IBM Latest Price Actions Give to Some, Take from Others

Analysis of News Events
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times
We all know the saying, "Every cloud has a silver lining." However, it's also true that every silver lining has a cloud, and a rain-filled one at that. As a case in point, consider the iSeries price changes that IBM announced last week. While many customers will save some extra silver because of those changes, others will get soaked by IBM for a few more dollars.

Pennies from Heaven

Let's start with the silver lining: the price reductions. If you're in the market for additional iSeries memory, you may pay less for it. IBM cut prices on its 512MB and 1GB memory cards for the Model 270 to $1,792 and $3,584, respectively, a 12.5 percent reduction. As for the Models 820 and 830, prices for the 512MB and 1GB memory cards dropped by 20 percent to $4,096 and $8,192. This brings prices for these models into parity with pSeries memory prices, which have been lower historically than those for the iSeries. Sadly, prices for Model 840 memory, which now costs more than twice as much on a per-MB basis as Model 820/830 memory, remain unchanged.

Many customers will also benefit from lower prices for selected DASD features. Starting immediately, you can save over 30 percent on 17.54GB, 10,000 RPM drives for your Model 170, 7XX, 270, or 8XX. This DASD feature now costs $1,400, the same price IBM charges for its older 8.58GB drives. You can also save over 23 percent on the 35.16GB, 10,000 RPM drives, which now cost $3,200. As with memory, these prices are now similar to those IBM charges for comparable pSeries drives.

IBM has also cut prices on selected processor feature codes and a handful of interactive CPW features. As I mentioned in my article last week, IBM stated that it will no longer charge extra for inactive Capacity Upgrade on Demand (CUoD) processors. This announcement triggered significant price cuts for Model 840 CUoD processor features. While time does not permit me to determine whether these cuts really do bring CUoD feature prices in line with those for non-CUoD features, the reductions are significant. For instance, the price for a Model 840 with feature #2352 (an 8/12-way, with eight active CPUs and four on standby) declined by $94,000. By the same token, an i840 with processor feature #2353 (a 12/18-way) or #2354 (the 18/24-way) now costs $80,000 and $104,000 less, respectively. IBM has also slashed prices for upgrades to these processor features by similar amounts and has cut the cost to activate standby processors by $34,000 per CPU.

Companies that buy smaller iSeries models will also appreciate some targeted price reductions for the Models 270 and 820. To get customers to buy more-powerful i270s, which require the purchase of an interactive CPW feature, IBM cut the price of the #1519 interactive feature on the Model 270-2432 from $56,300 to $32,300. It also slashed the sticker for the #1520 interactive feature on the Model 270-2434 from $112,500 to $52,500. These actions reduce prices for these two models by 36 percent and 43 percent, respectively. Price cuts were even greater for the base versions of the Model 820, which offer no interactive performance. You will now pay $24,000 less for an i820 uniprocessor, $43,500 less for the two-way model, and $60,000 for a four-way. As a result, you'll pay at least 50 percent less for these servers than you did a couple of weeks ago.

If you're a WebSphere user, you could also reap savings from what IBM calls its "sub-capacity" license plan. This plan applies to WebSphere Application Server (WAS) Advanced Edition 3.5, all versions of WAS 4.0, and all future versions of WAS running on the iSeries. It also applies to both the Business and Professional versions of WebSphere Commerce Suite 5.4, though not to earlier releases. If you host any of these products in an LPAR on an iSeries, you will only pay the per CPU charge for the number of CPUs that are hosting the products, rounded up to the next CPU.

To better understand the new plan, let's say you're running WAS 4.0 Advanced Edition on an 8-way iSeries within an LPAR that uses 2.3 CPUs. Until now, you would have had to pay $12,000 per CPU for all eight CPUs, or $96,000. Under the new plan, you'll pay for only three CPUs (2.3 rounded up to the next CPU) for a total of $36,000. For now, IBM will trust customers to accurately report the number of CPUs they are dedicating to WebSphere products. In future WebSphere releases, however, license management software will generate usage reports that customers will have to submit to IBM on a monthly basis.

For Software Subscribers, Stormy Weather

Into each life some rain must fall, and so it will be for the vast majority of iSeries owners who have a Software Subscription contract. On July 1 of this year, prices for all iSeries and AS/400 Software Subscription contracts will increase by 25 percent.

Unfortunately for many customers, this price increase will come at precisely the time when their old contracts expire. As you history buffs may remember, IBM announced Software Subscription in the spring of 1998. At that time, it told customers they would have to subscribe by July 1, 1999. Those who missed the date could not receive software upgrades until they purchased a subscription and paid additional currency access fees. Naturally, many customers subscribed near the deadline date, and a good number of them signed up for 3-year contracts. Those contracts will be expiring this summer, just as the new prices take effect.

Fortunately, iSeries customers in the United States can renew their Software Subscription contracts before July 1, 2002, and take advantage of the current lower prices. (IBM may make similar early renewal programs available to customers in other regions as well.) To qualify, you must make sure that IBM receives your order by June 24 and that you receive the new subscription by July 1. Realize, however, that renewing early may not be the most financially attractive option for you. According to my IBM sources, customers who renew early may not be entitled to some middleware products such as WebSphere Advanced Edition, MQSeries, or Domino. If that's the case, customers with significant middleware investments may not benefit from an early renewal. I'm talking with IBM to learn more about the pros and cons of renewing early, and I hope to write an article about this issue soon. In the meantime, ask your IBM account representative or Business Partner to help you weigh your options.

In short, IBM's latest announcements leave you with some interesting decisions to make. If you make those decisions wisely, you can dodge any budgetary storms on the horizon and, with some luck, find those silver linings that IBM laced into its iSeries price list last week.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..