OpenPowers Prove IBM Can Do Puppy i5s

If you like IBM‘s Power5 hardware, which has about as much horsepower under the skins as any server out there, and you like Linux, you are probably going to like the new line of Linux-only servers from IBM, called the eServer OpenPower machines. And if you like the OS/400 platform, like I do, you will probably be wondering why IBM can’t give such a great deal as it has with the OpenPowers on puppy OS/400 servers.

Putting out the OpenServer machines, as IBM did last week, makes perfect sense. The OpenPowers have something approaching X86 prices for what is arguably midrange OS/400-Unix iron. IBM hopes the OpenPower machines will kickstart customer and ISV enthusiasm for running Linux applications on IBM’s Power architecture. Big Blue is hoping that it can ride up the Linux wave and boost the volumes of its Power5 machines as it gets tougher to boost volumes in the RISC/Unix market. This is all well and good. But the OpenServers may make AIX customers feel a little chilly, and OS/400 shops feeling left out in the cold.

IBM has offered Linux as an operating system option on its pSeries Power4 server line for more than a year, and has been offering Linux within logical partitions on its iSeries line for several years. The OpenPowers are a little bit different, in that IBM is actually creating a machine that has an intentionally lower price and that will be restricted to running only Linux operating systems from Red Hat or Novell and applications compiled for Linux.

The reasons IBM has decided to launch a Linux-only Power server line (something we heard about as a possibility more than a year ago) with very aggressive pricing, compared with the i5 and p5 lines (which are based on the same exact hardware), are complex. First of all, now that rivals Sun Microsystems and Hewlett-Packard have sorted out their Unix server strategies (at least compared with two years ago, when Sun was living in denial and HP was in the midst of explaining its consolidation strategy in the wake of the Compaq acquisition), it is harder to make a RISC/Unix deal solely based on the price of the hardware. HP and Sun, especially now that the Integrity line has been fleshed out top to bottom and Sun has embraced the Opteron processors in its entry and midrange Sun Fire line, more or less have sensible platform plans and pricing in the Unix space. Unfortunately, now that Linux 2.4 is well accepted as good enough to do many Unix-style jobs, the Unix market is eyeing Lintel iron as a replacement for aging RISC/Unix iron. The advent of Linux 2.6, which is more scalable, reliable, and usable (thanks in large measure to a better job scheduler and workload manager), only makes Linux an easier sell to Unix shops that gasp at the high prices Unix vendors charge for their RISC hardware and Unix operating systems.

According to Jim McGaughan, director of eServer strategy at IBM, the OpenPower line is starting with a 4U, OpenPower 720 machine today, which comes with single core, dual core, and quad core options. (The Power5 chip has two Power cores, and a Model 720 can have one or two Power5 chip modules, depending on the configuration.) McGaughan says that IBM will deliver a 2U form factor Power5 machine early next year (probably with one- or two-core options). If the market demands it, IBM could easily create a broader line of OpenPower machines that span from one Power5 core to as many as 64, which is what the future p5 590 server, due any day now, will offer IBM’s Unix customers. If IBM needed to create a low-powered Linux box, it could even slug the Power5 chips, activating only one core and clocking it at half or even one-quarter speed (as it does within the eServer i5 line), and delivering an even lower performance and price point into the Linux market. On the other end of the spectrum, Linux 2.6 scales pretty well to 16-way SMP processing, and Linux applications are probably not able to scale much beyond eight-way SMP, so an eight-way OpenPower box is probably the practical and necessary top-end limit for such a Linux-only server. Just as is the case for 32-bit and 64-bit X86 iron, by the way.

With the OpenPower machines, no matter how far up or down IBM scales them, Big Blue is trying to create a new hybrid RISC/Linux option that shoots the gap between Lintel iron and RISC/Unix iron, offering Unix performance with pricing that approaches that of the higher-volume Linux on X86 platforms. “The chatter from our competition preceding this announcement has been quite high,” says McGaughan. “And the sweet spot in this market is for two-way servers. We know it, and they know it.” You might think IBM would have launched a two-way server first then, but getting the Power5 chips down to a 2U form factor is not an easy feat, and it will take a little time. “The OpenPower line introduces some really interesting dynamics for the industry, and IBM knows now, unlike it might have a decade ago, that you get a one-time shot at these markets. That is why we are coming out with guns blazing.” As for self-impact, he says IBM is well aware that this is going to happen, that some customers who might have bought an AIX platform will now buy and OpenPower and choose Linux. He quoted the old adage in IT: if you don’t eat your own lunch, someone else will.

