IBM Puts Upgrade Price Increases in Context

Analysis of News Events
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

In recent weeks, IBM has done two things that illustrate one of its longstanding philosophies about how it sells the eServer iSeries. First, it released a new study by International Data Corporation (IDC) which documents the superior return on investment that customers can achieve by consolidating Windows, Linux, and Unix servers to the iSeries. Second, it announced that on January 1 of next year, it will increase prices on upgrades from iSeries 8xx systems to eServer i5 models.

If these two actions seem to contradict each other, have patience. By the time you finish this article, I will explain how they fit into Big Blue’s time-honored strategy for marketing its premier midrange server. Before I do that, however, let’s dive into the events in question.

Cost of Ownership Revisited

In its latest study of the iSeriesInfrastructure Simplification and the ROI of Consolidating Windows, Linux, and AIX 5L Application on IBM eServer iSeries Systems – IDC interviewed 12 iSeries customers at great length to understand their IT costs. As the title of the report implies, each of the customers had consolidated Windows, Linux, or AIX workloads from other servers to the iSeries.

Through its interviews, IDC found that these workloads were being managed with greater efficiency, fewer full-time equivalent IT staff, and greater reliability on the iSeries than on their original servers. As a result, the iSeries consolidations delivered an average three-year cost savings of $147,194 per 100 users. These savings, in turn, yielded an average three-year return on investment of 258%. Almost 59% of the savings were actual reductions in "hard costs" such as savings on hardware, software, and IT staff. The remaining 41% of the savings came from downtime reductions and improvements in the productivity of IT staff and users.

If this study seems vaguely familiar to you, it is because IDC conducted a nearly identical analysis of six companies in 2003 that yielded similar results. As I stated in a review of the earlier study, I found the results to be valuable but open to attacks by critics. By studying only six companies, the 2003 report could have been dismissed as statistically unreliable. In addition, critics could have pointed out that the study did not compare the savings of consolidating workloads to the iSeries versus consolidating workloads to fewer Windows and Linux servers. It would be fairer to determine the savings realized by consolidating Intel server workloads to Intel servers, and then compare the results to the savings realized by consolidating the same workloads to an iSeries.

I am glad to say that IDC’s latest study goes a long way toward addressing the first issue of statistical validity. By replicating the 2003 study with 12 new companies, IDC has done much to show that the original results were not a statistical fluke. I am also glad to see that the study analyzed companies that consolidated AIX as well as Windows and Linux workloads. This helps to set the iSeries apart as a server whose consolidation capabilities (and the savings that result from those savings) are practically impossible to compare with those of other servers. After all, what server besides the iSeries can consolidate Windows, Linux, and Unix workloads with comparable levels of virtualized management? I certainly can’t think of one.

It was precisely because of these capabilities that my firm – Andrews Consulting Group – recently published a white paper that I wrote about the advantages of consolidating Intel servers to the iSeries. If you have not seen the paper, I would encourage you to download it from IBM’s Web site. By the way, feel free to email me if you have any questions or comments about the report.

Coming to an iSeries Upgrade Near You...

While IBM was demonstrating the cost savings of the iSeries with one hand, it was increasing prices to upgrade to the latest models with the other hand. Early this month, the company announced that on January 1 of next year, it will increase prices for upgrades from iSeries 810, 825, 870, and 890 models to eServer i5 systems. Admittedly, such price actions are not uncommon to the iSeries. They also took place in 1999 and in 2001 during periods when the fair market values of used AS/400s declined sharply. In both cases, IBM increased upgrade prices to reflect growing price differences between used systems and the servers to which they could be upgraded. A similar decline in fair market values has beset the iSeries 8xx family over the last year. As such, IBM’s price action follows a historical precedent.

