IBM i Gets Pressure from Microsoft’s Small Biz Server 2011

November 8, 2010 Timothy Prickett Morgan

I have said it before, and I will say it again. The basic concepts of the Smart Cube server appliance, launched by Big Blue without much fanfare two years ago based on Power Systems and what is now called the IBM i operating system, are correct. You want to drop an application system into SMB shops that provides an application store like iTunes and that provides a consistent support mechanism, managed by IBM and its software partners together, as well as remote, utility-style computing that integrates into the box. IBM seemed to get it, I think.

As the launch last week of the “Aurora” and “7” releases of Small Business Server demonstrates, Microsoft surely gets this concept. And it understands that SMBs are looking for dirt cheap Windows software stacks on which to run their applications; presumably, the dirtiest and cheapest X64 server iron they can get by with. Microsoft unveiled the Aurora code, which is now known as Windows SBS 2011, back in July at its Worldwide Partner Conference in Washington, DC. The new SMB edition of the Windows Server 2008 R2 stack takes some of the ease-of-use features from the “Vail” Windows Home Server, which is designed for people who don’t want to spend any more time setting up a server than they do a Windows 7 PC they bring home from BestBuy.

There are three editions of Windows SBS 2011. The first is the Essentials Edition, which is the basic print and file server running locally in your office or data closet that also comes pre-integrated with Microsoft’s online Office 365, hosted email, collaboration, and customer relationship management tools that are actually out there running on Microsoft’s Azure cloud. Microsoft says that the server comes with 25 users built in, and that unlike other Windows Server 2008 editions, it does not have additional Client Access License (CAL) fees on top of the server. Windows SBS 2011 Essentials will sell for $545 per server, and that price does not include any fees for the online services mentioned above that it can integrate with.

Now check out how good of a monopoly that Microsoft has. For a regular Windows Server 2008 license, you buy the license and then pay CALs. Take Windows Server 2008 R2 Standard Edition, which comes with five CALs and costs $1,029 per server. The CALs cost $36 a pop for these licenses, so the base operating system is therefore worth $849 and the CALs make up $180 of the cost. (CALs normally cost $39.80 a piece for other Windows Server 2008 editions at list price.) If a CAL is a CAL, then the value of the 25 CALs in the base SBS 2011 Essentials license is $900, and that makes the underlying server operating system worth -$355. In a way, Microsoft is paying for you to use it, or betting that you will put fewer than 15 users on it and therefore keep you from buying a Linux machine or not buying a local server at all.

Windows SBS 2011 Essentials will be available some time in the first half of 2011 and will be available through Microsoft’s normal hardware and software channels.

The next notch up is Windows SBS 2011 Standard Edition, which was formally known by the code-name “7” just to be confusing. The Standard version of the new SBS adds local email, Web serving, virtual private networking, and file and print serving. This edition is akin to the SBS Standard Editions we know from the past, only it adds in automatic daily server backups to the Microsoft Azure cloud. Microsoft expects to release Windows SBS 2011 Standard in December, with availability among OEMs and system builders expected around February 2011. Windows SBS 2011 Standard won’t be so cheap, however. The server licenses will cost $1,096 plus $72 per CAL. It is not clear how many CALs are included in the base license for the new SBS Standard Edition, but Microsoft did say that it will only allow it scale up to 75 users. The reason is costs more is because it includes Exchange Server 2010, SharePoint Foundation 2010, and Windows Sever Update Services.

If you want to add a SQL Server database to the SBS license to run OLTP and Web applications locally, then you have to get the Premium Edition Add-On, which bolts on SQL Server 2008 R2 for Small Business and also juices the Windows license to have all of the features and scalability of Windows Server 2008 R2 Standard Edition. This Premium add-on will be available in December and will cost $1,04 per server plus $92 per CAL.

Microsoft’s data sheets are written by people who don’t know or don’t care about servers, so the system requirements are not in them. I imagine the software is aimed at boxes with one or two processor sockets and a few gigabytes of memory at least.

On the smallest of IBM’s machines–Power 720 boxes or PS700 blades with only four 3 GHz cores–IBM is charging $2,245 per core for a license. As I demonstrated last week for the Power 720 and back in May for the PS700 blades, a single-core Power7 machine can pretty much match the performance and price/performance of a Windows-X64 box with a database on it. But once you move that IBM i box up to the second core or try to add users above the base five users per core to the box at $250 a pop, the Windows machine starts winning. Windows SBS 2011 will offer more goodies at an attractive price even compared to the Standard Edition combo of Windows Server 2008 and SQL Server. The entry server heat will be on.

What’s your move, IBM?

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