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Smaller Vendors Make Gains In Mainframe Software


Customers report better service and easier-to-understand pricing

By Martin J. Garvey
InformationWeek
May 6, 2002 12:00 AM (From the May 6, 2002 issue)

The Department of Defense let its guard down two years ago when it laid out $5 million for Computer Associates' Unicenter suite for a project that Lockheed Martin Inc. is implementing. Since then, three CA engineers have been on-site to install the mainframe software, billing by the hour. They're finally testing the asset-management and software-distribution modules, but the fault-management module doesn't even send out a signal when an entire network operation is down, says Joe Banks, senior network engineer at Lockheed Martin in Greenbelt, Md.

So Banks decided to look elsewhere. He saw a copy of E Health, a computer product from from Concord Communications Inc., sitting on a shelf when he arrived at the Defense Department in January. "When I came on board, they were trying to implement Unicenter," but it was a tough job, he says. Banks asked for two months to show what E Health could do. He only needed a month. By then, E Health was generating reports on fault management, trending, availability, latency, and byte counts. "For now, E Health is all they're using, and they're scaling back on Unicenter," planning to use only two modules, he says. Annual maintenance for E Health will be $100,000 to $150,000, a fraction of CA's rates.

It was an expensive lesson, one that many mainframe customers are learning. Old mainframe-software pricing and service may be on the way out. A few smaller vendors, such as Concord and Macro 4, are winning new customers by providing quick installations, lower prices, easy-to-understand pricing structures, and solid customer service. At least partly in response, IBM will introduce a new pricing structure this week, and CA sales execs will tout a little-known pricing option.

"It's nearly impossible to move out of CA," says Bruce Schmidt, second VP of host-technical support for TIAA-CREF, a retirement-fund company in New York. "They lock you in and charge you more." So far, Schmidt hasn't gotten rid of CA's asset-management, software-distribution, and security mainframe tools because he'd be forced to shut down operations. But he did replace Compuware Corp.'s AbendAID and Expediter applications, for which TIAA-CREF paid hundreds of thousands of dollars a year for a decade.

Compuware told TIAA-CREF in January that it was considering raising prices. So when Macro 4 knocked on his door, Schmidt was happy to answer. He negotiated a fixed price for the software, installation, and ongoing maintenance that was significantly less than what TIAA-CREF paid Compuware.

Switching to a smaller vendor can yield substantial savings. A large U.S. bank relied on CA's Unicenter for server and desktop management. The cost: $750,000, plus $250,000 a year. "They're just big, fat maintenance contracts on expensive terms that don't add value," says Phill Moran, the bank's assistant VP of communications infrastructure. Hoping to replace CA, Concord came in and delivered reports within 48 hours. The cost: $50,000 for the product, installation, and training, plus another 15%, or $7,500 per year, for maintenance. The bank's contract with CA expires in July.

KB Consolidated Inc. in Pittsfield, Mass., had a similar experience. Last year, Compuware wanted $675,000 for AbendAID and Expediter and $400,000 for annual maintenance. Macro 4 said it could save KB money. Compuware then cut its prices in half. But KB went with Macro 4 and expects to save 15% off Compuware's discounted price.

"Before, CA and Compuware got a black eye for exorbitant pricing and poor customer service, but IT executives busy with mainframe growth just kept paying," Meta Group analyst Bill Snyder says. "Now, customers are just doing [mainframe] maintenance. Software competitors are looking to take business away from each other because the market isn't growing."

Until now, IBM's mainframe customers paid for software such as DB2 or CICS based on the computing capacity of their hardware. They can continue with that model or use a new usage-based option.

IBM has built functionality into its zOS operating system and will give customers a reporting tool that lets them pay for the average capacity used per partition per month. Logical partitions in the mainframe let multiple instances of zOS run at once, and multiple applications can run on each partition at different times of day. The new option is available July 1, along with volume discounts on zOS, CICS, DB2, and IMS.

Once IBM adjusts its rates and structures, other large vendors will follow, TIAA-CREF's Schmidt says. CA already offers customers a pricing structure based on business volume, such as the number of reservations an airline books, says Stephen Richards, CA's executive VP of sales. The trouble is that customers aren't aware of it. "My 2,500 salespeople will unilaterally be delivering this message to them," he says. Compuware refused to comment on its options.

Concord and Macro 4 offer lower prices primarily because they don't have as much overhead. Concord competes with Unicenter, and Macro 4 competes with Compuware and IBM.


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