What Is A Used 520-Class Machine Worth?

March 19, 2012 Timothy Prickett Morgan

I must be getting old, there’s no doubt about that. And perhaps my memory is not as good as it used to be. But I thought something was funny when I looked on the IBM Global Financing’s refurbished equipment site to check out what second-hand Power Systems machines running earlier versions of the i5/OS V5R4 operating system cost. With i5/OS V5R4 being mothballed in September 2013, it seemed pretty relevant to see what Big Blue was charging for gear that ran V5R4 and that could also possibly run IBM i 6.1 or 7.1.

The used equipment market has always been a refuge for customers who cannot, for technical or economic reasons, move ahead with new iron and the new software it generally requires. So one way to avoid having to jump to IBM i 6.1 or 7.1 is to have a duplicate V5R4 machine (or even a V5R3 box if you are still using that operating system) sitting in a closet somewhere, or perhaps even clustered to your main box and ready to take over in the event of a failure. So long as you have either the skills or the business partner backing you up, and an understanding employer in case something goes wacky, hanging back with the software is one way to deal with change. (If you chose not to decide, you still have made a choice. . . .)

So I went to the IBM used equipment page dedicated to older IBM i-family boxes, and there were two Power 520 machines that Big Blue had dusted off and gussied up for resale. The first configuration was a Power 520 with a single 1.9 GHz Power5 processor, 1 GB of main memory, four 70.6 GB 15K RPM disks, and i5/OS V5R4M5 all for $5,919. This machine was launched in 2006 and is rated at 30 CPWs running 5250 green-screen workloads and 600 CPWs on generic server-style software. The second machine that IBM Global Financing is peddling is a Power 520 with two 1.9 GHz Power5 cores (with only one activated), plus a PCI-X expansion tower (feature 0595) with 16 70.6 GB disks, 4 GB of main memory, a bunch of peripherals, a license on that one core for V5R4M5, and a price tag of $49,225.

I just sat there, looking at that price and had a very large sense of déjà vu, and stroked my beard for a moment, hit the IT Jungle search, and found this story from January 2011. Lo and behold! These were the same two machines IBM was flogging last year, and the configurations and the prices have not changed one bit. How can that be? And is this a good deal?

I entered the AS/400 market on the tail-end of the System/36 and System/38 eras in July 1989, a little more than a year after the AS/400 was launched–forgive me, but I was still in college at the time, so I missed the Silverlake launch–and I can tell you that there was a vibrant and complex market for second-hand System/3X gear and AS/400s up until the late 1990s. Back when The Four Hundred was a subscription-based newsletter in its first decade, one of the things I did each quarter was try to case the used equipment markets, asking dealers what their takeout prices were for various servers, storage, memory, and other aspects of AS/400 systems, as well as what their retail prices were for the same equipment. The spread between the two was their bread and butter, and comparing this used gear against new machines was what kept them in business. IBM’s expensive upgrade prices for processor features eventually drove a lot of dealers out of the business, and that was absolutely intentional on the part of IBM, which controls the distribution of new Power Systems gear and which also controls a big portion of the second-hand market by virtue of the takeouts it does when customers upgrade systems.

IBM is not the only dealer in second-hand equipment still around, but in a few minutes of poking around the Web I could only find a few that would print end user prices for used Power Systems gear. Data Tech Computer, of Alpharetta, Georgia, has two puppy iSeries machines on its site. The first is an iSeries 9407-M15 server with 8 GB of memory (half the maximum of the system) that has a 1.9 GHz Power5+ processor (it is capable of having two), with 280 GB of disk capacity, a 30 GB QIC tape drive, and a bunch of other peripherals plus a V5R4 license for five users all for $5,500. This machine is rated at 3,800 CPWs, green or client server.

Oddly enough, the other machine is an older i5 520 machine with a single Power5+ processor running at 1.9 GHz (again, this machine can have two processors) that has 60 CPWs of green-screen power and 1,200 CPWs of client/server power, and Data Tech wants $6,000 for this box with V5R4 on it. The i5 520 is set up with 2 GB of memory, 280 GB of disk, a 30 GB QIC drive, and V5R4. The “deal of the day” at Data Tech when I was poking around was another P05 tier machine, a Power6-based Power 520 machine with a single-core 4.2 GHz processor with four memory slots. With 4 GB of main memory, 837 GB of 15K RPM disks, a 1.6TB LTO tape drive, a RAID disk controller, and an operating system license (presumably V5R4, but it doesn’t say), this machine, with 4,300 CPWs of interactive and client/server oomph and a P05 software tier has a price of $18,500.

Yeah, based on these Data Tech configurations and prices, IBM’s prices on those two 520-class machines don’t make a lot of sense. It takes a market to set prices, and I am not convinced there is a “market,” in the strict sense of a large number of buyers and sellers with access to information about takeout and retail pricing as well as the flow of deals going into IBM i shops.

I found a reseller called Computer Merchants that peddles gear in Australia and New Zealand that is very old school, publishing online a price list for retail prices on a slew of Power-based systems for i5/OS and IBM i operating systems, including breakout pricing for individual features. Midland Information Systems, which used to help me with my equipment pricing back in the day and which is based in Apopka, Florida, has a pretty broad inventory of Power5, Power5+, and Power6 systems that have been refurbished. Canvas Systems, based in Norcross, Georgia, also has a sophisticated quoting system for getting info about what is in stock, but like Midland, doesn’t publish retail prices. Canvas has over $100 million in inventory, which spans many makes and models of servers, storage arrays, and switches. World Data Products, based in Minnetonka, Minnesota, also peddles used iSeries and System i iron, and has been helpful to me in the past when I was casing the used equipment market.

I think the important thing if you are trying to acquire a secondhand system is to make a lot of phone calls and talk to lots of dealers. Ditto if you are looking to try to recapture some of the value in your old systems if you upgrade them. In many cases, the peripherals in the system have an aggregate value that far exceeds the value of the underlying processor on an old machine. And the OS license, which is sometimes transferrable (it depends on the release), can also be valuable as well. Make the effort, and you could end up saving your company a bundle.

Now, one last thing: Providing that I can get dealers to cooperate, would a used equipment pricing guide, perhaps done every six months, be useful? If you think so, let me know, and I will consider re-opening that can of worms.