1. IBM Think!Thursday Sales Enablement Series
IBM INTERNAL USE ONLY
IBM Think!Thursday Sales Enablement Series
IBM Software Think!Thursday
Processor Value Unit Licensing Kickoff
July 27th, 2006

2. IBM Think!Thursday Web Conference Audio Details
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3. IBM Virtual Innovation Center Think!Thursday Details
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IBM Virtual Innovation Center Think!Thursday Details
Presentation and Audio replays available from the IBM Virtual Innovation Center (
VIC Think!Thursday access instructions:
Must add Think!Thursday to your VIC profile
After logging in, select Product selections from the left hand navigation bar
Select “Add a product”
Select the Software Brand “Think!Thursday sales series” of your choice and click Submit
Refresh by clicking on the VIC link at the top of the left hand navigator.
To access Think!Thursday from the VIC
After logging in, select “Selling Resources” from the left-hand navigation bar
Select the Software Brand “Think!Thursday sales series” of your choice from the Sales & marketing section

4. IBM Think!Thursday Program Information
IBM INTERNAL USE ONLY
IBM Think!Thursday Program Information
Think!Thursday Presentations and Audio Replays on the VIC
Overview Tab / Upcoming Events by Software Brand
Find upcoming sales series details and presentations prior to the event
Overview Tab / Current Replays subsection by Software Brand
Find current month’s sales series previously held including presentations and audio replays
Resides here for 1 week after live call, then located under Education Tab.
Education Tab by Software Brand
Find archive of all prior IBM Software brand sales series presentations and audio replays
IBM Think!Thursday schedule of events
IBM Virtual Innovation Center (Upcoming Events)
PartnerWorld Marketing and Enablement calendar
Think!Thursday Program Feedback – Program Managers:
Alex Kaplin
Amy Malkasian
Mike Ryan

5. Processor Value Unit Licensing Executive Kickoff
Melinda Matthews, IBM Software Group, Worldwide Sales Director, Channels

6. Processor Value Unit Overview Education July 27, 2006
IBM INTERNAL USE ONLY
Processor Value Unit Licensing for Middleware Evolving the Structure to Provide a Foundation for the Future
Processor Value Unit Overview Education
July 27, 2006
Hello. My name is _________, and I am part of the ____________ organization in IBM’s Software Group. I would like to talk to you today about an announcement that IBM is made on July 25th, This announcement reinforces that IBM is evolving our per processor licensing approach in a way that carefully balances licensing simplicity with the value an individual customer receives from our middleware on specific hardware platforms. This licensing evolution does not change a customer’s net price today, but builds a foundation to accommodate future software and hardware technologies.

7. General Education Agenda
IBM INTERNAL USE ONLY
General Education Agenda
What is this Announcement
Software Licensing Background
Changing Processor Technology
Software Vendor Licensing Response
Processor Value Unit Licensing
Summary
This presentation will describe why IBM is making this announcement, what is being announced, and how it will be implemented. We will start by looking at the current licensing marketplace and the ways that new hardware technologies, especially multi-core chips, have impacted software licensing. To do this we will also discuss some key hardware terms that have become important in software licensing.
With this background, I will then describe how IBM and most other middleware vendors have adapted their current licensing structures to address these changes in the interim. Then we will look at the new approach IBM is announcing on July 25th, called processor value units, and the benefits of this structure. This includes a key benefit -- current customer budgets will not be impacted since we will not be changing a customer’s prices in the transition to this licensing structure.
Now lets move to page 3 to talk about the announcement

8. What is this Announcement?
IBM INTERNAL USE ONLY
What is this Announcement?
A licensing structure and strategy for per processor priced middleware in Passport Advantage
Simple conversion from current licensing
Effectively software prices do not change for existing processors
Announced and GA’d on July 25, 2006
We will be announcing a replacement of per processor licensing for all middleware available through Passport Advantage that uses this metric. Although we have other software licensing metrics, such as user pricing, these other metrics will not be affected by this announcement. Only those products which are licensed per processor are impacted.
We have a simple conversion from the existing per processor licenses, which I will show you later in the presentation. A key feature of this conversion, though, is that with the exception of some minor rounding changes that occur in a few countries, we are not changing the prices our customers pay for their middleware on current processor technologies.
As I mentioned before, this announcement took place on July 25th. General availability was the same day.
Now lets move to page 4

