In future, IBM mainframe users can expect the company to be more receptive to their requests for discounts – but they won’t be making any big gains from this new generosity: for what IBM discounts, it will already have made back with price increases across the board. All customers are affected by the higher list prices, but only some will get the discounts, and even then not the full discount. The idea, according to a report by US analysts Dale Kutnick and Marc Butlein published in their MetaView Newsletter, is that IBM still makes a nice cut while putting itself forward as an amenable business partner: but, it is argued, this policy could ultimately backfire. At the start of the 1980s, IBM saw itself as a virtual monopoly and felt no need to offer discounts on list prices. This only changed when the plug-compatible manufacturers overcame the fear, uncertainty and doubt sown by IBM and succeeded in convincing blue chip users that it really was quite safe to leave the IBM nest for a machine generation or so. These convincing IBMcompatible machines, according to Kutnick and Butlein, forced IBM to offer discounts of from 5% to 15% between 1980 and 1985. In the late 1970s and early 1980s, mainframe prices followed an 83% curve: that is, on average, every year prices declined 17% for a given performance. But between 1985 and 1989, prices have followed a 92% curve, effectively representing a disguised increase of around 10% when taken against the practice of the five previous years. At the same time, major 3090 customers were enjoying discounts of between 10% and 34%, so that they were paying roughly the same prices they would have done on the old pricecurve. This ploy enabled IBM to offer higher discounts each year without losing any money in fact it did extremely well out of it. The same thing beckons on the software side, reckon Kutnick and Butlein. After the massive price increases of up to 120% this summer, they expect that for 1990, IBM will start by offering their best customers discounts of 20% to 30% they go on to say that this will be followed by higher list prices for new releases. In the long term, however, it is argued that IBM could be cutting its own throat with this strategem, as small-to-medium mainframe users, which are not offered the discounts, turn more and more towards cheaper alternatives. For the present, argue the two analysts, this way of doing business may well be paying off, but eventually it could increase plugcomptible manufacturer competition – Fujitsu is now legally in a position to market a fully-compatible rewrite of MVS, and to persuade users to buy it will have to undercut IBM software prices substantially. The current IBM tendency also threatens to promote the growth of nonmainframe solutions, warn the two analysts darkly. Here comes Unix.
