User-Capped i5 520s, SAP Solution Edition 520s Launched

October 16, 2006 Timothy Prickett Morgan

When I wrote last week about upcoming System i5 servers that IBM was possibly going to announce in the future, I didn’t expect the announcements to come out that week. My sources were under the impression that it might happen before the end of the year, possibly with an announcement soon after that. Obviously, something has changed, and I think Big Blue has seen that moving to the Power5+ processors is not enough to make the i5 platform competitive with dual-core Wintel and Lintel platforms.

Whatever the cause, the good news is that IBM is acting. Last Tuesday, IBM quietly announced what I am calling user-capped system i5 Solution Editions. On Thursday, the company put out some press on a new i5 520-based Solution Edition for SAP. IBM made a lot of noise about the SAP box, and said nothing about the user-capped machines. This is a bit of a mystery, but the important thing is, the machines are here and it will allow IBM to make a different kind of case for the i5.

I have sources very close to IBM’s plans that indicated the company was considering launching an i5 520 with a 20-user cap on i5/OS licenses rather than having an unlimited usage license, as all OS/400 and i5/OS licenses have had for many years. (For a brief time in the mid-1990s, IBM offered OS/400 based on an initial tier per server plus a $400 per user seat fee, but this pricing scheme was revoked after about 18 months, if memory serves me.) Mark Shearer, the general manager of the System i product line, referred to the ideas that IBM was working on–including a user-capped server as well as utility-style pricing–as a series of “Work Stream” projects. So I called these user-capped i5 servers by that name, Work Stream. If they had any other code name, I have no idea what it might be. Invader-II might be appropriate, since the Model 170 “Invader” servers that were announced in early 1998 using 125 MHz “Apache” Power processors were the last time that IBM was very aggressive at the low-end of the OS/400 product line.

As the actual name of the four new machines that IBM announced last week suggest, these are Solution Editions, which means you have to buy applications from one of the 22 certified i5/OS application software providers in conjunction with buying these lower-cost servers. You can’t just buy one of these boxes and run your existing code on it, whether you wrote it yourself or whether you got it from a third party. To get the lower price of the Solution Edition, you have to spend money. In the case of the user-capped i5 520 Solution Edition Entry and Growth machines, which have i5/OS licenses for 20 and 40 users, respectively, you have to spend at least $10,000. With the i5 520 Solution Edition for SAP boxes, you have to spend at least $15,000.

All four of these machines are based on the same basic i5 520 Express iron–two of the models have one 1.9 GHz Power5+ core activated, and the other is what IBM calls a “1/2-way” machine, which does not mean it is a half-way machine, but rather a single-socket machine with one core activated and the possibility of activating the second core.

The first of the user-capped machines is called the i5 520 Solution Edition Entry. It has no governors on it; it doesn’t even have as much as a babysitter, in fact. The box is rated at 3,800 CPWs and applications can take full advantage of the processing capacity in this box as they run their online and batch applications. This machine does not have 5250 green-screen processing capacity, as i5/OS Enterprise Edition offers, but instead is akin to i5/OS Standard Edition. That means WebFacing, Host Access Transformation Services, and other approved software that officially circumvents the 5250 governors in i5/OS (but which definitely use 5250 processing capacity) can work on these machines. The base machine comes with a 1.9 GHz processor, as I said, and also has 2 GB of main memory, four 35 GB drives (the fast 15K RPM ones), a feature 5757 RAID 5 disk controller, a DVD drive, and a base IOP. These features have all been given unique numbers in the IBM pricing database because IBM is giving them away for free. That’s right. For the i5 520 Solution Edition Entry, you pay $13,900 for the base box, and IBM throws in the peripherals you need to get started. (I was predicting $14,900 last week, so I wasn’t that far off.) IBM also makes you buy WebSphere Development Studio for the box, which costs $1,800. (I didn’t see that coming, but in hindsight, IBM makes you do that on the i5 520 Express machines, so I should have seen that coming.)

You really need to look at this table comparing the two i5 520 Solution Editions and their closest i5 520 Standard Edition siblings. At list price for 20 end users, this machine costs $695 per user, not including the cost of WebSphere Development Studio. Now, if you wanted to buy a regular i5 520 Standard Edition machine to support 20 end users, you might buy the same exact box, but you would have to pay $35,100 for the i5 server with 3,800 CPWs of power, $1,160 for the memory, $4,796 for the disks, and $1,499 for the RAID controller. That’s 42,555 at list and with a 12 percent discount on the street, that’s probably $37,500. That works out to $1,875 per seat. Now, to be fair, you might be able to support a few hundred users on this box, for a couple hundred dollars a seat–but look at the cash you have to shell out to get the entry box. Most small OS/400 and i5/OS shops do not have that many end users, so these i5 520 Standard Edition boxes have looked ridiculously expensive. On a cost per CPW basis, the i5 520 Solution Edition Entry box has a 67 percent discount.

Let that sink in a minute. Savor it a little, like cognac.

