® IBM Software © IBM Corporation IBM Internal Use Only--Not to be shared outside the company until July 25, 2006 Processor Value Unit Licensing for Middleware Evolving the Structure to Provide a Foundation for the Future Processor Value Unit Pricing and Licensing Education

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Pricing and Licensing Education Agenda  Per Processor Licensing Background  Middleware Vendors Differentiate For Multi-core  Transition to Processor Value Unit Licensing  Prices Unchanged  Assign Processor Value Units to New Processors  New Processor Value Unit Part Numbers and Pricing  Summary

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Historical Per Processor Middleware Licensing  One per processor license for each activated processor core in the server (full-capacity)  For sub-capacity - one license for each activated processor core in the partition  A significant number of SWG distributed products use per processor licensing  Products which use per processor licensing are deployed on various processor technologies across multiple hardware platforms 1 Core Server 4 Entitlements Required (Full Capacity)

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Now Middleware Vendors Differentiate by Processor Type…... Adding complexity to middleware licensing RISC Dual-core Single-core x86 Dual-core Sun Octi-core * Microsoft per processor entitlements are derived from their per chip licensing. Effective License Entitlements per Processor Chip TypeIBMMicrosoft*OracleBEA Single-core (All Chips)1.00 RISC Dual-core1.00N/A x86 Dual-core0.50 RISC Sun T1 Octi-core0.38N/A0.25

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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 * Suggested Retail Price

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Current Marketplace for Per Processor Licensing  More complex licensing structures  Unique licensing requirements for differing technologies  Fractional licensing to provide necessary granularity  Uncertainty of licensing for multi-core technologies Multi-core technology has created a number of challenges for customers The Current Structure is Not Sustainable

IBM Software Internal Use Only--Not to be shared outside the company until July 25, In Today’s Environment, the Marketplace Needs  Simplicity  Obtain benefits of fractional licenses without calculating fractions  More flexibility through granularity  Especially for multi-core chips  Leverage sub-capacity licensing  Continued software price performance improvements  Clarity in the licensing structure

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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 * 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.

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Processor Value Unit Licensing has Simple Conversion Current per Processor Entitlements x 100 = New Processor Value Unit Entitlements

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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 *

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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!* WebSphere Application Server Network Deployment on RISC Dual-core (2 cores) Price per Entitlement Number of Entitlements Extended Price Per Processor$15,0002$30,000 Conversion factorDivide by 100Multiply by 100 Processor Value Unit$150200$30,000 * There may be slight changes due to rounding with the implementation of processor value units in some countries

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Increased Clarity as New Processors Will Be Assigned Processor Value Units  Deliver price performance improvement  Over time, new processors will be differentiated based on relative performance  Overall framework balances precision and simplicity

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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,  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

IBM Software Internal Use Only--Not to be shared outside the company until July 25, New Part Numbers, but No change to Part Number Structure WAS ND Processor  Part number structure unchanged  License + 12 months of Maintenance  Maintenance Renewal  Maintenance Reinstatement Part Number Structure Unchanged Note: Example above assumes processor value unit assignment = 100 (eg. single-core chip type) WAS ND Value Units

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Summary  Historical Per Processor Middleware Licensing  Multi-core Technologies Challenging Licensing  Middleware Vendors Are Differentiating by Processor Type  Fractional licensing to provide necessary granularity  IBM Is Announcing a Processor Value Unit Licensing Structure  Customer price is unchanged  Replacement part numbers and prices

IBM Software Internal Use Only--Not to be shared outside the company until July 25, Backup

IBM Software Internal Use Only--Not to be shared outside the company until July 25, 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 *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. *