IBM Rejiggers eServer i5 Pricing

The eServer i5 and p5 product lines may share many technologies, but their packaging and pricing for anything beyond base hardware is going to be unique, based on demand in their respective OS/400 and Unix server markets. Nothing demonstrates this more than the pricing announcements that IBM made last week in the aftermath of the launch of the 16-way i5 Model 570 servers on July 13.

With the exception of the new i5 Model 520 Express configurations, whose prices remain the same, you are going to have to get your head wrapped around a new, multiplatform pricing approach that licenses both i5/OS and the 5250 green-screen processing capability inherent in i5/OS on a per-processor basis. The new i5 pricing will perhaps seem complex at first, but it makes sense when you realize that IBM expects many customers to mix and match i5/OS Standard Edition or i5/OS Enterprise Edition, AIX, and Linux on the same box. In fact, the changes IBM made with last week’s announcement (there is not an announcement letter) for the Model 570 machines, which ship at the end of August, will even allow i5/OS Standard Edition to be activated on a machine that has i5/OS Enterprise Edition on it.

Before I get into the thinking behind the eServer i5 price changes, let’s just go through what IBM has done with pricing over the past few years.

Just like before, you can order a base i5 server running either i5/OS Standard Edition or i5/OS Enterprise Edition. And, just as when IBM made its initial “Squadron” Power5 server announcements on May 3, a machine running the Enterprise Edition costs more than the Standard Edition, because the former has 5250 green-screen capabilities and the latter does not. It has been the case for a decade that, if you want to use 5250 processing capacity, you have to pay for it, and sometimes you have to pay a lot. However, IBM’s pricing for 5250 CPWs has come way down with this announcement, at least for very large machines.

With the past several generations of AS/400 and iSeries machines, IBM put the CFINT 5250 governor on special feature cards that restricted the amount of 5250 processing a server could do; if you wanted to add 5250 CPW processing capacity, you had to buy a different feature, sometimes for tens or hundreds of thousands of dollars. This was what I called the interactive software tax, since it was not really a hardware feature at all (although I am pretty certain IBM booked it that way) but a key that unlocked a software feature. After the Fast400 green-screen governor buster came on the market a few years ago, IBM decided that, with the January 2003 announcements, it would present only two ways to buy OS/400: with no 5250 processing capacity (Standard Edition) or with full 5250 capacity (Enterprise Edition). While it was great that the governors were gone (except on smaller machines, where they are still, even with the i5 Model 520 Express configurations, being used to throttle back 5250 performance), the effect was that customers who might have been able to buy smaller increments of 5250 processing had to take all or nothing. The price on the 5250 capacity came down in January 2003, to be sure, but now customers had to buy more than they might need.

As it turns out, according to Ian Jarman, iSeries product marketing manager, about 98 percent of the AS/400, iSeries, and i5 installed base do not currently need more than about 12,000 CPWs of green-screen processing capacity. IBM may have been building big 32-way Power4 boxes that had three times this capacity, but only a relative minority of customers needed it. With the advent of the Power5 processors, a four-way Model 570 machine using 1.65 GHz cores delivers just under 12,000 CPWs. Customers might need two, three, or four processors of 5250 processing capacity in the Model 570 for their green-screen workloads, and they might want to add other processors to run AIX or Linux, or even non-5250 OS/400 applications, but under the old pricing scheme they would have had to buy an Enterprise Edition license to span all of the processors in the machine. Moreover, with the Model 570 being essentially four four-ways lashed together to look like a big server, IBM could not reasonably charge a customer who bought a two-way Model 570 running Enterprise Edition a full license to that software as if it were going to grow to a 16-way box. Technically, it can, but practically, for most customers, it won’t. Something had to give.

What IBM has done to fix this conundrum is interesting but not simple: it has licensed i5/OS on a per-processor basis and has broken the 5250 capability from the Enterprise Edition license, and now that 5250 capacity is licensed on a per-processor basis, just like i5/OS is. It is, in some cases, more complex than that sounds. (I will explain below.)

Now, I know what many of you are thinking, isn’t this just the CFINT governor in new clothing? Not really, and for two reasons. First, this time around, CFINT is not running in the background, counting how much 5250 processing you are doing and then cutting you off when you hit a limit imposed by an interactive feature. Second, and this is the important part, 5250 processing capacity, as embodied in the new Enterprise Enablement features, is licensed on a per CPU basis but is not tied to any particular processor. If you buy 6,000 CPWs of 5250 processing, it is not quarantined inside a partition. The i5/OS operating system spreads it around the active processors in the box. You may buy four CPUs of 5250 capacity, but it ends up running across six, eight, or more processors in the box. I believe this will help the overall balanced running of the i5 system.

