IBM Goes After Windows with User-Priced System i Servers

April 16, 2007 Timothy Prickett Morgan

After years and years of complaints that IBM has not done enough to make the AS/400, iSeries, and System i5 lines more competitive with Windows on X86 and then X64 boxes, Big Blue has now codified a new set of entry i5 servers based on its Power5+ processors that is sold on a per-user basis instead of as a system with a set price tag. By shifting to user-based pricing, IBM hopes to be able to make a more compelling case that an i5 hardware and software stack is competitive with a Windows-X64 stack.

It will take a few weeks of analysis to quantify whether or not this is the case. And the first step is to describe what IBM has done and why with the System i 515 and 525 servers.

First of all, these two machines are not the first machines that IBM has delivered that have user-based pricing. Back in October 2006, IBM launched two special Solution Edition machines, the Solution Edition Entry box with a 20-user cap and the Solution Edition Growth with a 40-user cap. Both machines had a reasonable amount of memory, a RAID 5 disk controller with four disks, and i5/OS V5R4 with its integrated DB2/400 database. The Solution Edition Entry box had one Power5+ core running at 1.9 GHz and 2 GB of main memory, and carried a list price of $13,900, while the Solution Edition Growth, which had 4 GB of main memory and the ability to activate a second processor core, cost $25,900. Adding the second core and activating i5/OS on that Solution Edition Growth box pushed the price to $48,700. Being Solution Edition machines, these boxes could only be acquired in conjunction with a certified set of application software from a select set of independent software vendors, who are helping IBM to push the i5 into new accounts. In this regard, the Solution Edition boxes were of limited appeal.

But, as I showed in a series of articles last year, such user-based pricing for a server and systems software stack could not only lower the cost of the i5 product line for customers using vintage AS/400 and iSeries servers and the OS/400 operating system. This pricing could compete respectably with Windows-X64 servers on a per-user basis. And I argued strongly–as did many of you–that IBM should expand the i5 line to user-based pricing across the entire line. (See The System iWant, 2007 Edition and The Business Case for the System iWant for more details on what I thought IBM should do.)

With last week’s announcements, IBM has met those expectations about half way, codifying user-based pricing in two entry machines that it believes will help it to compete against Windows boxes. And, as many of us were hoping, IBM took action in revising the packaging and pricing of the existing i5 line to compete instead of waiting until later this year or early next for the Power6 revamp of the System i and System p server lines.

The System i 515 and 525 servers are not Solution Editions, but rather general-purpose boxes. And that means they can run any workload customers desire, including their own homegrown code. The one thing they do not have, and which all i5 520s for the past few years have had as well as predecessor AS/400 and iSeries entry machines, is governors that restrict the performance of 5250 green-screen applications. These two boxes can run full-out on 5250 workloads, which means as far as RPG and COBOL applications are concerned, these are very powerful boxes. The have no restrictions in terms of Java performance, either, and because they have lots of L2 and L3 cache, they are also appropriate for running reasonably heavy Java and PHP workloads, too. Both machines are offered in so-called Express configurations, which means they are bundled with various hardware and services.

The System i 515 comes with a one dual-core Power5+ chip with one core activated. The Power5+ chip has 36 MB of L3 cache activated, which is shared by the cores. The System i 515 can have up to 16 GB of main memory and holds up to eight 15K RPM SCSI disk drives in 70 GB or 141 GB disk drives. (Older 10K RPM disks and smaller 35 GB disks are no longer supported in the i5 line; IBM does not yet offer small form factor SAS SCSI disks in the System i line, and probably won’t until the Power6 generation of servers.) The System i 515 comes with 90 days of base software maintenance that can be upgraded to a one or three year contract and a year’s worth of 9×5 hardware maintenance that can be upgraded to 24×7 coverage. Rather than charge customers on the front end for maintenance services that they do not value, IBM is breaking out the maintenance as a separate item–just like X64 server makers do. Similarly, given that virtual and logical partitioning are not entrenched in the SMB market yet, IBM’s Virtualization Engine, which can provide up to 10 logical partitions per processor core for running i5/OS, AIX, or Linux, is a separately priced item. Customers who need more processing capacity can activate the second core. The i5 515 comes with a license to i5/OS and DB2/400 that has five users; it can be expanded to 40 users in increments of five users at a cost of $250 per user. On first pass, this seems like a very reasonable fee, but I will reserve judgment until I do a more thorough analysis.

(You will notice that IBM seems to have figured out how to rationalize the System i5 name as we move to the Power6 generation. It is no longer the System i5, but the System i 5X5, where X is a variable and the “fives” mean Power 5. Now, if they would just call the operating system i/OS V5R4 and the database i/DB V5R4, the complete system would all make more sense. Baby steps . . . )

The System i 515 comes in three packages. The initial configuration, which according to Ian Jarman, product marketing manager for the System i line, is aimed at customers who are new to the platform. It comes with a single Power5+ core activated, 1 GB of main memory, two 70 GB disk drives, a 36 GB 4mm tape drive, 90 days of Software Maintenance, and 5 i5/OS user entitlements for $7,995. IBM Global Financing will do a 36-month lease on such a machine for $214 a month for customers who have really top-notch credit.

