White Paper – Maintaining and supporting legacy IBM Systems Clarifying the current situation for end-users

Introduction

This White Paper has been written for end user organisations with legacy IBM systems such as the AS400®, IBM® System i®(iSeries®), i5®, Power5®Systems®and even the most recent generation of IBM Power7®System that require annual maintenance and support.

At <Our Company> we are continually meeting end users, discussing their IT issues and identifying how we can assist them in meeting their organisations needs. More recently, we have become aware of numerous myths being propagated by vendors, sales personnel and their agents regarding access to legacy system updates and patches. This White Paper has been developed to clarify the current situation for end users and encourage more informed IT decision making around the end users right to maintain and support equipment as they see fit, whether that is through internal staff or external third party service providers, such as <Our Company>.

The Mainframe is dead. Long live the mainframe.

For the last quarter of a century IT Industry experts and Analysts have been predicting the death of mainframe systems. Each successive market development and innovation in IT was regarded as another nail in the coffin of the mainframe market. As the industry made the funeral arrangements the younger IT professionals focused on the more exciting “in-demand” technologies that offered greater longevity and better career prospects. As a result, the knowledge and skills in mainframe technologies has suffered a more pronounced decline with a smaller pool of more senior IT professionals, many of whom have since retired and have not been replaced. This skills gap in mainframe systems was seized on by many as yet another reason why the days of the mainframe system were over. In any other industry, that is where the story would end. But not in the IT industry.

Figure 1: Mainframe Systems Lifecycle

While there has indeed been a decline in mainframe systems, the rate of decline as illustrated in Figure 1 is much slower than any expert could have predicted. With the benefit of hindsight, there are many plausible reasons for why this has happened:

  • These systems have been very stable, typically less vulnerable to security threats and largely very reliable for decades
  • In many cases these systems are running business critical applications that have developed and evolved over years. For many organisations the risks in migrating to newer platforms is perceived to be too high
  • The cost benefit analysis of migrating to newer technologies, cloud based solutions or managed services does not yet deliver a compelling business case
  • IT functions in organisations are working in challenging environments where the pace of technology developments is accelerating and the organisational demands on IT increasing dramatically. Yet IT budgets are not increasing at the same rate. Consequently there is an inherent need to sweat existing assets.

As a result, mainframe systems continue to play a key role in running core business applications in many organisations globally. In fact, IBM mainframe sales have experienced significant growth over the last three years.

Whether the current rate of decline is extrapolated further out, or even increased as we look ahead, we can conclude with some confidence that many of these legacy systems will continue to be around for at least another decade. In all probability with the continued constraints on IT expenditure they are likely to be around even longer than that.

The legacy system challenges

For end users the prospect of continuing to support and maintain aging legacy systems presents several key challenges.

Firstly, these systems are getting increasingly expensive to maintain and support. In a recent report by the UK National Audit Office, which examined four Government departments, the legacy systems cost between 1% and 7% of the total operating cost of the department. Bearing in mind public sector IT budgets that will represent the largest proportion of the budget. In the private sector a report by Intellect estimated that up to 80% of Financial Services Institutions IT budget was spent on maintaining legacy systems.

Secondly, due to the high cost of maintaining and supporting these systems there is limited IT budget available to support innovation and technology change. So in effect end-user organisations are trapped into keeping these systems going to maintain business-as-usual.

Thirdly these systems run core business applications many of which have been evolved by system application programmers over decades. The logic and intelligence built into these applications and the interaction of different coded modules is complex. The idea of migrating to newer technology platforms may be appealing, but the risks of migration are perceived by many to be very high.

Finally, because legacy systems have been around a long time there is a dwindling supply of IT professionals with the in-depth knowledge and experience of these platforms. For many organisations retaining that senior level of expertise has become difficult logistically and financially, when IT budgets are being squeezed.

What is IBM doing about legacy systems?

The mainframe business and in particular the legacy systems are big business for IBM. While just 4% of IBM’s revenues are derived from mainframe sales, when you factor in the additional hardware, storage, software and related services, the mainframe accounts for a quarter of IBM’s revenue and nearly half of profits, according to Berstein Research.