The bigger user-capped box is called the i5 520 Solution Edition Growth. You buy it with one core activated running i5/OS, but it has 4 GB of main memory, four 35 GB disks, the RAID controller, and other goodies. I show this configuration in the middle columns of the table, but this one is not really useful. What is useful is paying $1,800 to activate the other core and then $21,000 to put i5/OS Standard Edition on that core. When you do that, you get a machine that is licensed to support up to 40 i5/OS users and that has 7,100 CPWs of performance for a street price that I am pegging at around $45,000. This compares to a little over $65,000 for a Standard Edition box configured exactly the same way, or about a 30.5 percent discount.

Now, if you need to add 20 more users and double the memory and you don’t need more performance immediately, then the middle configuration–the Solution Edition Growth box with only one core activated–is about twice as expensive as the Solution Edition Growth box. And it offers bang for the buck that is about halfway between the Solution Edition Entry box and the Growth box with the second core turned on.

These user-capped i5 520 Solution Editions come with i5/OS V5R4 only, as well as Query for iSeries, Query Manager and SQL Development Kit for iSeries, iSeries Access for five users; don’t forget to pay for WebSphere Development Studio (or more precisely, don’t forget to tell IBM to give it to you for free). You can obviously add more memory and disk to either machine as you need.

Now, here’s the interesting bit. While the i5/OS V5R4 licenses are capped to 20 users and 40 users, respectively, on these two boxes, you are on the honor system. There is no user governor on the machines, according to my sources at IBM. I am told that the software providers that are selling their applications on top of these boxes are also capping their code at 20 users and 40 users, so maybe they are policing who has rights to use the server in their code.

i5 520 SAP Solution Edition–Also Aggressively Priced

A few months ago, IBM put out a pretty aggressively priced Solution Edition for JDE EnterpriseOne (which is an ERP suite for OS/400 and i5/OS now owned by Oracle) that was based on the i5 520. And last week, SAP customers got a version of this box to help make the i5 less expensive to run the mySAP suite, too.

Look at a table I built comparing the new i5 520 Solution Editions for SAP to regular i5 520 Standard Edition machines. As you can see, the two i5 520 SAP boxes are essentially the same iron as the Solution Editions above, but with different prices and configurations. The base machines have no user caps, so they are more expensive. And while IBM is giving away eight 70 GB 15K RPM disks or six 141 GB 15K RPM disks as part of the two SAP configurations on the i5 520 platform, customers have to buy 8 GB of memory and they have to pay for it. This costs $4,640. They also have to buy the RAID 5 disk controller, which costs $1,499. However, in the two-processor SAP machine, the second core is activated and the i5/OS operating system is already licensed on it.

When you do the math (as I did in the table), these i5 520 Solution Edition for SAP boxes cost 44 percent less than the regular i5 520 Standard Edition with one core, and 38.5 percent less on machines with two cores activated. That is a very big discount for IBM. And that is after I lopped off 12 percent for something approaching a street discount. IBM says that these machines were designed to support 100 or fewer SAP users. So if you call the bigger box 100 SAP users, then it costs about $475 per user; if the smaller one supports 50 users, then it costs about $565 per user.

Both i5 520 Solution Edition for SAP boxes have i5/OS V5R4, with enhanced WebFacing support, plus the Web Enablement middleware (5722-WE2) and Director for iSeries (5733-DR1) installed.

If You Give a Mouse a Cookie. . .

While I applaud the aggressive pricing and welcome the change in marketing tactics that last week’s i5 520 server announcements demonstrated, the fact remains that by making this box a Solution Edition, which means you have to acquire software packages from a selected list of software vendors, a very large portion of the installed base of OS/400 customers who have their own RPG and COBOL applications can’t get in on the deal.

< Sound of soap box dragging out from underneath a desk >

Here’s the problem I still have. Who is IBM to declare that homegrown applications are any more or less valuable than third-party software? And how intelligent is it to alienate any portion of the OS/400 and i5/OS community? This is especially true when you consider that those who create their own RPG programs are arguably the customers who are most loyal to the OS/400 and i5/OS platform.

If ISVs are telling IBM that they need more competitive pricing for Solution Editions so they can better compete with Windows, Unix, and Linux platforms, then the customers who have AS/400, iSeries, and i5 iron are facing exactly the same pricing pressures as they try to justify to their bosses–who more times than not are owners of their companies, usually small businesses with under $50 million in sales–the continuing investment in the OS/400 and i5/OS platform. This is a more serious problem for IBM, of course, but IBM focuses on the key global ISVs since it is they, rather than Big Blue, who have the feet on the street.

In for a penny, in for a pound, IBM.

You can’t give cheap servers, free disk drives, and free memory to some customers and not expect all customers to want the same deal. IBM’s experience with customers’ RPG applications and the underlying 5250 protocol–arguably the thing that ties customers tightest to the i5 platform–seems to have taught it nothing. The green-screen software tax has helped IBM prop up its sales, to be sure. But how many customers moved off the platform because of the absurdly high price IBM charged for this feature? It would have been better to give it away for free and keep the customers happy–and keep the customers, period. It would have been the same money, but customers would have felt differently about why they spent it.

The server market is about volumes, and IBM’s practices for the past 15 years have been focused more on getting the most money for the least amount of sales work than on enlarging its customer base. If IBM wants to charge based on users instead of transaction load, that’s fine. But do it across the whole product line. Give everyone the same fair deal.

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