The next configuration up switches out the 4mm tape drive for a QIC tape drive (more commonly used in i5/OS and OS/400 shops) and adds the Query/400 and Query Manager tools to the mix for $9,995, or $276 a month on a lease. These machines would be rated at 3,800 CPWs on IBM’s internal performance benchmarks, but given the new workloads that IBM is chasing, it is not keen on thinking about CPW ratings but will instead try to focus on the SPECjbb2005 Java benchmark performance of the boxes.

The heftier System i 515 configuration has two 1.9 GHz cores activated, 4 GB of main memory, four 70 GB disks, a 36 GB 4mm tape drive, a year of Software Maintenance, Query/400 and Query Manager, and five i5/OS users for $21,995, or $499 a month for a 36-month lease. This box would be rated at 7,100 CPWs on IBM’s benchmark tests, and you have to do a system upgrade to get that extra processor core working. (Which means that the Power5+ chips with only one core activated are half-duds, meaning the second core doesn’t actually work.) It costs $2,995 to do the hardware upgrade to get that second Power5+ core.

All of these System i 515 boxes top out at 40 users, and there is no upgrade into the System i 515 or out of it.

For customers who need to support more users and or whose applications require more memory and disk storage, IBM is offering the System i 525. This machine is akin to a full-fledged i5 520 in that it can have up to 32 GB of main memory and supports up to 248 disk drives through Fibre Channel or High Speed Loop/Remote I/O disk enclosures. (That’s 35 TB using 141 GB disk drives.)

The System i 525 comes with one year of Software Maintenance that can be upgraded to a three-year maintenance plan; the hardware comes with a year of 24×7 maintenance. The Virtualization Engine partitioning is included with the i5/OS license, not broken out separately as with the System i 515. The System i 525 comes with one core activated and the second one can be activated on demand. Customers with iSeries 810 and i5 520 machines can upgrade into the System i 525 box. It comes with 30 users in a base configuration and can be upgraded in increments of 10 users at a cost of $250 per users up to 150 users. And, if customers want to convert it to an unlimited user machine, as a normal System i5 520 box is, they can do that, too.

There are three System i 525 Express configurations. The base box has a single 1.9 GHz core, a 30 user i5/OS license, a year of Software Maintenance and no memory and disk; it costs $34,900. A 150-user configuration of the System i 525 costs $59,900, and an unlimited i5/OS user box costs $79,900. The unlimited i5/OS user entitlement license actually costs $50,000, and it costs $$8,995 to activate the second processor core in the System i 525 machine.

Memory on the System i 515 and 525 machines still costs $550 per GB, as with other entry System i5 servers from last year. But IBM is selling 70 GB 15K RPM disks for $999, which is down 50 percent from the prior price for these disks, and is offering 141 GB disks for $1,799, a 40 percent price reduction from the price it was charging prior to this announcement. IBM is also offering feature 5570 RAID 5 controllers plus two 70 GB disks for $2,499, a 30 percent discount, and the feature 5571 card plus six 70 GB disks for $4,499, which is a 40 percent discount. These are not IBM’s highest-performing RAID 5 disk controllers, to be sure, but this is much better pricing than entry i5 customers have ever seen.

The System i 515 and 525 servers will be available on April 20.

One last thing: what is a user? In IBM’s book, people inside the firewall who need to access applications on the System i server need to have a user license, and so does any external user that authenticates into the system. But customers who are coming in from the Internet anonymously, to maybe browse a Web page or do some rudimentary informational search, do not need an i5/OS user entitlement. To deal with the users coming into the system from outside the firewall, IBM has done exactly what Microsoft has done with its middleware: have a single license fee for an unlimited number of Internet users, since you cannot count external users without a big hassle. This is done though a feature called i5/OS External Access, which costs $3,995 per System i 515 or 525 server.

While I am obviously pleased that IBM has taken the fight to Windows with the System i 515 and 525 servers, the limited number of upgrades into this line and none of them going out of it is an issue. What happens when someone outgrows a System i 515 or 525? They have to move to the much more expensive System i5 line, which is still based on unlimited i5/OS user licenses. As I said late last year, user-based pricing should go at least up through the four-socket i5 550 and 16-socket i5 570 products.

Another issue I see is that the rest of the i5/OS software stack–including compilers and other tools–as well as third party ERP software is still priced based on hardware tiers. IBM and its partners should be working in concert to get user-based pricing for all of the software running on these machines–not just the operating system and the database.

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