IBM Offers Upgrade and Trade-In Promotions to Bolster System i Sales

May 29, 2007 Timothy Prickett Morgan

With new user-priced System i 515 and 525 boxes out the door a month and a half ago to address the entry server market and no expectation of a revamping of the System i line with the Power6 processors until early 2008–unless, of course, market conditions force IBM to change its plans–the company last week announced a number of promotions that are designed to lower the cost of buying a modern System i and get customers to spend now rather than later.

The upgrade and trade-in promotion deals that IBM announced concurrently with the launch of the first Power6-based server–a System p 570 AIX box, as it turns out, but no System i variant as yet–are ones that are familiar in structure to deals gone by.

The System i Upgrade Promotion expires on November 16. It offers customers who upgrade from specific iSeries Model 810 and 825 servers to specific i5 520, 525, and 550 servers a rebate that varies not only depending on the machines involved in the deal, but also by when the customer does the deal. Customers who do an upgrade between now and September 30, which is the end of the third quarter of this year, get slightly higher rebates than they would if they do a deal between October 1 and November 16. Here’s the way the deal works out for those who do an upgrade before the end of September:

System i Upgrade Promotion
Upgrade from May 22 through September 30
Upgrade From:		Upgrade To:			Rebate Amount
Model	Feature	Description	Model	Feature	U.S.	Canada
810	7404	System i5 520	520	7784	$8,250	$9,600
810	7407	Standard Edition	520	7785	$9,000	$10,500

810	7412	System i5 520	520	7736	$22,600	$26,300
810	7430	Enterprise Edition	520	7736	$14,000	$16,300

810	7409	System i5 525	525	7792	$9,000	$10,500
		Express (Config #3)

810	7410 or	System i5 550	550	7154	$10,350	$12,000
	7428	Standard Edition
825	7416		550	7154	$10,350	$12,000

810	7406 or	System i5 550	550	7155	$29,000	$33,700
	7409 or	Enterprise Edition
	7412 or
	7340
825	7418		550	7155	$29,000	$33,700

And if you wait longer than that, the amount of cash that IBM or its reseller partners will slap back into your palm after the deal goes down drops by 15 percent, like this:

System i Upgrade Promotion
Upgrade from May 22 through September 30
Upgrade From:		Upgrade To:			Rebate Amount
Model	Feature	Description	Model	Feature	U.S.	Canada
810	7404	System i5 520	520	7784	$7,000	$8,100
810	7407	Standard Edition	520	7785	$7,750	$9,000

810	7412	System i5 520	520	7736	$19,250	$22,400
810	7430	Enterprise Edition	520	7736	$12,000	$14,000

810	7409	System i5 525	525	7792	$7,750	$9,000
		Express (Config #3)

810	7410 or	System i5 550	550	7154	$8,750	$10,200
	7428	Standard Edition
825	7416		550	7154	$8,750	$10,200

810	7406 or	System i5 550	550	7155	$24,750	$28,800
	7409 or	Enterprise Edition
	7412 or
	7430
825	7418		550	7155	$24,750	$28,800

State and local governments as well as commercial customers using iSeries 810 and 825 servers can participate in this upgrade promotion; federal government customers have to call their IBM reps to find out.

IBM also last week modified another trade-in rebate promotion that it put on the books on April 10, when the user-priced i5 515 and 525 servers were launched. The main modification in this deal is that IBM added the i5 525 to the list of eligible machines.

As I explained back in April, the AS/400 and iSeries to System i5 Trade-In Promotion is a deal that IBM keeps on bringing back to the bargaining table, so presumably this tactic works. Here’s how: Customers who have a vintage box can get a rebate of X dollars if they buy a new IBM midrange box within the current fiscal quarter, and if they wait to do it in the next quarter, they are told ahead of time that they will get a rebate that is substantially smaller than X. The rebate is based on the fair market value of the vintage server plus an additional incentive, according to IBM. The designated replaced machines in the trade-in promotion announced last week include the AS/400e 6XX, SXX, and 7XX servers from the late 1990s as well as the AS/400 50S or 53S Advanced Servers or the AS/400 500, 510, and 530 Advanced Systems that preceded them to market in the summer of 1995 as the first Power-based AS/400s. Customers with first-generation iSeries 250, 270, 820, 830, or 840 machines can also participate in this rebate promotion.

