More Software Pricing Carrots for IBM i Shops

Updated: February 14, 2011

by Timothy Prickett Morgan

IBM is making some more moves to try to get customers using older OS/400 and i5/OS releases and older iron to move up to more modern IBM i releases and the latest Power Systems hardware. The moves follow the extension of the marketing of i5/OS V5R4 until May 27 this year and a 25 percent licensing increase on older Power-based systems for that software--announcements that Big Blue made as the new year was getting under way.

In announcement letter 211-021, IBM did a bunch of different things. First, it has formalized expanding an IBM i license transfer scheme that has been quietly available for a number of years and that The Four Hundred told you about last August. According to Guy Paradise, worldwide marketing manager for the IBM i platform within the converged System z and Power Systems division, IBM started offering license transfers to customers in the United States and Australia two years ago through a special PRPQ request mechanism, which was formalized a bit in April 2010 and then put out on IBM's Power Systems Web site last summer before we stumbled upon it.

Last week, that IBM i transfer deal was expanded to cover more machines and formalized to cover all geographies excepting Japan. Starting February 18, customers who are on i5/OS V5R4 (5772-SS1), IBM i 6.1 (5761-SS1), or IBM i 7.1 (5770-SS1) and who are running those operating systems on Power5/5+, Power 6/6+, or Power 7 iron can slide those licenses from one machine to another and only have to pay a net-priced cost for the license (if you are jumping from a P05 to a P10 tier, for instance) plus a $5,000 license fee for the transfer. IBM set up different groups of servers and has rules about what machine you can start from and what one you can move to, but generally speaking, you can't jump an i5/OS or IBM i license from one Power5 or Power5+ machine to another Power5 or Power5+ machine, but you can jump from this older gear to Power6, Power6+, or Power 7 iron. Here is the matrix table of From Systems and To Systems that are included in the i5/OS and IBM i license transfer deal:

As the rules go, you can do license transfers within groups 1, 2, and 3 above or within groups 4 and 5, but you cannot do transfers from groups 1, 2, or 3 to or from groups 4 or 5. If you are jumping from one machine to another machine and are using the same number of cores on the before and after machines and the before and after machines are in the same OS/400 and i software tier, all you need to do is pay the $5,000 license transfer fee. And again, if they are not in the same tiers, then you pay the net cost difference in the license fees plus the $5,000 transfer fee. The "From System" in the transfer has to have been installed for at least a year, and it has to also have been covered with IBM's Software Maintenance (SWMA) tech support services.

Here are some details that are not in the announcement letter. The transfer does not, according to Paradise, move over the SWMA; IBM has different mechanisms for doing this. The transfers can be made across different data centers and across different geographies, and indeed, according to Paradise, this is how some customers were using the early PRPQ offering as part of data center consolidations or data center rebalancing efforts. You do not have to have an IBM i license on the destination machine, either. So if companies want to consolidate their i5/OS V5R4 and IBM i 6.1 or 7.1 machines onto an existing Power System running AIX or Linux, they can do this provided that the groups match up. And, if you are a customer that wants to consolidate a slew of Power 520 servers onto a big ole Power 795, I am fairly certain that IBM will figure out some way to do the deal even though that would mean jumping groups. The user entitlements for the machines being upgraded slide over, but IBM has not said anything about 5250 Enablement licenses sliding over. Make a fuss about this and make sure you don't double pay for this. If you paid for 5250 green-screen processing capacity on your current machine on a per core basis at a certain price, IBM should be offering the same net-cost upgrade fee, core for core.

You cannot support Power4 or Power4+ machines under this deal, or OS/400 V5R3. The original PRPQ in the US and Australia allowed for this.

In addition to the i5/OS and i license being formalized and offered on more machines, Big Blue has also discounted the unlimited user license fee for the Power 720 machines with the special-priced IBM i Solution Edition. On the four-core version of the Power 720, IBM is allowing for users to be sold in bundles of five instead of 10 and has set the price of this five-user feature to $350, or $70 a seat instead of the $250 per seat that IBM has tried to charge in the past. This is a very good price per end user, so don't say I never said anything nice about something you did, IBM. The cost of buying a license to an unlimited number of users on the four-core Power 720 has been cut to $10,500, a 44 percent price cut compared to the prior $18,750 list price. On the Power 720 machines with six and eight cores, that lower $70 per-seat price is not in effect--you still have to buy in 10-packs that cost $2,500--but IBM has cut the price for unlimited user licenses was cut by the same 44 percent, to $28,000 from $50,000.

Obviously there are some customers who are having trouble buying Solution Edition bundles, which offer discounts to customers on hardware configurations if they buy a bunch of system or application software from an approved list of vendors. In many cases, ISVs are still charging in software tiers, and when customers upgrade from one machine--usually a P05 to P10 or a P10 to P20 jump in the installed base these days--they are getting hit by software tier upgrade charges from ISVs and they don't want to pay extra for no change in functionality. To my eye, it looks like IBM is lowering its own revenue just to get the Solution Edition deals done. Hopefully, ISVs will take the hint and start giving a bit, too.

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