So with such a healthy revenue stream, IBM have been introducing some changes:

  • For the last couple of years IBM have increased support costs for many of the legacy hardware and software platforms each year (another 3% in 2013), at a time when many suppliers are holding or reducing prices.
  • In 2012 & 2013 IBM introduced extended support fees for clients running specific software versions (typically older legacy versions). These extended SWMA fees can be up to 100% more expensive than a current version support fee.
  • In April 2012 IBM announced that customers must sign a revised “Licence for Machine Code” by August 2013, or it will be deemed accepted. Effectively forcing IBM customers to accept the new conditions.
  • In October ‘12 IBM stopped providing Machine Code updates with T&M service calls and then starts to block access to all Machine Code Updates without a valid IBM Maintenance contract or Warranty
  • In November 2012, IBM announces that, effective April 1, 2013 a Reestablishment Fee will apply to any customer not on IBM maintenance but needing Machine Code updates. A penalty for any customer who paid IBM for their systems but didn’t have them under maintenance with IBM up to that point
  • In February 2013, IBM announced, effective August, 2013, that IBM must approve Machine Code Licence transfers between customers thus blocking secondary market access for IBM customers and reducing residual value of IBM customer investments.
  • In July 2013 IBM started to reverse some of the above by amending the effective date for new “Licence for Machine Code” and Machine Code Licence transfer approvals out to April 2014, and also clarifying that only machines purchased after April 2012 will be affected by any of the above.

That’s a lot of changes in a short space of time and the question is why? Imagine if Intel®did something similar with the software running on the chipsets installed in the millions of PC’s, notebooks and servers that now populate the globe. The bottom line for companies who have made significant investments with IBM over many years these changes have further increased maintenance and support costs of these legacy systems significantly.

How is the industry reacting?

There is a perception amongst many IT professionals and industry commentators that IBM are restricting access to certain services and facilities and attempting to control the aftermarket for legacy systems. This has led to several important developments for end users:

The legal precedent

We have already seen restrictive practices in the IT market, where an OEM attempted to restrict access to a library of hardware-code corrections (patches). This issue was brought before The Court of Justice of the European Union (the Supreme Court of the EU) in case C-128/11, where the ruling was:

“Even if the maintenance agreement is for a limited period, the functionalities corrected, altered or added on the basis of such an agreement form an integral part of the copy <Our Company>lly downloaded and can be used by the customer for an unlimited period.”

This effectively enshrined in EU law the right of customer access and use of the fixes/patches.

A coordinated industry campaign

The Services Industry Association (SIA) has launched an initiative around the ‘Digital Right to Repair’. At stake is the buyers right to choose how a purchased digital product can be supported post purchase i.e. by internal resources or external third party service providers. The principle is that the vendor should not control that decision or block access to critical patches or updates. A buyer should be free to modify, upgrade, repair or resell that equipment as they see fit. This campaign is gathering momentum internationally has been very successful in bringing this issue to the attention of legislators and the IT/business media.

Users resisting vendor pressure

In parallel to legal developments and industry campaigns end users are standing up to vendors and resisting where it is clear that the vendor is attempting to implement what is a restrictive practice. Ultimately some end-users are voting with their feet and moving maintenance and support arrangements to third parties service providers, who are guaranteeing service levels that the vendors are failing to commit to.

Conclusions

As an owner of legacy IBM equipment you have the following options:

  • With the right technical knowledge and experience you can maintain and support this equipment yourself
  • You can outsource the maintenance and support to a suitably qualified Third Party Maintenance provider, such as <Our Company>
  • You can upgrade it to newer pre-owned equipment and software, from within the EU, that an IT service company like <Our Company> will support
  • You can upgrade it to new equipment from IBM that will come with IBM’s warranty and support.

In each of these options, the vendor cannot retrospectively apply any back charges to you for the equipment you are using so don’t let them.

Our advice to end-users is:

  1. Don’t let IBM confuse you. In this White Paper we have provided you with the facts to help dispel the myths being propagated by vendors and their agents and representatives. At the end of this document you can provide all the relevant references to <Our Company>l published material to support this position.
  2. Make an official complaint to IBM if they are trying to charge you for something that was previously freely available or is contrary to the European Court of Justice ruling from July 2012.
  3. Complain to your local and/or European politicians or even write to the European Court of Justice (ECJ). It has become increasingly clear that the legislators are taking a stronger line on anti-competitive or restrictive practices in industry.
  4. Sign the Digital Right to Repair petition (www.digitalrighttorepair.org) Send copies of any complaints to SIA so that they can gather any evidence of anti-competitive behaviour.

At <Our Company>, we believe IT leaders in every end-user organisation should support the ‘Digital Right to Repair’ campaign. It is in the best interests of the entire industry and it is only fair that end-users of legacy IT equipment should have the freedom to choose their maintenance service provider based on the quality of service and price.