Newsgroups: bit.listserv.ibm-hesc
Date:         Wed, 11 Nov 1992 12:38:43 EST
From:         Fred Dwyer <FDDWYER@RHQVM21.VNET.IBM.COM>
Comments: To: IBM-HESC%PSUORVM.BITNET@CORNELLC.cit.cornell.edu

'MSG From: SMTP    --IINUS1   To: FDDWYER --RHQVM21           11/11/92 01:00:20a
 =========================================================================
>From:         Jerry Bryan <BRYAN@WVNVM.WVNET.EDU>
>In article <IBM-HESC%92111007375701@PSUORVM.CC.PDX.EDU>, Fred Dwyer
><FDDWYER@RHQVM21.VNET.IBM.COM> says:
>                                                     We believe that
>>if anything, HESC pricing needs more granularity, not less.
>
>Hmm.  This can quickly become a religious issue, and I can easily
>argue either side of the question.  This is not necessarily my
>installation's position, not even my own, but let me play devil's
>advocate just for a moment.

I AM RELUCTANT TO BECOME INVOLVED WITH THE DEVIL BUT CANNOT RESIST
THE TEMPTATION TO CLARIFY A FEW POINTS.  PLEASE SEE MY COMMENTS
INTERSPERSED BELOW.  FRED DWYER
>
>It seems to me that the HESC is getting far away from its original
>"look and feel", and is becoming simply a large educational discount.
>In its original incarnation, the HESC served (at least) two purposes:
>1) for software an installation would have run anyway, it made the
>software less expensive, and 2) it allowed an installation to run
>software it would not otherwise have run.  In either case, the
>advantages to the installation were more and better software at less
>cost, and for IBM more use of IBM hardware and software, with
>attendant current revenue (but see below) and potential
>future revenue due to faculty and students trained on IBM hardware
>and software.
>
NOT A BAD CHARACTERIZATION, AND NOT NECESSARILY DIFFERENT TODAY.

>Regrettably, IBM views the HESC as a net loss with respect to current
>revenue.  This point of view totally ignores my item #2 above, and
>ignores the hardware revenue associated with both my item #1 and item #2
>above.  I believe that IBM should evaluate the HESC in terms of future
>revenue, and also in terms of current revenue, where the absence of the
>HESC would result in loss of current hardware revenue and loss of
>HESC software revenue for software that otherwise would not be run at
>all.

IBM DOES NOT ASSUME THAT ALL, OR EVEN MOST, OF THE HESC LICENSES WOULD
EXIST UNDER STANDARD TERMS AND CONDITIONS IF HESC WERE NOT IN PLACE.  IF
THAT WERE OUR ASSUMPTION, THE HESC WOULD NOT EXIST.  WHILE THE
JUSTIFICATION FOR HESC CERTAINLY CONSIDERS ALL OF YOUR POINTS (ABOVE),
WITHIN THE LAWS OF OUR LAND, IT IS NECESSARY FOR EACH PRODUCT TO STAND
ON ITS OWN.  FINANCIALLY HESC MUST BE SELF SUPPORTING.  THIS HAS BEEN
TRUE FOR HESC SINCE INCEPTION.  YES, IT IS TRUE THAT YOUR LOCAL
DISCOUNT STORE MAY OFFER "LOSS-LEADERS" BUT THAT IS A VERY DIFFERENT
ENVIRONMENT, A VERY DIFFERENT LEGAL EXPOSURE.

>As I understand it, IBM product managers assume (quite incorrectly
>in my opinion) that without the HESC, they would get all the revenue
>for all the HESC products.  My opinion is that without the HESC, virtually
>no installation would run what you might call "marginal products"
>(my item #2), and that virtually every installation would be involved
>in even more consideration of downsizing than they are already doing,
>and would be getting rid of software even in my category #1.

MOST IBM PRODUCT MANAGERS SUPPORT HESC.  THAT IS HOW 700+ PRODUCTS
HAVE COME TO THE HESC OFFERING.  IN A VERY FEW INSTANCES PRODUCT MANAGERS
HAVE DECLINED HESC LISTING.
>
>What all of this has to do with granularity is that the courser the
>granularity, the less association there is between the cost to the
>installation for the HESC and the amount of software which is run.
>With such cost insensitivity, there is more incentive for installations
>to run IBM software and hardware, and less incentive to downsize to
>(possibly) non-IBM hardware and software.  The customers get more
>software for less money, and IBM has more customers and more revenue.
>This is a win-win situation if ever I saw one.  Therefore, I argue
>(for today, at least) to return the HESC to its roots, and to provide
>courser granularity, not finer.

THE GRANULARITY ISSUE IS SIMPLY A QUESTION OF HOW WELL MEMBERS CAN
MATCH THEIR COSTS TO THEIR PRODUCT REQUIREMENTS.  IF THE MEMBERSHIP
IS WILLING, IBM WOULD PROBABLY BE HAPPY TO MAKE HESC INTO A SINGLE
GROUP FOR $160,000 PER YEAR.  REDUCED GRANULARITY, EACH MEMBER INCENTED
TO TRY SOFTWARE HE/SHE MIGHT NOT OTHERWISE ORDER, BUT MEMBERS WOULD NOT
GET MORE FOR LESS.  EACH ADDITIONAL PACKAGE ORDERED WOULD REPRESENT
ADDITIONAL COST TO IBM AND WOULD BECOME A PART OF THE GROUP FEE (IT
WOULD GO UP).  IN FACT, BASED ON THAT ASSUMPTION (THAT THIS WOULD
STIMULATE ADDITIONAL SOFTWARE ORDERS) WE WOULD HAVE TO FORECAST THE
GROWTH AND PRICE FOR IT AT THE START OF THE "ONE-GROUP-HESC" OFFERING.
THE SUM OF PRESENT GROUP FEES ($160,000) WOULD NOT BE ENOUGH.  PLEASE
UNDERSTAND, THE HESC IS NOT A GRANT OR ANY FORM OF GIVE-AWAY, IT IS
A PROGRAM UNDER WHICH WE LICENSE PRODUCTS AT WHAT WE VIEW (FOR MANY
REASONS) TO BE A ROCK-BOTTOM PRICE.  THIS HAS NOT CHANGED.  HESC IS
TRUE TO ITS ROOTS.
                                      FRED DWYER
                                      IBM ACIS


========================================================================

>From:         "William C Spears, Jr" <CAWCS%LATECH.BITNET@pucc.Princeton.EDU>
>In response to Jerry Bryan's comments / HESC / granularity --- it seems
>that IBM may be moving in the direction that we thought would happen in
>the beginning, that is get us use to using the additional software and
>then simply "pull the plug" although the warning was up front as defined
>by the original rules when joing HESC!!
                -----------------------------------
We are very distressed by your perception.  All I can do is assure you
that IBM continues to support the HESC.  We are in no way ready to
"pull the plug."  As a matter of fact, today's HESC offering provides
to members more security than the original offering.  Now you may retain,
by continuing to pay the group fees, HESC licenses for IBM withdrawn
products, as long as those products are of value to you.  Further,
although not contractually committed, we have instituted a practice
of not withdrawing products from HESC until they are withdrawn from
marketing.  While we cannot assure that such unique HESC withdrawals
will never happen, we have successfully avoided any such withdrawals
for more than 2 years.
                               Fred Dwyer
                               IBM ACIS
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