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Recent PVU and Sub-capacity (Virtualization) Announcements OverviewApril, 2009

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Agenda

Background

PVU announcement New Intel Xeon processor technology (Nehalem)

Sub-capacity (virtualization) licensing announcement Sub-capacity offering enhancements

Letter to customers

Competitive software licensing update

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Background: Today’s Server Market Environment

x86 Multi-core Processor Technology moves from dual to quad-core Chip vendors adding more cores on one chip/socket (quad-core chips)

Most x86 servers will have 8-cores in 2009 (2 chips/sockets x quad-core chips)

Intel x86 per core performance increasing significantly beginning in April 2009

Customers adoption of Server Virtualization growing rapidly Desire to improve traditionally low server utilization (5-10% for x86, 15-20% for RISC)

Smart technology dynamically allocates processor resources to software

Customers routinely refresh server hardware every 3-4 years

Customers can use virtualization to restrict capacity so they pay for only what need

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Why license to the core?

IBM has consistently defined a processor as a core Many other vendors changed their definition following the introduction of multi-

core x86 chips in 2005

Why license to the core instead of some other HW metric? More granular and flexible, allowing customers to minimize their SW costs

Aligns physical licensing with the virtual CPUs within virtualization

An analogy: would you prefer to always buy sports tickets by individual game or for the whole season or event?

By game: purchase only games you want

By season: must buy them all

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Clarify the word “Processor” in your vocabulary

“Processor” has many meanings in the industry today Can be core, chip or socket

This leads to a great deal of confusion

You must ask how many cores are on the server when “processor” is used

IBM SW defines processor as a core We only accept that definition

We do not use another vendor’s or a customer’s own definition

Since it is confusing, don’t use the word “processor” by itself Instead, use the term “core” or “processor core”

Or, use the term “chip” or “processor chip” if that is what is being referred to

The key question is: how many cores are on the server?

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PVU announcement: Intel’s new “Nehalem” chip What is Intel’s new “Nehalem” processor chip?

Next generation Intel Xeon multi-core

processor chips for servers Will become the standard Intel processor:

– Available now in Dual- and Quad-core versions

– Hexa and Octi-core versions expected in 2010-11

Announced by Intel on March 30, 2009 Uses the Xeon brand name, just like previous Intel x86 server chips

– Available now for 1 and 2 socket servers

– Expected to be available on 4 socket servers in 2010

Significant performance improvements Fewer processor cores required for equivalent workload

PVU licensing: requires 70 PVUs per core

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Likely 2009 Server Replacement Scenario

At 70 PVUs per core, significant P/P improvement

Old XeonDual-core

(1H06)

New XeonQuad-core

(1H09)

Almost 200%more

performanceper core

Performance per core

50 PVUs per core Old Xeon

70 PVUs per core

New Xeon

40% higher PVUs per core

PVUs per core

Price per unit of

throughput cut in half!

Price / Performance

Old XeonDual-core

(1H06)

New XeonQuad-core

(1H09)

“Nehalem”

Example for a 2 socket server:

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Processor Model Numbers used to determine PVU requirement

70 PVUs per core for Intel Xeon Nehalem processor technology 35xx series (3500 to 3599)

55xx series (5500 to 5599)

50 PVUs per core for previous generation Intel Xeon 34xx series and prior (3000 to 3499)

54xx series and prior (5000 to 5499)

All existing AMD Opteron multi-core processor technologies

Refer to the PVU table for model number requirements (excerpt below)

See final page for links to complete PVU table, and Processor Model Number Discovery Guide

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Significant performance improvements...fewer cores required

Software value for software products priced on Processor Value Units (PVUs) is based on processor capacity available The price scales to the software value received

New Intel processor chips pack more cores per chip and more processing capacity per core Replacing old for new 2 socket servers will double cores

With capacity planning, many customers will see a reduction in the number of PVU software licenses required on Intel Nehalem Customers can use IBM sub-capacity (Virtualization) licensing to limit

processing capacity available

Customers require fewer cores to run a constant workload

Software Value is Based on Processor Capacity Available

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Sub-capacity Announcement: Enhancements

Nearly all PVU-based products now eligible for sub-capacity licensing Only those that won’t run in a virtual machine are ineligible

Elimination of two part number structure (full cap vs. sub-cap) The existing full-cap part numbers will now apply to both full-cap and sub-cap Customers’ existing PVU license entitlements can be used for full-cap or sub-cap. Customers’ S&S entitlements will be converted at next S&S renewal after July 1

To use these products in sub-capacity mode, customer must still agree to the sub-cap terms per the Sub-Capacity Attachment to the PA Agreement

Benefits of this change: Offers a complete IBM SW PVU portfolio for customers who are virtualizing Simplifies license ordering/tracking for both customers and IBM Eliminates the need for conversions of existing licenses when deploying sub-

capacity environment

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Sub-capacity Announcement: Enhancements

Expansion of eligible virtualization technologies Citrix Xen Server virtualization Red Hat Enterprise Linux (Xen) virtualization Microsoft Hyper-V virtualization VMware Server 2.0 Operating System commands and BIOS settings Above technologies will be supported in ILMT during 2H 2010

Re-confirm ILMT support during 3Q 2009 for VMware

Re-confirm eligibility & ILMT support during 3Q 2009 for PowerVM

Benefits of this change: Allows customers to expand the use of sub-capacity licensing to more workloads Increased flexibility to use the most appropriate virtualization technology

IBM has the best licensing support for virtualization in the industry!

