IBM Adds i Shops to Expanded p Shop Trade-In Deal

Published: March 2, 2009

by Timothy Prickett Morgan

Last week, IBM added the i side of the Power Systems house to a long-running trade-in deal it was giving to shops using alternative Unix and proprietary platforms from Sun Microsystems, Hewlett-Packard, and Fujitsu if they acquired a System p 550. In addition, the company tweaked the deal to offer incentives for shops buying Power 520, 550, or 560 servers and also announced discounts on i5/OS V5R4 and i 6.1 user licensing fees.

The original System p trade-in deal was launched in February 2008, just as IBM was putting the dual-core Power6 processors into its System p lineup in the midrange of the line and ahead of the April 2008 merger of the System p and System i product lines.

That trade-in offer was only available to customers who were dumping Sun and Fujitsu Sparc servers as well as HP's Alpha, PA-RISC, and Itanium machines. Depending on the configuration of the replaced server, IBM was giving anywhere from $3,000 to $9,600 on machines with between two and 12 processor cores. At the time, IBM said that the amount of the trade-in credit was based on its assessment of the fair market value of the server plus "an additional incentive." And looking at those numbers and the relative vintage of some of the machines (particularly some HP Integrity and Fujitsu PrimePower 1500 and 2500 servers), I think IBM is crashing the supposed market just a bit. I simply do not believe that a PrimePower 2500 with a dozen processors is worth under $9,600, and certainly not with memory and other peripherals in the box. Anyway, under the original deal, IBM capped the amount of the trade-in credits customers could get based on the size of the System p 550 machine they acquired, which at the time were configured with Power6 processors running at either 3.5 GHz or 4.2 GHz.

In April 2008, IBM expanded the number of Unix and proprietary machines from HP that were targeted under the deal, adding older Superdome machines, but the financial terms remained the same.

Last week, Big Blue remembered that the System p and System i products have merged and also recalled that there is a pretty big installed base of AS/400 and iSeries iron out there that can and should be targeted as much as its rivals Unix and proprietary iron. Because, let's face it, in this economy, if IBM doesn't cut those AS/400 and iSeries customers a deal and show some love, HP, Sun, and Fujitsu are sure going to try. IBM is also allowing customers who bought Power5-based System p 520 and 550 servers to take advantage of the trade-in credits. After all the rejiggering, AS/400 and iSeries are being given pretty miniscule trade-in credits, ranging from $250 to $1,500, and if you are contemplating an upgrade right now, you should argue that this only includes the value of the base processor and chassis, not the peripherals inside the box. Either that or get a secondhand dealer to tell you what the machine in your shop is really worth. System p 520 and 550 boxes are being given trade-ins ranging from $250 to $2,000, so it is not like the company is being super generous to AIX shops, either. You can see the trade-in credits IBM is giving in this table.

This time around, the trade-in credit ceilings that are part of the deal are both higher and lower than in the original deal, which stands to reason now that Power 560 machines, which can offer up to 16 Power6 cores, and Power 520 boxes, which go as low as a single core and as high as four cores, are added to the mix of machines customers can acquire under this trade-in deal. The credit ceiling ranges from $500 on a single-core Power 520 to $16,000 on a 16-core Power 560. You can see the trade-in credit ceilings IBM has set under this deal in this other table.

To take part in this trade-in credit deal, the replaced iron has to have been in use at your site as of February 22. Although the announcement letter doesn't say this, the way these deals work, IBM and its channel resellers are able to cut a check right back to you for the trade-in, but they do not and will not discount the deal on the front end by the trade-in amount because they want to book the higher revenue and eat the trade-in as a cost.

To help cushion the blow of the economic meltdown among its small and medium business customers most likely to buy Power 520 rack or tower servers or BladeCenter JS12 or JS22 blade servers, IBM also last week announced a special promotion on i5/OS V5R4 and i 6.1 end user licensing fees, and between February 20 and June 19, it is giving companies end user licenses for half price. That drops the price from $250 to $125 a pop. The discount can also be applied to software features that convert from user-priced i5/OS and i OS licenses to unlimited user licenses, which is a very attractive thing to certain companies.

Read on to the next story in this issue to learn more about IBM's iLoyalty sales campaign and how it is pitching these and other deals through its channel to end users who are hesitant to spend money.

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