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CA extends usage-based pricing to SMBs

Computer Associates International Inc. is rolling out its usage-based pricing to low-end mainframe users on z/VSE and VSE/ESA operating systems. What remains to be seen is whether it will save anyone money.

In an effort to stave off an exodus from the mainframe to less expensive servers by small to midsized businesses...

(SMBs), vendors are continuing to tweak their pricing strategies. But some critics say the moves do little to actually cut pricing.

Companies like Computer Associates International Inc. are rolling out plans to cut underutilized IT resources by switching from capacity-based pricing to a usage-based model. The move allows customers to determine software license costs based on the computing power they use, rather than what hardware they own.

The Islandia, N.Y.-based company said it's extending its Measured Workload Pricing to smaller mainframe customers using the z/VSE and VSE/ESA operating systems. The strategy is a follow-up on CA's original announcement last fall to switch larger mainframe customers to the usage-based model.

What remains to be seen is whether it will save anyone money.

"The initiative is about providing flexibility, rather than lowering pricing," Mark Combs, senior vice president of research and strategic initiatives at CA, said in a phone interview.

But according to Charles King, principal analyst for Hayward, Calif.-based Pund IT Research, you can't expect a vendor to say it was charging too much in the past.

"Most businesses have extra capacity to some degree and this is a way for customers to avoid paying for what they don't use," King said. "This will be powerful for customers in retail or manufacturing where they need to be able to deal with seasonal spikes. This gives them flexibility, saves them a few bucks and lets CA look like a hero in the process."

Gordon Haff, senior analyst for Nashua, N.H.-based Illuminata Inc., agreed that pricing models are nice, but people are looking to cut their bills. No one is going to switch to a flexible-pricing model if they're going to pay more doing so.

"Users are deeply suspicious of Oracle or CA when pricing models change. [They worry] they're going to get screwed out of more money. When vendors say, 'Ooh, we have a deal for you -- you get to pay for your software flexibly,' it sets off alarms," Haff said.

Why is CA going this route? Combs said it boils down to customer demand.

"As computing evolves, customers are looking for on-demand [pricing] -- though I hate to use an overused term," Combs said.

According to Jerry Addison, computer and network operations at Blue Cross Blue Shield of Delaware, capacity-based pricing plans can be successful depending on how customers are expected to gather the reporting.

For more information:

CA addresses licensing costs complaints with new program

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"We're a small shop here, so capacity reporting is something I'd be interested in," Addison said. "With the IBM program you just run a test once a quarter or once a year, but if a company wanted you to count up all of your librarian users -- that would be a pain."

CA said the pricing plan would most benefit customers in a situation where they are growing their business or making changes to their infrastructure. For someone in a steady state, it's not going to have a lot of effect.

Let us know what you think about the story; e-mail: Matt Stansberry, News Editor

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