IBM Software Recent PVU and Subcapacity Virtualization Announcements

IBM Software Agenda § Background § PVU announcement 4 New Intel Xeon processor technology (Nehalem) § Sub-capacity (virtualization) licensing announcement 4 Sub-capacity offering enhancements 4 Letter to customers § Competitive software licensing update 2

IBM Software Background: Today’s Server Market Environment § x 86 Multi-core Processor Technology moves from dual to quad-core 4 Chip vendors adding more cores on one chip/socket (quad-core chips) § Most x 86 servers will have 8 -cores in 2009 (2 chips/sockets x quad-core chips) 4 Intel x 86 per core performance increasing significantly beginning in April 2009 § Customers adoption of Server Virtualization growing rapidly 4 Desire to improve traditionally low server utilization (5 -10% for x 86, 15 -20% for RISC) § Smart technology dynamically allocates processor resources to software 4 Customers routinely refresh server hardware every 3 -4 years Customers can use virtualization to restrict capacity so they pay for only what need 3

IBM Software Why license to the core? § IBM has consistently defined a processor as a core 4 Many other vendors changed their definition following the introduction of multicore x 86 chips in 2005 § Why license to the core instead of some other HW metric? 4 More granular and flexible, allowing customers to minimize their SW costs 4 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 season: must buy them all By game: purchase only games you want 4

IBM Software Clarify the word “Processor” in your vocabulary § “Processor” has many meanings in the industry today 4 Can be core, chip or socket 4 This leads to a great deal of confusion 4 You must ask how many cores are on the server when “processor” is used § IBM SW defines processor as a core 4 We only accept that definition 4 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 4 Instead, use the term “core” or “processor core” 4 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? 5

IBM Software PVU announcement: Intel’s new “Nehalem” chip § What is Intel’s new “Nehalem” processor chip? 4 Next generation Intel Xeon multi-core processor chips for servers 4 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 4 Uses the Xeon brand name, just like previous Intel x 86 server chips – Available now for 1 and 2 socket servers – Expected to be available on 4 socket servers in 2010 § Significant performance improvements 4 Fewer processor cores required for equivalent workload § PVU licensing: requires 70 PVUs per core 6

IBM Software Likely 2009 Server Replacement Scenario Example for a 2 socket server: Performance per core Price / Performance Price per unit of throughput 40% higher PVUs per core Almost 200% more performance per core Old Xeon Dual-core (1 H 06) PVUs per core cut in half! “Nehalem” New Xeon Quad-core (1 H 09) 50 PVUs per core Old Xeon 70 PVUs per core New Xeon Old Xeon Dual-core (1 H 06) New Xeon Quad-core (1 H 09) At 70 PVUs per core, significant P/P improvement 7

IBM Software Processor Model Numbers used to determine PVU requirement § 70 PVUs per core for Intel Xeon Nehalem processor technology § 35 xx series (3500 to 3599) § 55 xx series (5500 to 5599) § 50 PVUs per core for previous generation Intel Xeon § 34 xx series and prior (3000 to 3499) § 54 xx 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 8

IBM Software Significant performance improvements. . . fewer cores required § Software value for software products priced on Processor Value Units (PVUs) is based on processor capacity available 4 The price scales to the software value received § New Intel processor chips pack more cores per chip and more processing capacity per core 4 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 4 Customers can use IBM sub-capacity (Virtualization) licensing to limit processing capacity available 4 Customers require fewer cores to run a constant workload Software Value is Based on Processor Capacity Available 9

IBM Software Sub-capacity Announcement: Enhancements § Nearly all PVU-based products now eligible for sub-capacity licensing 4 Only those that won’t run in a virtual machine are ineligible § Elimination of two part number structure (full cap vs. sub-cap) 4 The existing full-cap part numbers will now apply to both full-cap and sub-cap 4 Customers’ existing PVU license entitlements can be used for full-cap or sub-cap. 4 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: 4 Offers a complete IBM SW PVU portfolio for customers who are virtualizing 4 Simplifies license ordering/tracking for both customers and IBM 4 Eliminates the need for conversions of existing licenses when deploying subcapacity environment 10

IBM Software Sub-capacity Announcement: Enhancements § Expansion of eligible virtualization technologies 4 Citrix Xen Server virtualization 4 Red Hat Enterprise Linux (Xen) virtualization 4 Microsoft Hyper-V virtualization 4 VMware Server 2. 0 4 Operating System commands and BIOS settings 4 Above technologies will be supported in ILMT during 2 H 2010 § Re-confirm ILMT support during 3 Q 2009 for VMware § Re-confirm eligibility & ILMT support during 3 Q 2009 for Power. VM § Benefits of this change: 4 Allows customers to expand the use of sub-capacity licensing to more workloads 4 Increased flexibility to use the most appropriate virtualization technology 4 IBM has the best licensing support for virtualization in the industry! 11

