For The Love Of Labor

Sun Microsystems (Santa Clara, Calif.) announced that American Express (New York) would use its enterprise middleware to help the company develop portal applications and enhance its identity management services.

Amex's licensing cost is pegged to the number of its employees. Thus, if and when productivity enhancements allow the employees of American Express to serve a greater number of customers, the cost of its middleware will stay about the same – which is quite unlike pricing models pegged to the number of customers, processors or other metrics. "We have a deterministic pricing model," explains Donna Rubin, senior director, worldwide financial services partner and industry marketing, Sun Microsystems.

Per-employee pricing, which Rubin describes as a "breakway business pricing model," does have its obvious advantages for companies that plan to increase their customer-to-employee ratio, whether they do so by reducing headcount, entering new markets, acquiring customers or finding organic growth. Per-customer pricing, on the other hand, turns software providers into partners on the upside, which could, on the margins, have a negative impact on growth decisions.

Early adoptors of Sun's per-employee pricing have done rather well. When pricing for the Sun Java Enterprise System (JES) was announced in 2004, the enterprise license was set to $100 per employee/year, with a cumulative five-percent price cap on annual renewals. Now, less than two years later, American Express signed its deal with Sun for a reported $140 per employee/year for its approximately 70,000 employees.

Rubin is quick to point out that today's customers are getting a lot more software for their money, including several identity management components: two-factor authentication, single sign-on, and support for federated identity. Also, Sun recently acquired business integration provider SeeBeyond and is integrating the SeeBeyond ICAN suite into JES as the "Sun Java Integration Suite." This will better enable companies to embark upon technology strategies using Service-Oriented Architectures (SOAs).

American Express has been an innovative negotiator for IT services in the past. For example, in its seven-year, $4 billion-dollar deal with IBM announced in March 2002, American Express was given an "a la carte" menu of IT services, with the freedom to choose the types and amounts of services it wanted. At the time of the deal, former Amex CIO Glen Salow remarked, "Think of it like an electric utility. No matter how much or how little you use, it will be there, and that's what you'll pay for."

Salow is now executive vice president of technology at Amex spin-off Ameriprise Financial (Minneapolis) and has been succeeded by Stephen Squeri as executive vice president and CIO at Amex. Squeri, a 20-year employee at the company, was formerly president of American Express' Global Commercial Card group.

See also:
American Express Signs On With Sun Microsystems
By Charles Babcock, InformationWeek
January 26, 2006