As an examination of the announcement reveals, IBM is boosting upgrade prices by between 1.3% and 50.3%, with the average increase standing at 12.5%. While the price increases vary widely, there are patterns in the increases. For each iSeries 8xx model, IBM is boosting prices for less expensive upgrades by greater margins than prices for more expensive upgrades. For instance, the cheapest upgrade path for an iSeries 810 Enterprise Edition with 1,470 CPW is an eServer i5 Model 520 Enterprise Edition with 2,400 CPW. The price for this upgrade will increase by 38% on January 1. By contrast, upgrades from the same iSeries 810 to more powerful eServer i5 models will be increased at rates as low as 5%. The more expensive the upgrade and the greater the increase in CPW levels, the lower the price increase.

In addition, IBM is increasing prices for upgrades of Enterprise Edition models at greater rates than for Standard Editions of the same models. Take our prior example as an illustration. While it will cost 38% more to upgrade an iSeries 810 Enterprise Edition with 1,470 CPW to an eServer i5 Model 520 Enterprise Edition with 2,400 CPW, the price to upgrade between the Standard Editions of these models will only increase by 12%.

What do these increases mean for iSeries customers? If you are an iSeries Model 8xx user who has been considering an upgrade to an eServer i5, you should seriously consider doing so this year. You should especially consider upgrading now if you have been contemplating one of the less expensive upgrades for an iSeries 8xx Enterprise Edition, as prices for such upgrades will increase by the greatest percentages.

A Perennial Pricing Position

While some customers may grumble about IBM’s latest pricing action, it is not an action that is at odds with the company’s cost of ownership claims for the iSeries. For years, IBM has positioned the iSeries as the most cost-effective platform for consolidating other servers rather than as the first business application server that small businesses should buy. This positioning reflects a simple reality: the Intel server industry has a cost structure and distribution model that lets it sell the cheapest servers...end of story. IBM knows that the iSeries cannot profitably compete head to head with Intel servers on their terms. However, it can compete with them once those servers proliferate to the point where their ongoing costs exceed those of the iSeries. It is at this inflection point when low list prices begin to lose their luster as purchase criteria.

Since IBM believes that many firms are finally hitting this inflection point, it is happy to sit back and let the market come to them. Indeed, it is so confident that the market is coming to them that it is not afraid to increase upgrade prices. While IBM’s confidence may not be warranted in some situations, a growing number of companies are making IT infrastructure simplification a top priority. Clearly, IBM is betting that more companies are going to do likewise.

In short, we all know that just because a product is cheap does not mean that it will cost the least. Perhaps IBM’s latest announcements are just its way of reminding us of this truth.

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..

Lee Kroon
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology.


Support MC Press Online





  • White Paper: Node.js for Enterprise IBM i Modernization

    SB Profound WP 5539

    If your business is thinking about modernizing your legacy IBM i (also known as AS/400 or iSeries) applications, you will want to read this white paper first!

    Download this paper and learn how Node.js can ensure that you:
    - Modernize on-time and budget - no more lengthy, costly, disruptive app rewrites!
    - Retain your IBM i systems of record
    - Find and hire new development talent
    - Integrate new Node.js applications with your existing RPG, Java, .Net, and PHP apps
    - Extend your IBM i capabilties to include Watson API, Cloud, and Internet of Things

    Read Node.js for Enterprise IBM i Modernization Now!


  • Profound Logic Solution Guide

    SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation.
    Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects.
    The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the companyare not aligned with the current IT environment.

    Get your copy of this important guide today!


  • 2022 IBM i Marketplace Survey Results

    Fortra2022 marks the eighth edition of the IBM i Marketplace Survey Results. Each year, Fortra captures data on how businesses use the IBM i platform and the IT and cybersecurity initiatives it supports.

    Over the years, this survey has become a true industry benchmark, revealing to readers the trends that are shaping and driving the market and providing insight into what the future may bring for this technology.

  • Brunswick bowls a perfect 300 with LANSA!

    FortraBrunswick is the leader in bowling products, services, and industry expertise for the development and renovation of new and existing bowling centers and mixed-use recreation facilities across the entertainment industry. However, the lifeblood of Brunswick’s capital equipment business was running on a 15-year-old software application written in Visual Basic 6 (VB6) with a SQL Server back-end. The application was at the end of its life and needed to be replaced.
    With the help of Visual LANSA, they found an easy-to-use, long-term platform that enabled their team to collaborate, innovate, and integrate with existing systems and databases within a single platform.
    Read the case study to learn how they achieved success and increased the speed of development by 30% with Visual LANSA.


