priced me out of IBM"--I have seen folks do that, and the result is
always more expensive.

B.  In every pricing change that I have seen, some folks win, some folks
lose--this is the nature of every pricing model--there are always sweet
spots.  This gives lesson number 3) Learn as much as you can about the
licensing program (or find someone who has), talk to as many folks at
IBM and resellers as you need to (try to get the ones that have more
than a few years under their belts), before you do any audit, or
compliance, or any other type of license activity.  Often there are very
simple things that can be done to reduce/manage your license exposure--a
well informed customer always comes out ahead. (Reseller plug:  there
are a lot of good resellers out there, use them)

C.  In every price change there is some flexibility in the system.  If
you pricing goes down--you are in the clear.  If your pricing goes up,
here is a process that has proven successful in the past:

i) make sure that IBM has the proper count/description of each of your
licenses. IBM is a large company, with customer entitlement numbers
coming from a large variety of sources--make sure the counts are all
correct.

ii) For larger customers, those with many products, and if you source
from more than one vendor--pull all of your licensing together and check
that IBM does not have you under two or three (or more) different
companies, numbers etc. in their systems.

iii)  If you have a good understanding of all your IBM software, and how
it is being actually used, you are ready for your next step: engage IBM
or your reseller on your pricing difference.  IBM does not want to lose
a customer.  There are many, many IBM and reseller programs and
strategies that provide compliant ways to reduce your licensing cost
that can help you manage your price increase.*

This gives lesson 4) Negotiate, don't terminate (sorry, could not
resist).  Seriously, if the pricing difference is creating trouble, let
IBM or your reseller know, they often can do something.

The good news:

I cannot think of a case in the last 10 years in which we did the
homework of counting and checking that did not reduce the IBM licensing
cost of a customer.  Also in the last 10 years in all of the pricing
changes--I have not seen a case in which those that followed the above
failed to get a more manageable number.  IBM is a very big and vast
company--the well informed and active customer can make a real
difference in their licensing costs.

If your reseller or rep is not helping in this process--take action.  An
IBM rep can pull in folks who have the experience that can help you, and
your reseller can likewise.

I hope this helps, and that I did not miss anything.

*Those of you with depth will notice that I did not go into deeper
strategies or negotiating pricing, it seems that every time I publish
that kind of info, someone in IBM takes it the wrong way--so I no longer
do that.  As a counter (I hope that I do not regret it) folks can call
me if they want more detail or with questions (please be sensitive to
the fact that we have had other resellers (some very large) as
clients--there will be no recruiting or sales attempts--we do not work
that way).

--
--David Moring
www.backupinsight.com (A Division of Applied Autonomics LLC)
512-782-HELP
david AT backupinsight DOT com