Take a look at the table I created to describe the new i5 pricing. Here is how you buy an eServer i5 now. You buy a base i5 server with either i5/OS Standard Edition or Enterprise Edition. Each base box has a range of processor cores that are in it, from a base number of cores, up to the maximum in the box, which can be activated as needed. Each base machine has a certain number of i5/OS processors licensed as well. In general, the number of cores activated is higher than the number of i5/OS cores licensed. (This, obviously, cannot be true on single-core machines.) For instance, on a base Model 570 server with nine active cores that can be extended to 12 cores (designated as a Model 570 9-12 in my table), only four cores are activated with either i5/OS Standard Edition. You have to figure out what you want to do with those other five cores, then license i5/OS, AIX, or Linux for them, or save them for a rainy day and do nothing. In the case of Enterprise Edition, IBM is activating an extra core processor on Model 570 boxes, which is part of the Enterprise Edition package and is intended to run Linux (although, again, you don’t have to do anything with this extra core).

On Standard Edition machines, there are no Enterprise Enablement features to activate, and if you want to use Enterprise Edition, you have to upgrade. On Enterprise Edition machines, there is a base number of i5/OS Enterprise Enablement features that is either the same as or larger than the base number of i5/OS licenses. (On the two smaller Model 570s, customers are in effect being asked to prepay for one or two cores of green-screen capacity, even if they are not yet using it.)

Having bought the base i5 box with the base processor cores activated, the base i5/OS licenses activated, and the base Enterprise Enablement features activated, you can build from there. To activate a 1.65 GHz core on a Model 570 machine costs $7,700. (It used to be $4,400, but the p5 folks jacked up the price. I was not able to obtain the price for activating a Model 570’s cores using 1.5 GHz processors.) To activate i5/OS on a core costs $45,000, whether you are talking about Standard Edition or Enterprise Edition. AIX 5L 5.2 or 5.3 costs $430 per core on a Model 520 and $1,225 per core on a Model 570. Linux pricing is a bit messy, and that is not really IBM’s fault. A license to Novell‘s SuSE Linux Enterprise Server 9 for one or two cores will cost $798 when it starts shipping on August 31, and you can buy it directly from IBM. Red Hat Enterprise Linux 3 Update 3 will cost $295 for a two-core license, but a license with maintenance support will cost $995.

If you have an i5 box running Enterprise Edition, you can also turn on more green-screen processing capacity; if you are one of the few who needs to go above the Enterprise Enablement 5250 processing level in the base boxes, you activate i5/OS licenses and then can add more 5250 processing capacity. With some boxes, customers have prepaid for this green-screen capability and will have to add as many as three i5/OS licenses to a box, just to hit the peak base Enterprise Enablement capacity. Look at the Model 570 2-4 box. It has three processor cores activated, four Enterprise Enablement features, but only one i5/OS license. It seems a bit crazy, but this way customers can buy this machine and have OS/400, AIX, and Linux on the same box and not have to overpay for i5/OS, even if they have, by my estimation, been overcharged for the green-screen capacity. On any Model 570 box, it costs another $150,000 to activate the Enterprise Enablement feature on one processor core, which is pretty steep. But IBM will activate 5250 on all processors in any Model 570 machine for $250,000. For those few customers who need 30,000 to 45,000 of green-screen oomph, the cost of getting a big box just dropped quite a bit.

A 16-way Model 570 with all cores activated to run i5/OS Enterprise Edition and 5250 Enterprise Enablement features costs $2.16 million, or about $48 per 5250 CPW. Based on past pricing trends, I was expecting a 13-way i5 Model 570 to cost around $2.5 million, or about $70 per 5250 CPW.

To illustrate the benefits of the new pricing scheme against the iSeries Model 8XX, IBM provided me with a table comparing the iSeries Model 890 with the i5 Model 570. With main 64 GB of main memory, the Model 890 with 20 cores fully activated for 5250 processing and running i5/OS Enterprise Edition costs $2.2 million. But a Model 570 with 10 cores activated and nine of them running i5/OS Enterprise Edition costs 39 percent less with 12,000 CPWs of green-screen capacity (but 25,500 of overall capacity activated for other work). With all of the nine i5/OS cores dedicated to green-screen work, the cost of the Model 570 rises to $1.7 million, but that is still 28 percent lower than the cost of the Model 890 that does about the same work.

The question now is whether this will be too complex for the sales reps, business partners, and customers to deal with. My guess is that, given the complexity of Windows and Unix pricing, which is not much friendlier, the fact that the i5 costs less than the iSeries, and allows companies to do more things, will mitigate the fact that this is different and possibly confusing to a lot of people.