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Sub-Capacity Licensing Summary

Sub-capacity Licensing Requirements Agree to the terms of the Sub-capacity Attachment Use Eligible Sub-capacity Products (nearly all now eligible) Use Eligible Virtualization Technologies (see below) Use the IBM License Metric Tool (ILMT) and maintain Audit Reports

Eligible Virtualization Technologies IBM PowerVM (AIX / i5os): LPAR, DLPAR, Shared Proc Pools, Micro-Partitioning IBM System z (with Linux): LPAR, zVM Sun / Fujitsu (Solaris): Dynamic System Domains, Containers/Zones inside DSD HP Integrity (HPUX): nPar, vPar & Integrity VM x86 Intel / AMD (Linux and Windows):

Citrix Xen Server virtualization Red Hat Enterprise Linux (Xen) virtualization Microsoft Hyper-V virtualization VMware virtualization Operating System commands and BIOS settings to limit processor core capacity

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Customer notification letters beginning April 7

Letter will contain:

Highlights of recent sub-cap offering enhancements

– Expanded list of Eligible Products

– More Eligible Virtualization Technologies

– Simplified Tracking and Reporting

Official notice from IBM of new Sub-cap Attachment (Z125-7174-02), which is effective for all PA customers on or before August 1, 2009

Points customers to official IBM websites for PVU and sub-capacity licensing, including PVU Table

Direct link: http://www-01.ibm.com/software/lotus/passportadvantage/customer_notification_letter_subcap_licensing_enhancements_07_Apr_09.html

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Recent Oracle licensing changes make their structure even more like PVUs than before

Increased licensing requirements for IBM POWER6 and z processors Appears to be retroactive

Requires processor model numbers to determine x86 licensing

Oracle IBM

POWER6 Licenses required increased No change

System z10 Licenses required increased No change

x86 processor model numbers

Required Required

Virtualization support Limited - hard partitions onlyExtensive - hard and soft

partitions

List prices More expensive Less expensive

S&S1st year S&S not included in

licenseIncludes 1st year S&S in

license

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Impact of Oracle’s recent licensing change

For a 4 core Power Systems p570 (POWER6) server

Old Oracle Licensing

New Oracle Licensing

IBM Licensing

Licenses per core .75 1.0 120 PVUs

Total licenses 3 4 480 PVUs

ProductWebLogic Server

Enterprise Ed.WebLogic Server

Enterprise Ed.WebSphere App

Server ND

SRP* price (US$) one license + 12 months S&S

$30,500 $30,500 $174

Total SRP* price (US$) for 4 core POWER6 server

$91,500 $122,000 $83,520

* Suggested retail prices (SRP) as of March 31, 2009

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IBM sub-capacity is much broader than Oracles Oracle does not allow soft partitioning

Does not allow VMware or other virtualization on x86 (except for Oracle own VM)

You pay for all virtual CPUs (vCPUs) on the box, vs. vCPUs assigned to the Virtual Machine (VM)

With IBM you only pay for vCPUs that are assigned to the VM

WAS Network Deployment is licensed for 2 vCPUs

VMware VM with WAS ND on 2 vCPUs

VMware VM without WAS on 6 vCPUs

AdvantageIBM

WebLogic Server Ent. Ed. is licensed for 8 vCPUs

VMware VM with WebLogic Server Ent, Ed. on 2 vCPUs

VMware VM without WebLogic Server Ent. Ed. on 6 vCPUs

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Summary

PVUs Rating for new Intel Xeon (Nehalem) provides significant

improvements in SW price performance

Sub-capacity Support expands to nearly all PVU-based products

Single part number reduces complexity

Support for additional virtualization technologies

IBM licensing supports the most virtualization technologies

Customers must still agree to the sub-cap terms per the Sub-Capacity Attachment to the PA Agreement

Including the use of ILMT

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Seller Resources:

PVU internal website portal: http://w3-103.ibm.com/software/xl/portal/viewcontent?type=doc&srcID=XT&docID=P216209A21004Q75

Sub-Capacity Licensing internal website portal:http://w3-103.ibm.com/software/xl/portal/viewcontent?type=doc&srcID=XT&docID=Z693913I54286V29

IBM License Metric Tool (ILMT) customer presentation http://w3-103.ibm.com/software/xl/portal/viewcontent?type=doc&srcID=T9&docID=D809594U66137V33

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Customer Resources:

PVU external website portal: http://www-01.ibm.com/software/lotus/passportadvantage/pvu_licensing_for_customers.html

Sub-Capacity Licensing external website portal:http://www-01.ibm.com/software/lotus/passportadvantage/subcaplicensing.html

IBM License Metric Tool (ILMT) information: http://www-01.ibm.com/software/lotus/passportadvantage/ibmlicensemetrictool.html