IBM Chases HP and Sun Unix Shops with Power Rewards

April 28, 2008 Timothy Prickett Morgan

Seeking to capitalize on the sunsetting of Hewlett-Packard‘s PA-RISC Superdome and HP 9000 machines and to convert the vast base of UltraSparc-II and UltraSparc-III machinery with the Sun Microsystems brand on it, IBM has launched a frequent buyers club marketing program called Power Rewards to try to convert the HP-UX and Solaris bases to Power6-based gear running AIX and/or Linux. The deal offers customers migrations services of a specified cash value based on a point scoring system that is tied to the Sun and HP iron being replaced.

Why can’t IBM just say it is giving away migration services that scale in value based on how much and what kind of Unix iron they trade in? Well, in a way, this program does do that. The complexity of counting points and tying it directly to the replaced iron standardizes on a global scale how sales reps and reseller partners should value the Sun and HP iron in terms of the migration services they will give in trade as they take that iron off the streets. It also gives marketeers something to do and then later brag about. To be sure, if IBM just offered free migrations to customers who bought an equivalent or greater amount of Power6 processing power as the Sun and HP iron they were replacing, they would probably get the same results. But who would be able to take credit for the cleverness of the marketing and sales, then? And to be fair, IBM does need to change things up a bit, and this is at least a different approach to the early 2000s, when IBM took on HP and Sun by having very powerful and relatively inexpensive Power4 iron and starting the discounting at 50 percent off. With IBM relying more heavily on Power Systems sales to boost its sales and profits, Big Blue can’t win deals by discounting that deeply any more. So it has to try less straightforward marketing approaches.

The Power Returns program is meant to resemble the frequent buyer programs created by airlines and popularized by just about any organization selling anything these days. Customers trading in a specific kind of server get a certain level of points per processor core they turn in, and then these points are in turn redeemable for IBM goods and services. (You can see the full list of services on this page.) The deal is not just restricted to the newly constituted Power Systems line, which is based on the Power6 processors–that means the Power 520, Power 550, Power 570, and Power 595–but also applies to System p5 590 and 595 servers running AIX and Linux as well as the System i 595, which are based on Power5 and Power5+ processors; the latter machine runs i5/OS V5R4 or i 6.1 but can also have AIX or Linux partitions.

From IBM’s rhetoric and point scheme, it is safe to say that HP’s aging HP 9000 server base is the primary target. IBM reckons that there are 175,000 of the HP 9000 servers still out there in the world, and the companies who use these machines like Unix, they probably have no intention of moving off Unix, and because HP is mothballing the PA-RISC line of machines this year, they have to make some sort of decision. The odds favor them moving from HP-UX v2 on PA-RISC boxes to HP-UX v3 on Itanium-based Integrity machines, of course, but a certain percentage of customers who are facing a recompilation of their code and the installation of a new platform are willing to make a bigger jump, perhaps to a Power Systems box running AIX 6.1, for instance. So that is why IBM is giving 4,000 Power Rewards points per core for PA-RISC machines that are replaced by Power Systems gear, compared to 1,000 points per core for SPARC, Itanium, Alpha, and MIPS machines. (While IBM does not say it, the MIPS chip implies that the deal also applies to Irix-based servers from Silicon Graphics.)

If IBM was as aggressive about chasing the Sun base, it would perhaps have given 2,000 points per core, or maybe the same 4,000 points for UltraSparc-III, UltraSparc-IV, UltraSparc-IV+, and Sparc64 VI processors. The latter three chips are all dual-core processors with a respectable amount of processing capacity–enough to warrant at least 2,000 points as reckoned against the PA-RISC chips, and if you want to be fair about it, the UltraSparc-IV+ and Sparc64 VI chips should be worth maybe 8,000 points. But, IBM sets the rules, and it even warns customers that it can change its mind at any time about the points for a given core. I think that as IBM sees demand wane for this offering in the HP 9000 base it will jack up the Power Reward points for real Sparc processors–particularly after it gets through the Power6 ramp and wants to go after Sun shops that were hoping to see UltraSparc RK “Rock” chips and their “Supernova” servers at the end of 2008 and who have been told they have to wait until the second half of 2009 for these machines to appear. When IBM has Power6 chips in volume–and I do not believe that this has happened yet, even if you consider that Power6 was probably supposed to be here in September or October 2006–you can bet that it will ratchet up the marketing on this and other programs to try to find the several hundred big Sun customers worldwide who are willing to switch. There are billions of dollars at stake here. I do not think that IBM will offer a lot of points for the new multicore Sparc T1, T2, and T2+ systems, since each core in those eight-core chips does relatively little work. But IBM could surprise us and offer 4,000 Power Reward points on these machines.

Anyway, having traded in the HP, Sun, or SGI Unix iron (and presumably OpenVMS for the Alpha-based AlphaServer line also being mothballed by HP at this time), IBM has a list of 35 different products or services that burn anywhere from 1,000 to 95,000 points. These range from a low of 1,000 points for two processors’ worth of IBM’s Tivoli Enterprise Edition system management tools to migration workshops and services, to performance tuning, PowerVM hypervisor implementation, high availability assessment and workshops, data center thermal analysis, and various other “green” services to help data center managers cope with power, cooling, and performance issues. The key service, as far as Sun and HP Unix shops are concerned, is the 40-hour block of migration services, which burns 15,000 points. As an example of how it works, IBM said that a 64-core HP 9000 Superdome machine would earn 256,000 points, which would then rack up enough points to cover 680 hours of these migration services; the company added that hiring experienced IBM consultants for such work for that amount of time would have a list price of $255,000, which works out to $375 per hour.

One more thing: IBM has capped the amount of points you can earn by acquiring the new system to 50 percent of the unit value of price of the new system. So, for instance, if you buy a base Power 595 for $1.5 million, you can only earn a maximum of 750,000 points on whatever Sun, HP, or SGI iron you trade in.

IBM and its business partners are both able to sell the Power Rewards offering, and customers have 90 days to turn in the old gear after they install the new Power Systems or predecessor System i or System p iron. IBM says that this deal cannot be combined with any other offerings. If a big HP Superdome or Sun Enterprise server account is at stake, or maybe even a midrange one at a hungry reseller, I do not believe that for even a microsecond.

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