IBM Software Sub-Capacity Licensing Summary § Sub-capacity Licensing Requirements 4 Agree to the terms of the Sub-capacity Attachment 4 Use Eligible Sub-capacity Products (nearly all now eligible) 4 Use Eligible Virtualization Technologies (see below) 4 Use the IBM License Metric Tool (ILMT) and maintain Audit Reports § Eligible Virtualization Technologies 4 IBM Power. VM (AIX / i 5 os): LPAR, DLPAR, Shared Proc Pools, Micro-Partitioning 4 IBM System z (with Linux): LPAR, z. VM 4 Sun / Fujitsu (Solaris): Dynamic System Domains, Containers/Zones inside DSD 4 HP Integrity (HPUX): n. Par, v. Par & Integrity VM 4 x 86 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 12

IBM Software Customer notification letters beginning April 7 § Letter will contain: 4 Highlights of recent sub-cap offering enhancements – Expanded list of Eligible Products – More Eligible Virtualization Technologies – Simplified Tracking and Reporting 4 Official notice from IBM of new Sub-cap Attachment (Z 125 -7174 -02), which is effective for all PA customers on or before August 1, 2009 4 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 13

IBM Software Recent Oracle licensing changes make their structure even more like PVUs than before § Increased licensing requirements for IBM POWER 6 and z processors 4 Appears to be retroactive § Requires processor model numbers to determine x 86 licensing Oracle IBM POWER 6 Licenses required increased No change System z 10 Licenses required increased No change x 86 processor model numbers Required Virtualization support Limited - hard partitions only Extensive - hard and soft partitions More expensive Less expensive 1 st year S&S not included in license Includes 1 st year S&S in license List prices S&S 14

IBM Software Impact of Oracle’s recent licensing change For a 4 core Power Systems p 570 (POWER 6) server Old Oracle Licensing New Oracle Licensing IBM Licensing . 75 1. 0 120 PVUs 3 4 480 PVUs Web. Logic Server Enterprise Ed. Web. Sphere App Server ND SRP* price (US$) one license + 12 months S&S $30, 500 $174 Total SRP* price (US$) for 4 core POWER 6 server $91, 500 $122, 000 $83, 520 Licenses per core Total licenses Product * Suggested retail prices (SRP) as of March 31, 2009 15

IBM Software IBM sub-capacity is much broader than Oracles § Oracle does not allow soft partitioning 4 Does not allow VMware or other virtualization on x 86 (except for Oracle own VM) 4 You pay for all virtual CPUs (v. CPUs) on the box, vs. v. CPUs assigned to the Virtual Machine (VM) § With IBM you only pay for v. CPUs that are assigned to the VM VMware VM with WAS ND on 2 v. CPUs VMware VM with Web. Logic Server Ent, Ed. on 2 v. CPUs VMware VM without WAS on 6 v. CPUs VMware VM without Web. Logic Server Ent. Ed. on 6 v. CPUs Advantage IBM WAS Network Deployment is licensed for 2 v. CPUs Web. Logic Server Ent. Ed. is licensed for 8 v. CPUs 16

IBM Software Summary § PVUs 4 Rating for new Intel Xeon (Nehalem) provides significant improvements in SW price performance § Sub-capacity 4 Support expands to nearly all PVU-based products 4 Single part number reduces complexity 4 Support for additional virtualization technologies § IBM licensing supports the most virtualization technologies 4 Customers must still agree to the sub-cap terms per the Sub. Capacity Attachment to the PA Agreement § Including the use of ILMT 17

IBM Software Seller Resources: § PVU internal website portal: http: //w 3 -103. ibm. com/software/xl/portal/viewcontent? type=doc&src. ID=XT&doc. ID=P 216209 A 21004 Q 75 § Sub-Capacity Licensing internal website portal: http: //w 3 -103. ibm. com/software/xl/portal/viewcontent? type=doc&src. ID=XT&doc. ID=Z 693913 I 54286 V 29 § IBM License Metric Tool (ILMT) customer presentation § http: //w 3 -103. ibm. com/software/xl/portal/viewcontent? type=doc&src. ID=T 9&doc. ID=D 809594 U 66137 V 33 18

IBM Software 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 19