IBM Offers System i Blade Deal, Nixes i5 550 in Upgrade Deal

October 8, 2007 Timothy Prickett Morgan

The fourth quarter is now well under way, and if there is one thing that is surprising right now, it is the dearth of special deals from IBM to help bolster sales of the System i. IBM likes to close the year on a high note, and the fourth quarter has often been a very good one for the AS/400, iSeries, and System i family of machines. In no small measure thanks to wheeling and dealing by IBM and its reseller channel, which pushes the vast majority of System i machinery.

It is hard to say why more System i deals have not been announced. IBM and its partners could believe that prices are low enough (and so are margins) that there is no way to cut prices, even if there might be a competitive need. IBM might be biding its time until a fully fleshed Power6 product line comes out, and the lack of price cuts on existing gear would normally suggest that new gear is imminent. But, we know that new Power6 iron, excepting a Power6-based blade server that is expected to be shipping before the end of the year, is not coming out until early 2008–perhaps February, maybe March, and maybe as early as late January if fourth quarter 2007 sales are down. If a Power6 refresh of the System i line was imminent, IBM would have been selling Power5+ System i machines under lots of different deals in the preceding couple of quarters. IBM seems to have chosen to rush a Power6-based System p and System i 570 machine out the door (which spans from 2 to 16 cores) using modified versions of AIX and i5/OS that do not yet fully exploit the Power6 iron to satisfy its midrange and some of its high-end customers. And on the System i 570 using the Power6 chip (and again, IBM, I wish you had simply called this the System i 576 or 670 or something else so we could talk about it quickly and easily), IBM has a more granular pricing mechanism that radically reduces software costs for many customers, particularly those who want to mix i5/OS, AIX, and Linux. Throw in the user-priced System i 515 and 525 machines, which are still being pondered by the entry portion of the market, and you can see how IBM might be thinking it has its bases covered.

We’ll see, sometime in January 2008.

In the meantime, IBM did add a new System i-related deal last week, and updated another existing one.

After having delivered iSCSI links between outboard servers and the storage under the skins of the System i server, IBM has been trying to get i5/OS shops interested in using BladeCenter blade servers as auxiliary processors for hybrid i5/OS-Windows workloads and to run Windows infrastructure workloads, too. The new deal announced on October 2 is for customers who buy a new System i configuration, a model conversion to a System i machine, or an upgrade for an existing System i machine. Customers who spend $150,000 in the United States or $220,000 Canadian in Canada will get a free BladeCenter configuration. Customers have to buy a new System i 520, 525, 550, 570, or 595 with two iSCSI host bus adapter cards (either the copper or fiber ones, which cost $999 and $1,599, respectively). Customers can convert from second-generation iSeries 8XX machines (810, 825, 870, and 890) to current System i boxes (520, 525, 550, 570, and 590). And shops with existing 520, 525, 550, 570, and 590 machines can upgrade their processors, memory, and disks to take part in the deal as well. Having done that and spent the requisite amount of dough, IBM will give the customer a new BladeCenter H chassis with two Gigabit Ethernet switches made by Nortel Networks and two HS21 blade servers, each with a single dual-core Xeon 5140 processor running at 2.33 GHz and with 2 GB of main memory. The blades are configured with QLogic iSCSI daughter cards that can link back to the System i disk arrays and be used as storage. The BladeCenter H chassis with the two switches and power supplies has a list price of $4,027 on IBM’s Web store, while the blade servers cost $2,621 each right now (and are on sale as well). So IBM is throwing in $9,269 worth of BladeCenter iron for companies that spend $150,000 on System i iron. That’s a 6.2 percent discount off the System i spending if you planned to buy a BladeCenter anyway.

Here’s one thing about this deal I don’t like. With the Canadian Looney and the American Greenback trading at a one-to-one ratio as of last week, it seems kind of unfair to expect Canadian companies to spend a lot more to take part in a deal than their U.S. counterparts. IBM is still stuck in a world where the Canadian dollar was worth under 80 cents to the U.S. dollar–and that was a long, long time ago. Canadian firms should point this out to IBM and its partners and should only have to do a deal that is as large as U.S. firms are required to do. Anything else is not fair.

In addition to the free blade server deal announced last week, IBM also tweaked an existing deal that expires on November 16. This deal, which gives customers rebates based on upgrading from entry iSeries 8XX machines to System i 5XX boxes, came out with the launch of the Power6-based System i 570 server back in May and included upgrade paths into the user-priced i5 525. The top-end machine in this deal was the i5 550. As of last week, i5 550 machines with i5/OS Standard Edition or Enterprise Edition are no longer part of the deal. So if you have an iSeries 825, you cannot upgrade under this deal (since there is no upgrade path to the i5 525), which means the deal is relegated only to iSeries 810 machines, which have to be upgraded to i5 520 or i5 525 machines now. Since September 30, the rebate levels have dropped, and now the range is from $7,000 to $12,000. If you haven’t figured it out yet, IBM really wants customers to get the i5 525, not the i5 550.

The AS/400 and iSeries to System i5 Trade-In Promotion, which was discussed in the same article back in May, expired on September 30. If I had to bet Sam Palmisano’s last dollar, I would bet this broader trade-in deal announced back in May is revived with slightly different terms before the end of October–particularly if System i sales stall as customers anticipate new bladed i5/OS servers.

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