The OpenPower 720 comes in three variants, which will be available on September 24. The base machine has a single 1.5GHz Power5 core activated, and it can only have one core activated even though technically the Power5 frame can support two chips and four cores. (IBM is probably making use of Power5 chips where half of the chip doesn’t work.) For $5,000, this base machine comes with 512 MB of main memory, a single 36 GB disk (10K RPM), redundant power and cooling, and an enclosure for holding four SCSI disk drives. The two-way OpenPower 720 box can use either 1.5 GHz or 1.65 GHz Power5 cores and comes with 1 GB of main memory and a 36 GB disk; with two 1.5 GHz cores, this machine costs $8,000, and with two 1.65 GHz cores, it costs $9,250. It costs another $5,500 to add another Power5 module with two 1.5 GHz cores turned on and another $6,750 to add two 1.65 GHz cores. Perhaps most startling, IBM is charging a lot less money for the exact same main memory and disk drives in the OpenPower boxes as it charges for the i5 and p5 variants of the machines. Main memory costs from $640 for a 1GB DIMM (42 percent cheaper than on the i5 and p5) to $2,800 for a 4 GB DIMM (21 percent cheaper). 10K RPM disk drives range in price from $275 for a 36 GB disk to $699 for a 146 GB disk. IBM is charging between 63 and 69 percent less for these disks than it does for i5 and p5 machines, and with 15K RPM disks, IBM has slashed the prices by 72 to 74 percent.

So how do these OpenPower server prices stack up to compare to configured IBM eServer p5 and i5 machines? Let’s do the p5s first, since it is a cleaner comparison. A two-way p5 Model 520 with 1.65 GHz cores, 2 GB of main memory, and a 36 GB drive costs $10,800, compared to $9,760 for an OpenPower 720 with the same configuration. (These prices do not include an operating system.) Both of these machines come with standard logical partitioning (where the granularity only goes down to the core level). Both OpenPower and p5 customers have to buy the advanced Virtualization Engine features–which offer micropartitioning of up to 10 partitions per CPU plus virtualized I/O and LAN support–separately. It costs a flat $2,000 on the OpenPower machines, and $590 per CPU on the p5 machines in this same four-way power class. An eServer p5 Model 550 with two 1.65 GHz cores, 4 GB of main memory, and two 73 GB disks sells for $20,540, but a similarly configured OpenPower 720 will only have to pay $11,625 for the same iron. In a four-way configuration using 1.65 GHz cores, a p5 550 with 8 GB of memory and two 73 GB disks costs $32,487, while the OpenPower 720 with the same specs costs $20,675.

There is no way to compare raw i5 iron to the OpenPower iron since the entry i5 Model 520 Express machines come with an operating system, a database, and a fixed amount of green-screen processing power. But you can back out of it another way. If you configure a similar two-way i5 Model 550, you can see what the real premium IBM is charging for the use of i5/OS V5R3 and DB2/400. An i5 Model 550 with two 1.65GHz Power5 cores activated, 4 GB of main memory, and 146 GB of disk, running OS/400 Standard Edition with no interactive processing capacity but having DB2/400 integrated, costs $126,350. The same exact iron in the OpenPower 720 line costs $11,625 without an operating system, and $13,625 with the Virtualization Engine partitioning features. While IBM will say that some of that price difference has to do with lower CPU, memory, and disk costs IBM has for the OpenPowers, that is nonsense. What is really going on is that IBM is charging an extra $112,725 to run i5/OS and DB2/400 on the same exact server. And if you want to use 5250 green-screen processing capacity on the same box, you have to install i5/OS V5R3 on that same server, which costs an additional $292,000. Assuming that IBM makes no money on the OpenPower box in this comparison and assuming that i5/OS probably only costs IBM a few grand to make and support (say $400 per CPU for i5/OS and $2,500 per CPU for DB2/400), that would seem to imply that the gross profits on an i5 Model 550 with two processors and full-on green-screen capability are in the range of 97 percent. Think about that for a minute. For every i5 Model 550 IBM sells, it can subsidize about four OpenPower 720s and still turn roughly 20 percent gross profit on all five servers.

