Analyzing tricks competitors play – making the claim that list price comparisons are misleading

Red Hat JBoss Middleware offers customers economically attractive subscription fees compared to many competitors who price middleware based on upfront license fees and ongoing support costs. Multiple public Red Hat papers have presented price comparisons that present conclusions such as:

  • Red Hat JBoss Enterprise Application platform is 6.17% the cost of IBM WebSphere Application Server Network Deployment Edition1
  • Red Hat JBoss Enterprise Application platform is 7.8% the cost of Oracle WebLogic Server Enterprise Edition 12c2
  • Red Hat JBoss Data Grid is 16.7% the cost of Oracle Coherence Grid Edition3
  • How a Red Hat JBoss Enterprise BRMS subscription is millions less than the cost of IBM WebSphere Operational Decision Manager4

The above is just a partial list of available papers that compare Red Hat JBoss Middleware products with various competitive products. Within the papers that cite public competitors price lists, Red Hat JBoss Middleware annual subscription fees are consistently lower than competitor upfront license and ongoing support costs. The consistent Red Hat price advantage has resulted in several competitors publishing documents that propose alternate views of pricing scenarios. At times the math and pricing scenarios found in competitor documents and blog posts can be interesting to analyze. This article looks at the claim some Red Hat competitors have implied that comparing list prices is misleading.

 

I have always been entertained by the argument that comparing list prices is misleading. If list prices are meaningless, then why publish them in the first price? Is it just to set an inflated baseline to accommodate traditions of license discounting in the software industry? I can’t say for certain since I am not a professional price analyst. But for the purposes of this article, lets assume that list price discounting exists and bypass a debate on why. With that in mind, would you give a second thought to a vendor saying “for comparison purposes, lets use the same discount for us and Red Hat”? Perhaps not. Frankly, I would recommend asking for the biggest license discount possible from a Red Hat competitor.

Lets look at a discounting example. In the Red Hat competitive review titled “Red Hat JBoss BRMS 6 compared to IBM Operation Decision Manager 8.5.1”5, the 2-year license and support costs for IBM Operational Decision Manager at list price is calculated to be $5,644,800. The comparable Red Hat JBoss BRMS premium subscription6 prices out to just $72,000 for the same period. Lets say that you could get IBM to knock 20% of list price. That calculates to a big number savings of $1,128,960! But does such an eye popping discount mean real savings? Look at the discount a little differently. The IBM discount described would pay for just over 500 cores of a Red Hat JBoss BRMS managed premium subscription. And that is on a price comparison for just 16 cores of IBM Operation Decision Manager 8.5.1 running on Intel servers rated at 100 PVU per core.

Now not all competitor discounts will be as big as just presented. However, it is a good idea to check and see if the competitor “discount” is more than the annual Red Hat subscription being proposed.

In another example, an IBMer published a spreadsheet in the summer of 2014 that proposes a price comparison between IBM WebSphere MQ and Red Hat JBoss A-MQ.7 By default, the IBMer spreadsheet applies a 30% discount to both IBM and Red Hat. However, the IBM list price represents a larger cost basis for calculation than the JBoss A-MQ price. Thus, when comparing 2-years of IBM list price license along with subscription and support costs for 16 cores on Intel servers rated at 100 PVU per core, Red Hat JBoss A-MQ is 27.27% the cost of IBM MQ and 13.24% the cost of IBM MQ Advanced.8 That makes the cost basis for applying a 30% discount far lower for Red Hat than for IBM. Over 2-years, a 30% IBM discount for IBM MQ is $47,520, and $97,920 for IBM MQ Advanced. For Red Hat, the 30% discount would only be $12,960. But again, as in the previous example, the IBM “discount” is more money than a Red Hat JBoss Middleware subscription at list price. In this case, the “discount” for IBM MQ or MQ Advanced is more than a list price subscription for 2 years of a managed premium Red Hat JBoss A-MQ. When you look at it like that, where is the IBM “discount” savings?

This article has taken a quick look at the claim I have seen some Red Hat JBoss Middleware competitors make that list price comparisons are misleading. Is list price alone the only factor you should use when comparing the pricing of two competitive products. No, and in future articles I will explore more factors that I have seen competitors propose be used. I find some of those factors to have a shred of validity to them, and others to just be good for a chuckle and roll of the eyes.

What do you think? Please feel free to provide feedback on this article.

1“A comparison of JBoss EAP and WebSphere Application Server.” Red Hat. Red Hat, n.d. Web. 21 Oct. 2014. <https://engage.redhat.com/forms/eap-v-websphere>.

2“Application Platforms: Red Hat versus Oracle.” Red Hat. Red Hat, n.d. Web. 21 Oct. 2014. <https://engage.redhat.com/forms/eap-v-weblogic>.

3“Red Hat JBoss Data Grid 6.2 compared to Oracle Coherence Grid Edition 12.1.2.” Red Hat. Red Hat, n.d. Web. 21 Oct. 2014. <http://www.redhat.com/en/resources/jboss-dg-62-compared-to-oracle-cge-1212>.

4“Competitive brief: JBoss Enterprise BRMS versus IBM WebSphere Operational Decision Manager.” Red Hat. Red Hat, n.d. Web. 21 Oct. 2014. <http://www.redhat.com/en/resources/brms-vs-ilog>.

5Ibid 4.

6A defined in in the paper cited in footnote 4

7Kharkovski, Roman. “WMQ pricing vs JBoss A-MQ – Google Sheets.” WMQ pricing vs JBoss A-MQ – Google Sheets. N.p., 31 July 2014. Web. 21 Oct. 2014. <https://docs.google.com/spreadsheets/d/1ceT-YAWdWSZd3vMMdjMfc–E6DDFvaudhvzQkwPv6Eg/edit#gid=514909859>.

8Ibid 6 for IBM pricing. Red Hat pricing is based on a 16 core Red Hat JBoss A-MQ with Management, 16 Core Premium subscription priced at $21,600

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