Last month, IBM quietly made several System i announcements that will have significant impacts on the buying considerations of thousands of customers. Surprisingly, few members of the IT press or the midrange community are discussing these announcements. As such, consider this article to be a wake-up call from the summer doldrums. There are changes afoot!
Among IBM's stealth announcements, the most important one came in a memo that the company sent out to its Business Partners in mid-June about removing user limits on the System i Express Model 515. As you may remember from my first article about the System i Express models and their user-based pricing, IBM put a 40-user limit on the Model 515 but allowed the Model 525 to support unlimited users. The Model 515's 40-user limit remained in place when the company switched from charging for named users to concurrent users back in May.
While concurrent-user pricing enables the Model 515 to support more users in many situations, it still puts the entry-level system out of reach for some companies that are in the market for a new System i. Typically, these companies have large numbers of interactive "green-screen" users and minimal batch performance requirements. Since many of these companies have too many concurrent users for the Model 515, they must consider the more expensive Model 525 or the Model 520 with traditional CPW-based pricing. Moreover, depending on the number of users, there are cases in which a CPW-based Model 520 costs less than a user-based Model 525. This puts companies in the difficult position of choosing the Model 520 at a time when IBM wants to withdraw the system from marketing.
To 40 Users...and Beyond!
To give these customers a more palatable and less expensive option, IBM's Americas group has removed the 40-user limit from the Model 515. This means that Americas customers (i.e., both North and South America) can buy additional users above the 40-user level in five-user increments. This offering could save companies thousands of dollars by enabling them to purchase the Model 515 instead of the 520 or 525. Say, for instance, that you need a system with licenses for 55 concurrent users. Prior to the IBM decision, you would buy a Model 520 with an adequate CPW rating for your needs or a Model 525 with licenses for 60 users (since you purchase user licenses for the Model 525 in multiples of 10). Now, you can buy the far-less-expensive Model 515 with licenses for 55 users.
In addition, IBM will let its Americas customers buy unlimited user licenses for the Model 515. While there is no feature code for this offering yet in Big Blue's order configurator, the new option will cost $18,750. This is the same price that you would pay for 75 additional users on top of the five that come standard with the Model 515. Therefore, companies with 80 or more concurrent users should purchase the unlimited user option.
Before you run off to order a Model 515, there are several important things that you should remember about the system. First off, it can support only eight 70 GB disk drives, as the system has limited expandability. If your applications require more storage capacity or greater I/O throughput than eight disk arms can churn out, the Model 515 will not work for you regardless of how many users it can support on paper. In addition, while the Model 515 can support 10 logical partitions in uniprocessor configurations and 20 partitions as a two-way system, only two of those partitions can run i5/OS. The Model 515 also supports a limited subset of hardware features, so many customers cannot use a number of their old cards and peripherals on the system. If these limitations are not problems for you, the uncapped Model 515 could save you a lot of money.
Two Rebates Reach Retirement
While IBM gave to its System i customers with one hand last month, it took away with the other. On June 19, the company announced that it is withdrawing two rebate programs. The first is the ServerProven offering under which customers that buy selected systems or upgrades with applications from ServerProven-certified vendors can receive rebates of up to $70,000. The second program offers rebates ranging from $10,500 to $215,000 to customers that upgrade from selected iSeries 8xx and System i5 machines to a Model 520, 550, or 570 Standard Edition. If your company wants to grab either of these rebates, your invoice for the new system must be dated on or before July 16 to be eligible, as that is the withdrawal date.
Though it is disappointing to see IBM pull the plug on these offerings, such withdrawals are part of a never-ending cycle of marketing experimentation on the vendor's part. It is typical for the company to launch incentive programs, watch them closely to see if they deliver adequate revenues and profit margins, and then modify them or kill them off when they cease to do so. In many cases, the computer giant uses what it learns from these exercises to craft new incentives that it often announces within days of discontinuing the old ones.
My educated guess about the two defunct programs is that they were no longer attracting enough buyers to the ServerProven applications (or at least to many of them) and Standard Edition models. That said, I would not be surprised to see IBM run true to form by announcing new incentive programs later this year. After all, the company must find ways to keep customers buying current System i models prior to the announcement of the new POWER6 lineup in 2008. That gives the System i team a powerful motivation to offer deals, so keep an eye out for new bargains in the near future.
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
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