Linux costs come nowhere near these bundled i5/OS and DB/400 levels, in part because IBM has special discount deals with Red Hat and Novell to get commercial Linux on these machines (as well as on the i5 and p5) at lower prices than is available directly from these vendors. You can get SuSE Linux Enterprise Server 9 (which is the level supported on the Power5 boxes) through IBM for $689 for a system that has up to two processors, and for $1,299 for any system that spans from 1 to 16 processors. Unlike Novell, Red Hat doesn’t charge per system (regardless of the number of partitions), but per Linux instance on a server within partitions, even if there is only one partition (meaning it is in effect an SMP server). Through IBM, you can get Red Hat Enterprise Linux AS 3 Update 3 (which is required on the Power5 machines) for $995 on a two-way machine or partition and for $1,295 on a partition or machine that spans up to an eight-way instance. McGaughan says that IBM will launch its own electronic technical support service in conjunction with Red Hat and Novell, probably sometime in the fourth quarter, so IBM’s customers can get the same one-contact with Global Services for support for Linux as they get for OS/400 and AIX. (Red Hat and Novell are backing up theses offerings with Level 3 support, just as they do for similar HP services.)

By the way, there is some nonsense talk going around that the Power5-Linux boxes do not have any applications. The truth is, IBM has about 600 Linux applications available for Power-Linux, which compares decently to the 750 applications in the Red Hat-on-X86 portfolio or even the Itanium portfolio, which had about 400 applications spanning Windows, Linux, and Unix by the end of 2003. McGaughan says that any PowerPC or Power4 Linux application can run on the Power5 machines with the exception of applications specifically compiled to take advantage of the VMX vector co-processor in the PowerPC 970 processors used in IBM’s BladeCenter blade servers. Any Power-Linux application that does not use these VMX functions will run even on the PowerPC 970.

What the OpenPower announcement makes clear is that i5 and p5 customers are being asked to subsidize IBM’s aggressive moves into the Linux space, much as OS/400 shops have subsidized IBM’s aggressive moves into the Unix market since 1997. The OpenPower announcement is great news for IBM’s potential Linux customers, but is maybe not so great for the midrange shops who are not getting such favorable pricing for their Power5 hardware. But IBM has to do something to pump up Linux on Power specifically and Power server volumes generally, and this is a good tactic even if it is not particularly fair (whatever on earth that might mean in the business world).

The fact is, in today’s the server business, there are a number of different ways that server makers can differentiate their products. One way is to create a single server hardware platform that supports as many different operating system platforms as is technically feasible and economically practical. This is the method HP is using to champion its Integrity line of Itanium servers (which support Windows, Linux, Unix, and soon OpenVMS); similarly, IBM has used a multiple OS approach to prop up sales of its zSeries mainframes (which support a number of mainframe operating systems plus Linux and an AIX runtime environment) and its iSeries midrange gear (which have run OS/400 and Linux for years and which now support AIX with the eServer i5 machines launched in May).

The other approach to differentiation is the one that IBM has taken with the eServer line in a broader sense with the “Squadron” Power5 servers. IBM is creating versions of the Power5 frames that are based on exactly the same hardware, but differ from each other in operating system options, microcode and partitioning features, and pricing. The eServer i5 Model 550, the eServer p5 550, and the OpenPower 720 are all based on the exact same hardware, but they are sold with very different options on top of that hardware with very different pricing. And you cannot “upgrade” from one box into another. You have to make your platform choice ahead of time, and live with it.

With the HP Integrity approach, you get an economic value (which is hard to quantify) in that you can run a number of different operating system platforms on the same box either at the same time or in a series over the course of the technical and economic life of that server. HP charges a pretty hefty premium for this multi-OS capability, which is the hallmark of its Integrity line, compared to what it charges for processing capacity on its ProLiant X86 server line. With the IBM eServer approach, IBM has been selling the same essential hardware with prices that depend on how you use it. IBM used to discriminate against AS/400 and iSeries customers who were buying PowerPC or Power4 iron compared to the cheaper RS/6000 and pSeries iron based on exactly the same hardware. With the Power5 line, IBM has locked the i5 and p5 hardware prices, and is differentiating at the software level. OS/400 has legacy green-screen application support and an integrated database, and IBM charges a very hefty premium for these capabilities, which it can do since it has a monopoly on machines that support RPG and COBOL applications that run atop of the DB2/400 database. With the Power5 launch this year, IBM has shifted all of the premium it used to charge for AS/400 and iSeries servers into the new i5/OS operating system. Now, AIX has become a sort of legacy environment of its own (as has HP’s PA-RISC machines running AIX and Sun’s UltraSparc-III and UltraSparc-IV platforms running Solaris), and IBM is compelled to charge a premium for Power5 iron running even AIX–at least compared to that upstart, Linux.

Like Unix was the price/performance driver of the 1990s, Linux is shaping up to be the catalyst for the biggest bang for the buck in the 2000s.