9. Per Processor Software Licensing
IBM INTERNAL USE ONLY
Per Processor Software Licensing
Historically, one license entitlement for each processor core in the server
A significant number of SWG middleware products use per processor licensing
Server
Core
Core
Core
Core
4 Entitlements Required
SWG Revenue on x86 vs RISC Platforms
Lets start by looking at the existing per processor licensing environment. Historically, we and other middleware vendors have required one processor license for each core on the server. This is what we refer to as full-capacity licensing. In the picture you see on top of this page, 4 license entitlements would be required since the server has 4 processor cores.
We have also made sub-capacity licensing available when a customer doesn’t need to license to all the processor cores in the server. Sub-capacity licensing uses separate part numbers, and has a set of conditions which must be met. Let me just point out that two key conditions are that the customer must run a no-charge compliance tool and they must submit a report on their usage to IBM quarterly. If you are interested in learning more about sub-capacity licensing, please refer to the sub-capacity page in Passport Advantage available through Passport Advantage.
To give you a sense of the impact of this announcement, just over half of our middleware revenue uses the per processor license charge metric. Of these licenses, a little over half are on x86 based systems, with the remainder on RISC or Itanium systems. Looking forward, we expect the percentage of our licenses deployed on x86 servers to grow about 10 points faster than on RISC systems at about a 12% compounded annual growth rate.
Please go to the next page
Revenue is split fairly evenly between x86 and RISC
Double digit growth on x86
IBM Power
Sun Sparc
HP PA RISC
HP Itanium
Intel Xeon
AMD Opteron

10. What Exactly Is the “Processor”
IBM INTERNAL USE ONLY
What Exactly Is the “Processor”
Single-core Chip
Dual-core Chip
Processor Core
Chip
Socket
Processor Cores
Chip
Socket 1 1 2 1 1 2 1 1 2
IBM defines processor = core
However, Not All Processor Cores Are Created Equal
Before we go any further, lets talk about some hardware terms which have recently become very important in software licensing discussions.
From a software perspective, the core is the most important component of the server system. It is the functional unit that actually interprets and executes software instructions. One or more cores can be placed on a chip. When there is more than one core on a chip, it is called a multi-core chip. These chips then plug into what is called a socket on a server. At one time or another you may have seen the pins coming out of the back of a chip. These pins are what plug the chip into the socket.
Prior to the introduction of the x86 dual core chips in 2005, there wasn’t much of a question about what was a processor. When dual-core chips were originally introduced by IBM in 2001, both the individual cores were faster than the previous generation of cores, and by putting 2 of them on the same chip customers saw their performance improve over 2 times for the chip as a whole. As a result, almost everyone agreed the processor should continue to be defined as the core since users were getting the full benefit of both cores on the chip.
However, when x86 dual-core chips were introduced, Intel and AMD implemented the performance improvements using a different strategy. They began focusing their performance improvements at the chip level, not at the processor core level. So with their dual-core chips, Intel and AMD actually slowed their processor core down so that they would require less power and generate less heat. But with two cores on a chip, the customer still saw price performance improvement with the new generation of x86 chips.
IBM, as do most middleware vendors, continue to define a processor as the core because this is where the software actually executes. However, most hardware vendors have followed Intel and AMD’s lead and now define the processor as a chip because they can’t sell half a chip. As you can imagine, this has led to greater confusion in the marketplace.
For the remainder of this presentation, and in fact in any licensing discussion from IBM SWG, you should be aware that the terms “processor” and “core” are used interchangeably.
I’m sure you’re already aware that the number of processors that are required for a particular workload can vary by processor type, with more processors required when a core is relatively slower. And this difference now impacts the way a customer has to evaluate alternative platforms when considering where to implement an application, especially regarding the number of middleware licenses required. To provide a specific example, it generally requires more x86 processor cores to run a particular workload than would be required if that workload were running on a System p processor core (formerly known as the pSeries).
Lets move to slide 6.
1 Core
Same Workload
The number of processor cores required for a given workload varies by processor technology