Anyway, here’s how the rebates stack up. The i5 525 is an unlimited user box, by the way:

AS/400 and iSeries to System i5 Trade-In Deal
After May 22 but before June 30
Acquired	Spending	i5 List	Credit	Base	Approx
i5 Machine	Requirement	Price	Amount	Discount	Discount
i5 520 (7734)	Less than $88,000	$50,500	$5,400	10.7%
	$88,000 or More		$7,200	14.3%	8.2%
i5 525	Less than $113,000	$79,900	$12,300	15.4%
	$113,000 or More		$16,950	21.2%	15.0%
i5 520 (7735)	Less than $165,000	$92,900	$9,150	9.8%
	$165,000 or More		$12,900	13.9%	7.8%
i5 520 (7736)	Less than $272,000	$129,900	$12,300	9.5%
	$272,000 or More		$16,950	13.0%	6.2%
i5 550 (7155)	Less than $340,000	$220,000	$50,000	22.7%
	$340,000 or More		$65,000	29.5%	19.1%

And here is how it looks if you wait too long:

AS/400 and iSeries to System i5 Trade-In Deal
After July 1 but Before September 30
Acquired	Spending	i5 List	Credit	Base	Approx
i5 Machine	Requirement	Price	Amount	Discount	Discount
i5 520 (7734)	Less than $88,000	$50,500	$4,500	8.9%
	$88,000 or More		$6,000	11.9%	6.8%
i5 525	Less than $113,000	$79,900	$9,750	12.2%
	$113,000 or More		$13,500	16.9%	11.9%
i5 520 (7735)	Less than $165,000	$92,900	$7,500	8.1%
	$165,000 or More		$10,500	11.3%	6.4%
i5 520 (7736)	Less than $272,000	$129,900	$9,750	7.5%
	$272,000 or More		$13,500	10.4%	5.0%
i5 550 (7155)	Less than $340,000	$220,000	$35,000	15.9%
	$340,000 or More		$50,000	22.7%	14.7%

One more thing. The base discount that I calculated in the two tables above describing the trade-in rebate promotion is the list price of the new i5 server in a bare-bones configuration–no memory or disk. So this is not the effective discount customers will get based on the rebate, since they have to buy other stuff. The approximate discount shown in the table is how you game this deal: You spend the bare minimum to get the higher rebate amount, and in this case, I divided the cusp spending limit–in the first case $88,000– by the higher rebate amount. Any dollar you spend beyond this point does not in any way increase the rebate, and once you are kissing up against this cusp spending limit, you might as well go over by $1 and get the higher rebate.

IBM also added the new i5 525 server to an existing promotion that allowed customers buying a new i5 box or upgrading to one who also bought a Capacity BackUp (CBU) variant of the i5 machine for disaster recovery and high availability another set of rebates. Under this deal customers who buy an i5 520, 550, or 570 server with i5/OS Enterprise Edition on it (or upgrade to one) and who buy a CBU box that is suitable for it get rebates that range from $3,300 to $29,500, depending on the processing capacity of the machines in question. This deal was originally announced on January 30, and the deal has to close so IBM can send an invoice by August 15 to get the rebate.

Finally, IBM also announced that it has extended its no-charge removal deal for vintage System/36, AS/400, and iSeries iron–yes, with some of these iSeries machines being seven or more years old now, they, too are vintage boxes–to include customers who buy the new user-priced System i 515 and 525 servers. As this deal’s name suggests, IBM comes around and takes away the old iron at its cost as part of the acquisition of a new box. Customers could already buy regular i5 520, 550, 570, and 595 servers and get the old kit removed for free.

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