Another i5 Pricing Tweak: No User Cap on i5 515s

July 16, 2007 Timothy Prickett Morgan

IBM continues to tweak and tune its pricing for the new user-based pricing model that is embodied in the System i5 515 and 525 servers. Back in May, IBM shifted from counting all users that access the system as users to merely counting concurrent users on the system, thereby making the pricing more accurately reflect how customers use the machine. On July 8, IBM made further changes to the user pricing on the entry i5 515 server, which will remove some complaints by customers looking to acquire that box.

Back in April, when the i5 515 was announced, the base machine came with the rights for five users to access the system and make use of the operating system and database. Customers could add users to the systems in blocks of five for the cost of $1,250, or $250 per user. Companies were allowed to add users up to a maximum of 40 users, mainly because IBM wanted to get customers with anywhere from 30 to 150 users to buy the more expensive i5 525, which more closely resembles the pricing on the regular i5 520 models announced last year running i5/OS V5R4 Standard Edition. The user-capped i5 515 and 525 servers have full 5250 processing capability, unlike Standard Edition machines, and they are considerably less expensive than i5 520 machines running Enterprise Edition, provided the machines are intended to support a low number of users. The i5 525 was different from the i5 515 in that customers could buy a license for an unlimited number of users for $50,000.

In May, after getting feedback from customers in manufacturing, distribution, banking, insurance, and other industries who have lots of occasional users who need full access, IBM said that instead of counting the number of unique people authenticating onto i5/OS to count users, the company would switch gears to merely size a machine based on the maximum number of concurrent users on the system. For shops with a large number of occasional users, this made the i5 515 and 525 a lot more economically attractive. What IBM did not do is put this into a formal announcement letter, however.

In July, IBM made another change, removing the 40-user cap on the i5 515 and also allowing customers to create an unlimited user machine by acquiring a license for 80 users on the machine. I learned this from an internal IBM document given to sales reps and business partners called the System i5 Quick Pricer. The interesting bit is that the 40-user cap removal and the 80-user pricing limit on new user licenses is only being made available in the Americas region, according to this document.

If you think System i that customers in Europe and Asia/Pacific are going to put up with this kind of pricing discrimination, I have a bridge that connects Manhattan to Brooklyn that I would like to sell you. I’ll give it to you cheap. . . .

This is, yet again, an improvement in the way the i5 515 is being priced. Basically, for $18,750, you can convert an i5 515 to an unlimited user machine. I am now getting ready to do a final comparison between the user-priced i5 515 and 525 machines and their predecessors, the i5 520s. Right after I compare the i5 515 and 525 to Linux machines next week.

One last thing. In this updated System i5 Quick Pricer document, IBM made a further clarification that could be a change in pricing (to the benefit of customers) or could be a misunderstanding that is being corrected. IBM says it is a misunderstanding that is being clarified, but I was pretty clear in my questions regarding how internal and external users are counted on the user-priced i5 515 and 525 servers back in April. In any event, IBM says that the i5/OS External Access license, which provides unlimited access to external users and which costs $3,995, has nothing to do with the physical location of the users. Rather, it has to do with whether or not a user is an employee or a non-employee. So-called “regular” users–or what I would call internal users to be consistent with the naming, which IBM is not in this document–are employees and external ones are not. Simple distinction that clarifies when you have to pay the $3,995, right?

Wrong.

Apparently, the way it works is that the overall user count, the external user count can be sometimes thought of as a subset of the total user or “regular” user licenses on a user-priced system. So, basically, if you have external users but a small number of internal users, you can just buy internal licenses until you hit 15 external users, at which point it makes sense to shell out the $3,995 and buy an unlimited user license for external users. Until that point, don’t pay for the i5/OS External Access feature, but realize that 16th user and possibly the 15th external user (if you only have one internal user) or the 2nd external user (if you have 14 internal users) is going to cost you $3,995, not $250. But after that, internal users only cost $250 a pop up to 80 users on the i5 515, after which you don’t have to pay more. On the i5 525, you have to add a lot of users to justify that $50,000 unlimited user license–200, to be precise.

Got that?

I have this feeling that at a lot of small System i shops, no one is ever going to need to buy more than 80 or 200 licenses on these two-core Power5+ machines. Maybe they will have to go above that with the Power6 servers, which should have about twice the oomph, at which point, all hardware pricing being the same, the cost per user will go down and IBM will probably have to raise the user ceilings again or else it will be leaving money on the table. You watch. I will bet one week of Sam Palmisano’s pay that the user counts will be 160 and 400 to get unlimited user licenses on the i6 615 and 625 servers.

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