11. Historically, Fewer Processor Cores are Needed over Time
IBM INTERNAL USE ONLY
Historically, Fewer Processor Cores are Needed over Time
1 Core
Constant Workload
4 Proc
Year 1
Year 3
Year 5
2 Proc
1 Proc
Faster processor cores are capable of running more work
Processor Core Disparity Will Increase
For past 30+ years, HW vendors have delivered performance improvements at the core level, and customers have become accustomed to a reduction in the price per unit of throughput when they buy new technology. This is great for customers because for a constant workload this means that over time the customer can run it on fewer processors, requiring fewer software licenses. In addition, there are now two different chip design strategies that can be used to improve performance that impact software licensing. The performance of the processor core can be improved by increasing the clock speed of the processor. This is what has historically happened in most processors. Vendors, including IBM with our Power architecture, continue to push the processor performance this way.
Another way to improve system performance is to place more than one processor core an a single chip. This, as you saw on the previous page, is what we call a multi-core chip. Although the total chip level performance is less than two times the speed of the sum of the individual processor cores due the coordination effects, it has proven to be a very effective way to provide additional performance. Hardware vendors can use either of these approaches individually or in combination to provide performance improvements.
Unlike IBM, other vendors, including Intel and AMD, have primarily adopted the multi-core chip approach to provide improved performance. This strategy started with the introduction of their first dual-core chips in April of They did this in order to reduce the power required and the heat generated by their systems. In fact they actually slowed down their processor cores in these chips compared to the previous generation of single core chips, but increased overall chip performance by placing two cores on the chip. And, going forward, it is expected that their core performance will be essentially flat. They will drive their improved performance by leveraging multi-core chips.
However some vendors, primarily IBM with its Power architecture, continue to improve performance of its processor cores. As a result the performance difference between the faster processors and the slower ones will increase over time.
Although there were gaps in processor performance prior to 2005, these gaps will rapidly increase as these alternate chip strategies are executed. And this difference now impacts the way a customer has to evaluate alternative platforms when considering where to implement an application, especially regarding the number of middleware licenses required.
For a middleware vendor, this processor core performance disparity creates a dilemma regarding price. Do you set your prices targeting the slower processors available, thus providing a bargain to those with the faster processors, or do you instead set them based on the fastest processors available and effectively overcharge those with the slowest processors?
Now, lets move to page 7 to take a look at how middleware vendors have reacted to his challenge.
Core Performance
Time
One Processor Core
Improve Core Strategy
Multi-core Strategy
Core
Disparity
IBM Power processor core performance increasing
Intel / AMD processor core performance is expected to be flat

12. This Has Added Complexity To Software Licensing . . .
IBM INTERNAL USE ONLY
Software Vendors Are Differentiating by Processor Type
x86 Server
On x86 dual-core chips, 0.50 license entitlements are required per processor
(IBM per processor policy for x86 dual-core is “1 entitlement for 2 cores”)
X86
2 Dual-core Chips
4 Processor Cores
2 Entitlements Required
This Has Added Complexity To Software Licensing . . .
Middleware vendors have responded to this dilemma by requiring a different number of licenses for some processor types.
The changes in the middleware licensing began when the x86 dual-core chip was announced last year (2005). Since customers were getting much less than a 2X performance improvement over the previous generation single core chips, IBM made an exception to our one license per processor core policy and only required one license entitlement for the 2 cores on the x86 dual-core chip. Other vendors also adopted this approach. Then, Sun announced new server systems with the T1 (code named Niagara) octi-core chip late last year, additional exceptions were made since it had unique performance characteristics.
All this has added complexity to software licensing for both vendors and our customers. In effect, the industry has introduced multiple licensing levels or tiers for software licensing. IBM has three separate tiers, while Oracle has the most tiers at 4. As you can see, although IBM, Oracle and BEA all define a processor as a core, in effect customers have to deal with fractional licenses at the processor core level. And we have heard from our customers that fractional licensing, and the rules around it, are confusing.
Let me make one other comment while looking at this table of effective license entitlements per core. Some vendors might like customers to compare them with IBM only on the number of software licenses required. As you can see, on some platforms IBM requires more effective licenses than others do. However, the number of licenses is only half the story. I’m sure you’ve heard before that the price you pay is the product of the price per unit times the quantity. With the license entitlements shown here all we’re talking about is the quantity. To understand the real, bottom line impact to you, you have to compare your middleware alternatives at the final price you will have to pay, and we’ll show you more detail on this when we get to page 9.
Before we get to that, lets first take a look at why this will only get more complex over time on page 8.
IBM has three different middleware per processor core license entitlement levels today
(Result: fractional licenses)
* Microsoft per core entitlements are derived from their per chip licensing.