  • The Power of Coding in a Low-Code Solution

    LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed.
    Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

    • Discover the benefits of Low-code's quick application creation
    • Understand the differences in model-based and language-based Low-Code platforms
    • Explore the strengths of LANSA's Low-Code Solution to Low-Code’s biggest drawbacks



  • Why Migrate When You Can Modernize?

    LANSABusiness users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.
    In this white paper, you’ll learn how to think of these issues as opportunities rather than problems. We’ll explore motivations to migrate or modernize, their risks and considerations you should be aware of before embarking on a (migration or modernization) project.
    Lastly, we’ll discuss how modernizing IBM i applications with optimized business workflows, integration with other technologies and new mobile and web user interfaces will enable IT – and the business – to experience time-added value and much more.


  • UPDATED: Developer Kit: Making a Business Case for Modernization and Beyond

    Profound Logic Software, Inc.Having trouble getting management approval for modernization projects? The problem may be you're not speaking enough "business" to them.

    This Developer Kit provides you study-backed data and a ready-to-use business case template to help get your very next development project approved!

  • What to Do When Your AS/400 Talent Retires

    FortraIT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators is small.

    This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn:

    • Why IBM i skills depletion is a top concern
    • How leading organizations are coping
    • Where automation will make the biggest impact


  • Node.js on IBM i Webinar Series Pt. 2: Setting Up Your Development Tools

    Profound Logic Software, Inc.Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. In Part 2, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Attend this webinar to learn:

    • Different tools to develop Node.js applications on IBM i
    • Debugging Node.js
    • The basics of Git and tools to help those new to it
    • Using as a pre-built development environment



  • Expert Tips for IBM i Security: Beyond the Basics

    SB PowerTech WC GenericIn this session, IBM i security expert Robin Tatam provides a quick recap of IBM i security basics and guides you through some advanced cybersecurity techniques that can help you take data protection to the next level. Robin will cover:

    • Reducing the risk posed by special authorities
    • Establishing object-level security
    • Overseeing user actions and data access

    Don't miss this chance to take your knowledge of IBM i security beyond the basics.



  • 5 IBM i Security Quick Wins

    SB PowerTech WC GenericIn today’s threat landscape, upper management is laser-focused on cybersecurity. You need to make progress in securing your systems—and make it fast.
    There’s no shortage of actions you could take, but what tactics will actually deliver the results you need? And how can you find a security strategy that fits your budget and time constraints?
    Join top IBM i security expert Robin Tatam as he outlines the five fastest and most impactful changes you can make to strengthen IBM i security this year.
    Your system didn’t become unsecure overnight and you won’t be able to turn it around overnight either. But quick wins are possible with IBM i security, and Robin Tatam will show you how to achieve them.

  • Security Bulletin: Malware Infection Discovered on IBM i Server!

    SB PowerTech WC GenericMalicious programs can bring entire businesses to their knees—and IBM i shops are not immune. It’s critical to grasp the true impact malware can have on IBM i and the network that connects to it. Attend this webinar to gain a thorough understanding of the relationships between:

    • Viruses, native objects, and the integrated file system (IFS)
    • Power Systems and Windows-based viruses and malware
    • PC-based anti-virus scanning versus native IBM i scanning

    There are a number of ways you can minimize your exposure to viruses. IBM i security expert Sandi Moore explains the facts, including how to ensure you're fully protected and compliant with regulations such as PCI.



