IBM Starts Cutting Deals on Power Systems i for Q4

November 17, 2008 Timothy Prickett Morgan

Last week, I was talking to a downstream Power Systems reseller, one of the guys with a few hundred customers that he tends to with new systems, upgrades, software configuration, application tuning, and so on, to make his daily bread. By the sweat of his browser, as it were. And guess what he told me? He had no System i or Power Systems i deals at all in the pipeline for the remainder of the fourth quarter. None. Nadda. Zilch. Zip.

By the way, it has been a long time since this has happened to this particular reseller. We’re talking as bad as post-9/11, and maybe worse. Neither he nor I know for sure, because no one knows how bad the economy really is yet. But what this reseller does know is that his customers, some of which are fairly large midrange shops, have absolutely slammed the brakes on any new systems spending.

In what may be a preview of what we have in store, the only deals that this particular reseller did have in the works were for some second-hand iSeries gear for shops looking to get some disaster recovery on the cheap for their existing production systems.

Given the state of the economy, you might think that IBM would be cutting all sorts of deals to get customers to move to Power Systems i iron, particularly deals that involve giving customers rebates good for other IBM software and services. This is what IBM is doing to attack the Hewlett-Packard and Sun Microsystems Unix server lines with its Power Rewards program. And while the top-end Power Systems in the Power Rewards program do not restrict the i 6.1 operating system, the deal is really aimed at getting HP-UX and Solaris shops to move to AIX and/or Linux.

Personally, I wish that IBM had a Power Rewards program aimed at boosting the move from Windows-based ERP systems to i 6.1 running on Power6 iron. Or better still, something aimed at getting shops with various vintage ERP suites written in RPG to move up to newer boxes and newer ERP suites with a very large amount of services help to get customers to upgrade and Web-enable their applications. This could be done in conjunction with the myriad application modernization tool vendors, and help the entire ecosystem of tool makers as well as hardware resellers get in on the action. Given the economic climate, the amount of discounting would have to be pretty steep or the services rebates would have to be quite large, but such an approach might make a heck of a lot more sense for IBM Global Services to finance compared to pumping the server channel with midrange gear with IBM-borrowed bucks.

Instead of such a deal, IBM last week announced that it was targeting customers with iSeries 810, 820, 825, and 830 entry and midrange machines and giving them freebie i 6.1 operating system licenses if they upgrade to Power Systems iron with Power6 processors. Specifically, customers with iSeries 810 and 820 machines who move to Power 520 boxes (either the 9408-M25 i Edition with a max of two cores or the 8203-E4A converged AIX, Linux, and i Edition announced in early October and having a max of four cores) can get an i 6.1 license for the server, which IBM says is valued at $15,000. Customers with iSeries 825 or 839 midrange boxes can move to these two Power 520 variants or to a Power 550 with a maximum of four cores in the box (that’s the i Edition from April of this year, product number 9409-M50) or the new converged box from October (that’s model 8204-E8A). If these customers get a Power 520, customers get a single i 6.1 license, valued at $15,000, and if they get a Power 550, they get a license worth $44,000. That is a license for a single core, by the way. And presumably IBM is not cutting the price on the base system, which includes a single i 6.1 license on a single core already, but giving away the second, incremental core on the box.

This freebie i 6.1 deal expires on December 31.

Just a reminder. On larger machines, IBM has had a similar deal, which gives discounts on Power cores and i operating system licenses, in effect since September. (See IBM Cuts Deals on CPU and i5/OS for 550, 570, and 595 Boxes for more on that.) It is not clear if you can mix the two deals on the Power 550 box, but given the state of the economy, these deals are really an opening position in any negotiation–provided you have cash or very, very good credit, that is.

One more thing. As I reported over at The Register last week, IBM’s Power Systems division is giving big discounts on Power5, Power5+, and Power6 processor activations on installed machines. Like 45 percent off on the Power6-based 9117-MMA System p 570 server launched in the summer of 2007 and 60 percent off on Power5 and Power5+ based System p 590 and 595 boxes. This is similar to but different from the September deal for the i platform. My advice? If you are looking at doing a deal, see if the i or p deal is better for you, even if you are an i shop, and demand the better one.

We’re all one big, happy, blue Power Systems family after all. Right?

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