13. . . . And gets even more complex over time
IBM INTERNAL USE ONLY
. . . And gets even more complex over time
Future Server
“. . . [this Licensing approach is] tactical, not strategic or visionary… this model will not scale to address 16 core environments that will be commonplace…by 2010”
(Source: Gartner Group, “Oracle Announces New Multicore Pricing and Licensing” 2/06)
XXXXXXXXXXXXXXXX X 4 8 12 16 3 7 11 15 2 6 10 14 1 5 9 13
1 Chip
16 Cores
?? Entitlements Required
And Customers Want Licensing Granularity
There are now licensing structures that require 50% or less of a license for each processor core on multi-core chips. As the number of processor cores on a chip increases, these fractional licensing requirements become even more challenging. In fact, the analyst firm Gartner Group wrote in regard to Oracle’s fractional licensing approach, that it won’t effectively scale to handle increasing multi-core environments.
Some people suggest that the best way to solve this problem is for middleware vendors to license their middleware at the chip level instead of the core. Let me show you why this approach won’t work either.
With the power available in today’s processor cores, customers increasingly want to partition their systems so that an application is limited to only a subset of the total processors in the system, and have the licensing structure support this. This is the reason we introduced sub-capacity licensing a year or so ago. This approach is becoming increasingly common as virtualization technologies are widely adopted. In fact, technologies are beginning to emerge that enable partitioning below the whole processor core.
In the example on this slide, a customer whose server has four processor cores wants to run an application in 3 of them and DB2 in just the one remaining processor core. Under the traditional full capacity licensing model, they would be required to have 4 licenses of DB2. With sub-capacity, however, they would only require 1 DB2 license. If this were licensed at the chip level, 2 licenses would be required since the one core physically resides on a dual-core chip. When using chip licensing, this would require the customer to effectively pay for 2 processor cores even though DB2 is only being used in just one core. This situation becomes more challenging as the number of cores per chip continues to increase with quad core, then octi-core, etc.
Because customers require more granularity, most middleware vendors are licensing below the chip level to the processor core.
Now lets move to page 9
RISC Server
Demand ability to license to the processor core – or below
2 Chips
4 Cores
Appl
Appl
Appl
DB2
1 DB2 License Required

14. Customer Focus Should be on the Total Effective Price
IBM INTERNAL USE ONLY
Customer Focus Should be on the Total Effective Price
License requirements are only part of the effective price
Price per Processor = License quantity x Product price per License
With differing licensing structures in the marketplace, there is confusion about the pricing of software.
The license entitlements shown on the left side of the chart only capture the quantity. To understand the real price of the software, your should compare the price per processor core you will have to pay for each of your middleware alternatives. This is accomplished by simply multiplying the entitlements per processor times the price per processor. For example, using the Enterprise Edition of each vendor’s Data Server product, in those situations where IBM may require more effective license entitlements, we are very competitive on price.
This chart was developed using suggested retail price as an illustration. If you do the same analysis at your entitled discount level, I’m sure you will find similar results.
Please turn to page 10.
Product Pricing Reference:
Microsoft = SQL Server Enterprise Edition ($24,999 per cpu + 25% est maint = $31,250
Oracle = Oracle Database 10g Enterprise Edition ($40,000 per cpu + 22% est maint = $48,800)
IBM = DB2 UDB Enterprise Server Edition (36,400 per cpu, includes maint 12 months)
* Suggested Retail Price

15. Marketplace Needs a New Licensing Structure
IBM INTERNAL USE ONLY
Marketplace Needs a New Licensing Structure
Objectives of Processor Value Unit Licensing
Industry licensing leadership with sustainable structure
Balance simplicity with granularity
Simple structure and conversion
No price changes for software on existing processors
Maintain license scalability and transferability
Minimum change, keep new license & maintenance renewal structure
More granular and avoid fractional core licensing
More flexible pricing to address disparate core performance
Particularly for multi-core chips
Enable sub-capacity processor licensing to the core
Continue to deliver software price performance
Clarity in licensing structure
As we thought about these issues and the marketplace needs that they identified, we developed a set of objectives that any replacement for the per processor license metric must meet.
First, we wanted to demonstrate IBM’s licensing leadership with a structure that would adapt to the expected changes in the underlying technology.
We also wanted to balance simplicity with granularity
We did not want to change the price customers pay for their middleware on today’s processors. That was a mistake we believe Oracle made when they tried Universal Power Units in 2000 and 2001, and we recognized that it was important not to impact our customer’s current budgets with this transition.
We also recognized that a key benefit of our licensing structure was the customer’s ability to transfer their licenses within their enterprise, allowing them to adapt their software architecture to better reflect their changing business priorities.
Another objective was to minimize the change to our existing processes and structures, including Passport Advantage.
We also wanted to eliminate fractional licensing, but at the same time make the structure granular enough to address the issues we’ve just discussed regarding multi-core chips.
It was also important that any replacement structure effectively deal with the growing differences in processor core performance, recognizing that faster processor cores can generally accomplish more work than slower processor cores.
Additionally, any new structure needs to enable sub-capacity and continue to deliver software price performance improvements.
Lets take a look at the new processor value unit licensing structure on the next page.

