Increased leasing costs for development
boxes are leaving small ISVs wondering if they can afford to stay
up with the latest IBM technology.
“This is more than a price
change. As more people get priced out of the market, there will
be fewer people to move the product ahead. This is not forward thinking
on the part of IBM,” says Pete Massiello, president, OS Solutions,
Danbury, CT.
In a letter to developers, IBM announced
a raise in the lease rate for the iSeries developer lease offering,
from 1% to 1.75% of list price. Also, the duration of the lease,
still 24 months, no longer allows for early termination. This was
announced and made effective on June 7, 2002.
With the old contract, some developer
shops would opt-out of their lease after a year and get a newer
box on a new lease. Now, they must keep their technology for two
years, as well as pay the mandatory maintenance fee when the warranty
lapses after the first year.
“Previously, shops would get
newer technology and a new warranty after the first year,”
says Walden Leverich, president, Tech Software, Long Island, NY.
Smaller developers fear that this
price hike will leave them without the technology they need to keep
their own products current.
“IBM is making the system out
of reach and small vendors are being pushed out because they can’t
afford it,” says Oludare Ogunmadewa, developer, American Red
Cross, Falls Church, VA.
Leasing change impacts all shops
This price increase touches iSeries
shops using their boxes for production as well. Customers may see
an increase in software prices to compensate for the additional
cost to developers.
“This will undoubtedly cause
many small developers to pursue other platforms. The less developers
there are, the less variety of software available. Ultimately, that
hurts the platform,” says Jon Paris, president, Partner400,
Toronto, Canada.
Many technical conference session
speakers and on-site trainers are also ISVs who, without the ability
to trade in and get the newest box on the block, may not be as up-to-date
with the latest and greatest.
“You can read about new technology,
but it’s not the same as hands-on. There will be a decrease
in current knowledge if developers can’t get boxes that are
using the most current technology,” says Leverich.
Other affected platforms are the
pSeries, Storage Systems and Retail Store Systems.
IBM responds to developers’ concerns
Big Blue claims that the increase
in the developer lease price is in line with price performance
and the overall market.
“The rate has been 1%
for over six years. This is a rate driven off the list price,
which has come down significantly over that time” says
Jeff Magdall, director of ISV enablement, Server Group, IBM,
Poughkeepsie, NY.
IBM says that the option to
back out of the lease after a year was removed because shops
weren’t taking advantage of it, contrary to what developers
told the Insider.
“We found that this term
was seldom, if ever, used and having that term adds an unneccesary
level of complexity,” says Magdall.
The inability to opt-out also
increases the cost after the first year, when developers must
pay a maintenance fee rather than trading in for a new box
and warranty. This is something IBM agrees will tack on more
expenses.
“If they’re going
to have the box for two years they will need to maintain it.
This is a small change because very few were opting-out before,”
says Magdall.
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