  • Encryption on IBM i Simplified

    SB PowerTech WC GenericDB2 Field Procedures (FieldProcs) were introduced in IBM i 7.1 and have greatly simplified encryption, often without requiring any application changes. Now you can quickly encrypt sensitive data on the IBM i including PII, PCI, PHI data in your physical files and tables.
    Watch this webinar to learn how you can quickly implement encryption on the IBM i. During the webinar, security expert Robin Tatam will show you how to:

    • Use Field Procedures to automate encryption and decryption
    • Restrict and mask field level access by user or group
    • Meet compliance requirements with effective key management and audit trails


  • Lessons Learned from IBM i Cyber Attacks

    SB PowerTech WC GenericDespite the many options IBM has provided to protect your systems and data, many organizations still struggle to apply appropriate security controls.
    In this webinar, you'll get insight into how the criminals accessed these systems, the fallout from these attacks, and how the incidents could have been avoided by following security best practices.

    • Learn which security gaps cyber criminals love most
    • Find out how other IBM i organizations have fallen victim
    • Get the details on policies and processes you can implement to protect your organization, even when staff works from home

    You will learn the steps you can take to avoid the mistakes made in these examples, as well as other inadequate and misconfigured settings that put businesses at risk.



  • The Power of Coding in a Low-Code Solution

    SB PowerTech WC GenericWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed.
    Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

    • Discover the benefits of Low-code's quick application creation
    • Understand the differences in model-based and language-based Low-Code platforms
    • Explore the strengths of LANSA's Low-Code Solution to Low-Code’s biggest drawbacks



  • The Biggest Mistakes in IBM i Security

    SB Profound WC Generic The Biggest Mistakes in IBM i Security
    Here’s the harsh reality: cybersecurity pros have to get their jobs right every single day, while an attacker only has to succeed once to do incredible damage.
    Whether that’s thousands of exposed records, millions of dollars in fines and legal fees, or diminished share value, it’s easy to judge organizations that fall victim. IBM i enjoys an enviable reputation for security, but no system is impervious to mistakes.
    Join this webinar to learn about the biggest errors made when securing a Power Systems server.
    This knowledge is critical for ensuring integrity of your application data and preventing you from becoming the next Equifax. It’s also essential for complying with all formal regulations, including SOX, PCI, GDPR, and HIPAA
    Watch Now.

  • Comply in 5! Well, actually UNDER 5 minutes!!

    SB CYBRA PPL 5382

    TRY the one package that solves all your document design and printing challenges on all your platforms.

    Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product.

    Request your trial now!

  • Backup and Recovery on IBM i: Your Strategy for the Unexpected

    FortraRobot automates the routine tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:
    - Simplified backup procedures
    - Easy data encryption
    - Save media management
    - Guided restoration
    - Seamless product integration
    Make sure your data survives when catastrophe hits. Try the Robot Backup and Recovery Solution FREE for 30 days.

  • Manage IBM i Messages by Exception with Robot

    SB HelpSystems SC 5413Managing messages on your IBM i can be more than a full-time job if you have to do it manually. How can you be sure you won’t miss important system events?
    Automate your message center with the Robot Message Management Solution. Key features include:
    - Automated message management
    - Tailored notifications and automatic escalation
    - System-wide control of your IBM i partitions
    - Two-way system notifications from your mobile device
    - Seamless product integration
    Try the Robot Message Management Solution FREE for 30 days.

  • Easiest Way to Save Money? Stop Printing IBM i Reports

    FortraRobot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing.
    Manage your reports with the Robot Report Management Solution. Key features include:

    - Automated report distribution
    - View online without delay
    - Browser interface to make notes
    - Custom retention capabilities
    - Seamless product integration
    Rerun another report? Never again. Try the Robot Report Management Solution FREE for 30 days.

  • Hassle-Free IBM i Operations around the Clock

    SB HelpSystems SC 5413For over 30 years, Robot has been a leader in systems management for IBM i.
    Manage your job schedule with the Robot Job Scheduling Solution. Key features include:
    - Automated batch, interactive, and cross-platform scheduling
    - Event-driven dependency processing
    - Centralized monitoring and reporting
    - Audit log and ready-to-use reports
    - Seamless product integration
    Scale your software, not your staff. Try the Robot Job Scheduling Solution FREE for 30 days.