16. Introducing Processor Value Unit Licensing
IBM INTERNAL USE ONLY
Introducing Processor Value Unit Licensing
Middleware will be licensed in processor value units
Each processor core assigned a specific number of processor value units
Acquire the appropriate number of value units for each processor core
Each middleware program has a unique price per value unit
Processor value units are transferable among systems by product within the enterprise
IBM is addressing these issues by introducing the per processor licensing replacement, processor value unit licensing. A processor value unit is a unit of measure used to differentiate licensing of middleware on processors and over time will evolve to differentiate processor families based on relative performance. Initially, however, our focus is to convert to the new processor value units without disrupting our customers’ current plans and budgets.
Going forward, IBM middleware, which previously used the per processor licensing metric will now be licensed in processor value units. We have created 3 broad tiers or levels and all existing processors have been assigned to one of those tiers. For each product, customers will need to acquire the appropriate number of processor value units for the level or tier of the specific processor on which the software is deployed.
All the processors within a processor family will be assigned to the same tier. A processor family is a group of processors within a given processor technology which may vary in clock speed or cache size, but have the same or similar processor design and performance characteristics. We are not splitting families or causing customers to have to buy additional processor value unit licenses when they’ve installed minor technology upgrades to their existing hardware.
Please turn to page 12.
* Power PC 970 and Power 5 QCM dual-core chips require 50 Value Units
** T1 entitlements per processor adjusted with the elimination of fractional licenses.

17. Processor Value Unit Licensing has simple conversion……
IBM INTERNAL USE ONLY
Processor Value Unit Licensing has simple conversion……
Current per Processor Entitlements x 100
= New Value Unit Entitlements
…..And Avoids Fractions
To convert existing per processor licenses to the new processor value unit licenses, we have used a conversion factor of As an example, each core on a RISC dual-core based system required one license entitlement before this announcement, and going forward you would multiply 1 per processor license by 100 to get the new processor value unit requirement of 100.
For instance, if a customer needed to acquire 1 per processor license on an x86 dual-core server that had a total of 2 processor cores in the “old” structure, they would now need to acquire 50 value units for each processor core to get the total processor value unit license requirement of As you can see, this is also the same answer as you would get if you took the 1 per processor license and multiplied it by the conversion factor of 100.
By using a conversion factor of 100, we have eliminated fractional licenses and simplified the task of determining the number of licenses required on a server. For example, the RISC Sun T1 octi-core chip now requires 240 processor value units as opposed to 2.4 entitlements for the eight processor cores on the chip.
Now lets move to page 13
With the new structure, customers will acquire the required number of processor value units for each processor core
Server T1
1 Octi-core Chip
8 processor cores
30 x 8 = value units

18. Additionally, Simple Migration of Existing Entitlements
IBM INTERNAL USE ONLY
Additionally, Simple Migration of Existing Entitlements
Existing Maintenance Processor Entitlements converted to Processor Value Unit Entitlements
Current Per Processor Entitlements x 100 = Processor Value Units
Same conversion factor for all processor types
Migration of existing per processor licenses is also simple.
We are using the same conversion factor of 100 processor value units for each processor entitlement as discussed earlier for all processor entitlements. With this conversion approach, customers’ prior processor entitlement investments are protected as there are no additional processor value unit entitlements required assuming the customer had the appropriate level of entitlements under the old structure.
For example, under the old structure, on an x86 dual-core based system with 1 chip and 2 cores, 1 processor license would be deployed for the system (2 cores x 0.5 per core). When migrating to processor value unit entitlements, this conversion would result in 100 processor value units (1 processor entitlement x 100 processor value units). This equals the required processor value unit entitlement level for this configuration given 2 processors times 50 processor value units for x86 dual core equals 100 processor value units.
Earlier I mentioned that we are introducing this new structure without impacting the price customers currently pay today. Let me show you how we accomplished this on the next chart. *

19. With No Price Changes for our Middleware for Existing Processors*
IBM INTERNAL USE ONLY
With No Price Changes for our Middleware for Existing Processors*
Consistent conversion factor to create product prices
Both New Licenses and Maintenance Renewals
Current per Processor Price /100
= New Processor Value
Unit Price
Customer price = # entitlements X price per entitlement UNCHANGED!*
Just like the conversion of per processor licenses to processor value unit licenses, we have used a conversion factor of In this case, though, instead of multiplying today’s price by 100, we have divided it by 100 to get the new price per processor value unit.
Let me be clear about why the customer price doesn’t change as we move to the new licensing structure. The price a customer pays is the product of the number of licenses times the price per license. By multiplying the number of licenses by 100 and, at the same time dividing the price per license by 100, the net effect is no change.
You can see this clearly in the table on the bottom half of the chart. We’re using WebSphere ND deployed on a RISC dual-core server system. Originally the customer acquired two licenses at $15k per license for a total of $30k (US). By dividing the price by 100 and multiplying the licenses by 100, the customer will now have 200 processor value units at $150 each for the same total of $30k.
In order to accomplish this we maintained the existing three tiers. So I’d like to end this chart by emphasizing the point one more time: a customer’s prices will not change as a result of the introduction of the processor value unit licensing structure.
Please turn to page 15.
WebSphere Application Server Network Deployment on RISC Dual-core (2 cores)
Price per Entitlement
Number of Entitlements
Extended Price
Per Processor
$15,000 2
$30,000
Conversion factor
Divide by 100
Multiply by 100
Processor Value Unit
$150
200
* There may be slight changes due to rounding with the implementation of processor value units in some countries

