Original URL: http://www.theregister.co.uk/2009/11/09/neon_zprime_update/

zPrime cost-cutting mainframeware gets traction

Neon chuffed, talking to DOJ and Brussels

By Timothy Prickett Morgan

Posted in Servers, 9th November 2009 16:47 GMT

Neon Enterprise Software, which in late June launched a tool which allows customers to run IBM mainframe apps for a fraction of the cost, is getting traction and not as much push-back from IBM as you might expect.

Neon' tool, zPrime, allows chunks of applications written for IBM's z/OS operating system to run on the relatively cheap specialty zIIP and zAAP engines Big Blue sells for something like a quarter of the price of a regular mainframe engine.

Neon has rolled out a zPrime release 1.2, which the company says has some features to make it easier to move workloads to the System z Integrated Information Processor (a System z mainframe engine restricted, in theory, for accelerating DB2 database functions) and System z Application Assist Processor (a z engine restricted, in theory, to running Java and XML workloads. (Since 2000, IBM has sold another specialty mainframe engine, called the Integrated Facility for Linux, that is designated to run a Linux operating system and its applications.)

IBM sells the zIIPs, which became available in June 2006, and the zAAPs, which made their debut in September 2004, for a lot less money than a regular mainframe engine running z/OS. How much less is hard to say, since Big Blue doesn't provide list prices for mainframe engines or z/OS any more since it wiggled out of its consent decree to settle two antitrust lawsuits (one in 1952 and the other in 1969) in 2001.

One of the many stipulations of that consent decree was that IBM had to provide list prices and a rental price that bore some resemblance to the list price. IBM does provide a price for the zIIPs and zAAPs, which cost $125,000 per engine on the high-end System z10 Enterprise Class servers and $47,500 per engine on the z10 Business Class boxes. Maintenance on zIIPs and zAAPs, says IBM, is a lot less expensive, and these engines do not incur software license fees, as other engines in a mainframe do.

With zPrime release 1.2, Neon says that it has streamlined the process by which applications can be offloaded to zIIPS and zAAPs and has finer-grained control over how workloads are moved. And the company, which has been pretty secretive about how zPrime works, is now telling customers that the tool uses Language Environment Initialization Exits, and according to Lacy Edwards, chief executive officer and chairman at Neon, here's the important bit customers need to hear.

"zPrime uses standard z/OS exits," Edwards explains. "So disabling zPrime means disabling a ton of other applications."

(For a more detail on how zPrime might work, see El Reg's original coverage here.)

In the wake of the zPrime launch, IBM trotted out letters from Mark Anzani, chief technology officer for IBM's System z mainframe line, warning customers that IBM did not know back in July, when the letters were written, how zPrime worked and that its use might be a violation of a customer's mainframe software license agreements to make use of the tool. Edwards said this was nonsense back in July, and he is not saying anything different today.

"IBM is continuing its aggressive campaign to scare customers away," says Edwards. "We have had over 200 customers' lawyers look at this, and not a single one agrees with IBM."

The customers who have kicked the tires on zPrime, or who are just interested in the possibility of using it, stand to save big bucks, perhaps millions to hundreds of millions of dollars per year in software licensing fees, hardware charges, and maintenance fees. zPrime has the potential to really hurt IBM's $4bn mainframe hardware franchise and the very profitable mainframe software business it has - both of which go a long way towards funding those stock buybacks that IBM is so fond of.

In the Anzani letters from July, IBM was hinting that in creating zPrime, Neon might be violating its own license agreements with IBM for mainframe software and added that it might also be violating IBM's intellectual property.

"IBM has backed off on making any statements that zPrime violates any intellectual property or license agreements," says Edwards. "And IBM has not provided, in writing, any specific provisions in the customer license agreements where zPrime violates the licenses."

In a somewhat odd and almost certainly fruitless move that definitely will not stand up in court, IBM is apparently pointing customers who have mainframe software contracts to a website that was created after their contracts were signed and after zPrime came to market that stipulates what software can run on the zIIPs and zAAPs. At press time, El Reg was not able to identify the precise pages that Edwards says IBM is showing mainframe shops, but some information can be found on the zIIP and zAAP pages relating to their intended workloads.

Edwards says that Neon has contacted or been contacted by 1,500 mainframe shops, and that once the IBM sales rep catches wind that the customer is thinking about zPrime, the letters from IBM start. While 1,500 may not seem like a big number, consider this. IBM has confirmed that there are about 10,000 mainframe footprints in the world, and Edwards says that these machines are installed at maybe 6,000 to 7,000 unique customers. Moreover, Edwards reckons that about 2,000 of those mainframe shops "pay the freight" for the rest of the base.

Neon has 50 organizations that have put zPrime through the paces since July, showing that they can move around 90 per cent of IMS database and 80 per cent of DB2 database application processing, 90 per cent of batch application processing, 75 per cent of TSO/ISPF processing, and 45 per cent of CICS processing to specialty engines - thereby lowering the count of standard mainframe engines and software licenses needed to do the work. So far, it has 14 companies using it in production, and another 200 that are doing evaluations or are getting lined up to do them.

zPrime could have a dramatic impact on IBM's mainframe sales and profits in the coming quarters and years.

"The fact is, customers are getting heavily gouged," declares Edwards, who says that he has been to see the Department of Justice and antitrust regulators in the European Commission in Brussels, both of which are currently investigating IBM's behavior in the mainframe market that is, for all intents and purposes, a monopoly.

"If you look at the prices of mainframe hardware and software since the consent decree expired, it is just off the charts compared to other architectures. The abusiveness of the mainframe monopoly is just obnoxious. Everybody that could get off the mainframe is off, and for those applications that are left, customers don't have any options."

In the summer, when zPrime was just announced, Neon had not yet come up with a pricing mechanism for the tool. Edwards says that Neon is creating a price based on the size of the processors and the nature of the workload involved. When the math is done, Neon is looking at the two-year savings a customer can get and charging somewhere between 10 and 20 per cent of that figure on an annual basis.

In a relatively small mainframe shop, it might cost $250,000 a year to license zPrime, and it could cost $8m to $10m per year on a big box. But the savings can be substantial. On one large deal that Neon is working on, the company calculates that using zPrime to defer hardware upgrades, cut maintenance fees, and lower software rental fees could save that prospective customer $100m over a two-year period.

That's real money, and you have to figure that IBM, and therefore its lawyers, must be hopping mad. ®