Prices to soar for IBM OS/400 upgrades

Users who held off this far on upgrading to the latest version of IBM's OS/400 operating system better be prepared to fork out a lot more - up to 30 per cent - if they plan to do so next year.

On December 11, IBM pulled the plug on promotions and financing deals that could have saved some users thousands of dollars when upgrading from Version 3 releases of OS/400 to Version 4 of the operating system for IBM's popular AS/400 midrange server.

The deals - which included a 15 per cent discount on software, deferred payments until next year and attractive hardware trade-in deals - were introduced in May to sweeten a new pricing plan for OS/400 upgrades.

The conclusion of the promotions could make that pricing plan more onerous for users on older versions of the operating system, analysts said.

"The incentives were aimed at forcing customers to get on the plan by year's end," said Rizal J. Ahmed, editor of the "Insider Weekly," an AS/400 newsletter in Massachusetts.

According to Ahmed's calculations, which were confirmed by IBM, some AS/400 shops will spend up to 30 per cent more for Version 4 operating system and related software upgrades.

Though both IBM and analysts said that reaction to the pricing strategy has been decidedly mixed so far, users already on the pricing plan said it provided a good way to budget for OS/400 software.

"We have a fixed budgetable item, which makes planning easier and simplifies the decision to move to the next version or release," said Michael Crump, a technical project leader at Ball-Foster Glass Container.

Under the plan announced in May, AS/400 shops must pay for a monthly, annual or multiyear subscription when upgrading to Version 4 of the operating system in order to qualify for all future OS/400 software upgrades from IBM.

Users who choose not to subscribe within 30 days of upgrading to Version 4 will get hit with a substantial "currency access fee" in order to be able to subscribe to Version 4 at a future date.

The idea is that instead of having to pay for individual versions of the operating system - as was the case in the past few years - users will now get new versions as part of their prepaid subscriptions.

And it's cheaper to subscribe than pay for each version, especially if you are upgrading your environment a lot, said Jerry Rode, director of information technology at Saab Cars USA.

"Based on our cost analysis, we felt it was a good idea to subscribe," he said.

By signing up for a three-year subscription this year, Crump estimated that Ball-Foster saved $US44,000 compared with what he would have paid to subscribe next year.

But starting next month, users upgrading older generations of OS/400 to Version 4 will have to do so without the benefit of discounts.

Such subscription plans aren't at all unusual in the industry. Users subscribe to Sun Microsystems' Solaris operating system, for instance.

But it's still a relatively new model for long-standing AS/400 shops.

"IBM drew a line in the sand and told customers what they had to do and when they had to do it if they didn't want the price [of upgrading] to go up significantly," said Al Barsa, president of Barsa Consulting in New York.

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