20. Processor Value Units Provide Flexibility Through Granularity
IBM INTERNAL USE ONLY
Processor Value Units Provide Flexibility Through Granularity
Value Unit Licensing at the processor core level
Capability to enable sub-capacity licensing
Granularity to address changing technology
Flexibility to create new processor value unit levels
Deliver software price performance improvements
Time
Software price performance improvements will range over time depending upon a number of factors including market conditions
Processor core performance levels will vary between chip vendors
Processor Value Units relative to core performance
Processor Core Performance
Price Performance
# of Processor Value Units
Let me talk about flexibility from a number of different perspectives.
Through the use of processor value unit and sub-capacity licensing, we continue to make it possible for customers to consolidate servers and/or workloads in order to optimize their middleware system designs.
The processor value unit licensing structure allows flexibility to provide customers with continued software price performance improvements. As processor cores improve from generation to generation, we plan to deliver software price performance improvements on succeeding technologies
Please flip to the next page.

21. IBM INTERNAL USE ONLY
Increased Clarity as New Processors Will Be Assigned Processor Value Units
Deliver software price performance improvement
Over time, new processors will be differentiated based on relative performance, among other factors
Overall framework balances precision and simplicity
As we place new processor families in the processor value unit structure, a key objective of IBM is to continue to deliver middleware price performance improvements.
Going forward, we will also consider relative performance as a factor for assigning processor value units to a new processor family. To determine this relative performance, we will assess a number of different industry standard benchmarks. These benchmarks include both transaction processing (eg. TPC-C) and processor based (eg. SPECint and SPECjbb) standard benchmarks.
Other factors we will consider to determine the number of processor value units are market conditions and a desire to maintain a simple structure that balances precision with simplicity.
Lets move to page 17 now.

22. Quote and Order Tools Processor “Value Unit Calculator” is available
IBM INTERNAL USE ONLY
Quote and Order Tools
Processor “Value Unit Calculator” is available
Contains a “table” which indicates number of processor value units required for each processor core of all available vendor chips
Calculates number of processor value units required for every hardware environment
Used to calculate price (number of value units X price per value unit)
“Value Unit Calculator” will be inserted in SWG supported tools
Distributed Software Price Book
BP eOrder
PA Online
Value Unit Table is downloadable from Lotus Notes Pricing Data Base for use with:
User developed tools
VADS who do not use BP eOrder
To help determine the number of processor value units a customer might require on any server type, we are also providing a processor value unit calculator. You are certainly not required to use the calculator if you already know how many licenses you need, although we recommend it in order to obtain the latest processor family announcements.
In addition, since a number of reps and partners do not use the SWG supported tools, we are also making a Value Unit table available for download. This is, in effect, a spreadsheet that will guide you to the correct number of processor value units for any processor core type.
For more information on these new tools, please refer to the Quote Tools module in the announcement education.
Please move to the next page to see an example of the Processor Value Unit calculator.

23. New Tools to Determine Processor Value Unit License Quantities
IBM INTERNAL USE ONLY
New Tools to Determine Processor Value Unit License Quantities
Processor Value Unit Calculator Helps Determine License Quantities
Passport Advantage Online contains a link to the processor Value Unit Calculator
Calculates number of processor value units required for every hardware environment
Used to calculate price
(number of value units X price per value unit)
We are providing processor value unit calculator to help you determine the number of processor value units a customer requires on any server type. It will step you through a series of questions in either expert or guided mode that will include server vendor, server brand, and processor type. After inputting the number of processor cores on which the program will run, the calculator will assist you in determining the appropriate number of processor value units for your hardware environment.
Lets take a look at the benefits of Processor Value Unit licensing to both our customers and to you, our sellers
Link to Processor value unit calculator:

24. Benefits Of The New Structure
IBM INTERNAL USE ONLY
Benefits Of The New Structure
Customer
Provides granularity balanced with simplicity
Simple structure with easy conversion
Maintains license scalability and transferability
Enables sub-capacity processor licensing to the core
More flexible pricing to address disparate core performance
Delivers clarity and predictability
No price changes for software on existing processors
Continue to deliver software price performance improvements
Over time, new processors will be differentiated based on relative performance
Sustainable licensing structure
Addresses key marketplace needs with flexible structure
Sales
Provides an opportunity to capture additional revenue as customers migrate licenses to more powerful processors
Software price performance improvements is managed
Leverage flexibility and granularity to sell value with less discounting
As you can see, with new processor value unit licensing, IBM has made the structure clearer and simpler to administer for both our customers and IBM. Specifically, this reduces the complexity of fractional licenses and provides flexibility and granularity for licensing IBM middleware, enabling sub-capacity licensing and delivering software price performance improvements.
I’d like to emphasize one last time that we are not changing middleware prices with the introduction of this structure.
The benefits of this structure aren’t limited to new multi-core chip technologies, but will also position us to address the increasing adoption of new hardware and software technologies. The bottom line is that this new structure provides a sustainable licensing foundation for the future.
For you, our sellers, there is also the benefit that, for the first time, as customers migrate their workloads to more powerful processors, you have the opportunity to sell additional value unit licenses. Leveraging this licensing structure will also provide you with flexibility and granularity to sell value with less discounting.
Now before we wrap up I want to talk through 2 more charts to focus your attention on processor value unit part numbers and pricing implementation, please turn to page 21

25. Processor Value Unit Part Numbers and Pricing Implementation

26. Processor Value Unit Part Numbers and Pricing Implementation
IBM INTERNAL USE ONLY
Processor Value Unit Part Numbers and Pricing Implementation
Established Processor Value Unit Part Numbers
Replacing Per Processor Part Numbers
Each Per Processor Part Number is replaced by a Processor Value Unit Part Number
License plus 12 months Maintenance, Maintenance Renewal, etc.
Price and Passport Advantage Point Rounding
U.S. Dollars and Passport Advantage points were rounded to nearest two decimals
Some prices may be impacted +/- 1% by currency or country rounding
Passport Advantage point rounding should not impact customer band level
Created packs of 10 Processor Value Units as the minimum order quantity for programs where:
Per Processor License Plus Maintenance Price was less than US$1,250.00
Maintenance was less than US$250
Simplicity was needed for billing and administration
For example, US$100/100 = US$1.00 and when discounted would be below $1.00
To implement the processor value unit structure, IBM will replace over 1300 per processor part numbers going forward with a new part number on a one-for-one basis. The existing part number structure does not change, though. That is, we will still have part numbers for new license and first twelve months maintenance, maintenance renewal, maintenance reinstatement, and trade-ups.
To establish the new processor value unit prices, I told you we divided the existing price by the conversion factor of 100. In some countries, due to rounding, this may have resulted in very small price changes of +/- 1%. We converted the Passport Advantage points in the same fashion. Please note that we expect this rounding will not impact a customer’s Passport Advantage band level.
In addition, for billing and administration simplicity, we created packs of 10 Processor Value Units as the minimum order quantity for programs where the per processor license + first 12 months maintenance price was less than US$1250 and where maintenance renewal price was less then US$250. For example, when converting the per processor price of US$100 /100, the processor value unit price is US$1.00, which would result in prices under one dollar when discounted.
I spoke earlier on this page about the conversion to new part numbers. Lets take a look at this conversion in a little more detail now on the next page.

27. New Part Numbers, but No change to Part Number Structure
IBM INTERNAL USE ONLY
New Part Numbers, but No change to Part Number Structure
Part number structure unchanged
License + 12 months of Maintenance
Maintenance Renewal
Maintenance Reinstatement
Part Number Structure Unchanged
WAS ND Processor
WAS ND Value Units
IBM will replace all our per processor part numbers with processor value unit part numbers going forward, but the existing part number structure remains the same. That is, we will still have part numbers for new license and first twelve months maintenance, part numbers for maintenance renewal, and part numbers for maintenance reinstatement. As I told you on the previous page, all new license entitlements will be in processor value units and new part number prices will be in processor value units.
On the bottom of this chart you can see the effect of the part number change. Using WebSphere Application Server Network Deployment on a single core chip as the example, on the left you can see the old per processor part numbers, the number of required licenses and the price per license. On the right side you can see the replacement part number under the processor value unit structure, the number of these licenses which are required for a single core type processor, and the price per processor value unit. As a reminder, you can see the price per processor core does not change.
All new license entitlements will be in processor value units, so any new license acquisitions will be in processor value units. Existing license entitlements will remain unchanged using per processor licenses. For customers planning to use existing entitlements, they simply need to use the conversion factor of 100 to determine the equivalent number of processor value units.
All per processor software maintenance entitlements were converted to processor value unit maintenance entitlements on July 25, 2006.
A complete list of the new part numbers will be provided as part of the announcement on July 25, 2006 in a separate announcement letter.
Note: Example above assumes processor value unit assignment = 100 (eg. single-core chip type)

28. Next Steps Processor Value Unit Licensing sales kit (includes):
IBM INTERNAL USE ONLY
Next Steps
Processor Value Unit Licensing sales kit (includes):
Scripted customer presentation
English audio of this presentation (mp3 file)
Announcement letters
FAQs
Processor Value Unit table
Key terminology
Sales scenarios
Replacement part number file
Customer deliverables
Overview presentation (no script)
Brochure
FAQ
Sales kit link:
Now we’ve given you a lot of information in this presentation. There is a customer version of this presentation which contains a subset of the information contained herein. You should review the Customer Presentation so you are prepared to discuss the new processor value unit structure with your customers.
Thank you for your attention. I would be happy to answer any questions you may have at this time.

29. Reference Material
See the Processor Value Unit Licensing Announcement for Passport Advantage Middleware effective July 25, 2006 for more details. This, and other education material, will be available on the Passport Advantage web site
Questions should be directed through the normal software support structure. If they are unable to answer a question, they will have access to the Processor Value Unit Licensing project office.

30. IBM Business Partner Channel Sales Enablement Processor Value Unit Licensing
Michael Ryan, IBM Software Group Business Partner Enablement

31. URL: http://news. yahoo

32. IBM Business Partner Sales Enablement
Announce
July 25
IBM Business Partner Processor Value Unit Sales Skills Training
Aug 2nd
IBM Think!Thursday Sales Series Kickoff
July 27th
July
August
October
November
Legacy Passport Advantage P/N overlap and availability

33. Processor Value Unit Sales Skills Training
Sales skills enablement
Processor Value Unit technology education
Sales scenarios
Sales tools
Value Unit calculator
Conference call schedule
AP Geography:
Date: August 2nd, 2006 at 12:00 PM [(GMT+08:00) Kuala Lumpur, Singapore]
Conference call details link
Americas and Europe:
Date: August 2nd, 2006 at 11:00 AM [(GMT-05:00) Eastern Time (US & Canada)]

34. Software Sales Deliverables
Processor Value Unit Resources for Business Partners
Announcement Letter
July 27th Processor Value Unit Licensing for Middleware Kickoff
audio replay available 3 days after event
August 2nd Processor Value Unit Sales Skills Training
Processor Value Unit License Structure Overview
Sales Scenarios
FAQs
Customer Resources
Processor Value Unit Calculator
Passport Advantage Online for Resellers
IBM ID and password required

35. Call to Action
Attend the July 27th IBM Think!Thursday Processor Value Unit Licensing for Middleware Kickoff
Attend the August 2nd IBM Business Partner Processor Value Unit Sales Skills Training conference call
Review the software sales deliverables available at the Processor Value Unit Resources for Business Partners website
Contact your IBM Software Distributor , Techline, or IBM Business Partner sales representative for additional details and questions

36. Polling Questions
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37. Press *1
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39. IBM Think. Thursday Schedule. IBM Software Think
IBM Think!Thursday Schedule IBM Software Think!Thursday Aug 24th (11 AM ET) Title To Be Announced
Date Title
Aug 3rd IBM Tivoli Think!Thursday (11 AM ET)
Tivoli Mid-market Solutions: Update on the Express (SMB) Portfolio
IBM WebSphere Think!Thursday (1 PM ET)
The Benefits, the Value and Achieving SOA Certification Status
Aug 10th IBM Rational Think!Thursday (9 AM ET)
Automated Software Quality
IBM Information Management Think!Thursday (11 AM ET)
Title To Be Announced
Aug 17th IBM Lotus Think!Thursday (11 AM ET)
Web Content Management

40. IBM Software Think!Thursday replays available on the
VIC (Virtual Innovation Center)
June 22nd Autonomic Problem Determination
May 25th Passport Advantage Changes in the Distribution of Renewal Quotes
April 27th IBM’s Software Acquisition Strategy
March 23rd IBM Software Group’s Business Partner Software Value Incentive Program
Feb 23rd How & When to Access Pre- and Post-Sales Business Partner Support
Jan 26th Business Partner Channel Strategy