It Was Inevitable: IBM Jacks Maintenance Fees on Midrange Gear

Published: March 19, 2007

by Timothy Prickett Morgan

With System i5 sales off for the past few quarters and many customers sitting tight on vintage AS/400 and iSeries gear that works just fine, thank you very much, it comes as no surprise that IBM increased maintenance prices on many auxiliary pieces of equipment relating to AS/400, iSeries, and System i5 boxes last week. The System i division has to make its numbers and it has to encourage customers to upgrade at the same time, and raising maintenance prices is one of the standard sticks in the computer racket when carrots are not working.

IBM changed prices on two sets of maintenance fees as they relate to midrange gear as well as other hardware it sells. Changes to Enterprise Service Agreement (ESA) onsite, 24x7 support are outlined in this announcement letter, while changes in Minimum Monthly Maintenance Charge (MMMC) 24x7 and IBM onsite repair maintenance fees are outlined in a separate announcement letter.

IBM did not raise maintenance fees on the AS/400 and iSeries servers in its vast installed base, however--at least not yet. But prices have gone up on peripherals and expansion boxes that are related to these machines, and considering that these are very reliable pieces of machinery (many without moving parts), it is hard to see this as anything but an effort to pad revenues and encourage customers to move to more compact and modern machinery. The price changes are quite large in some cases. The price for feature 0578, 0588, 5078, and 5088 PCI and PCI-X expansion units went up by 133 percent to $240 a month. Feature 0595 and 5095 PCI-X tower units saw their prices go up by 9.6 percent to $274 a month. Maintenance for the feature 5066 1.8 meter I/O tower rose by 22.3 percent to $2,123 per month, while the price for the feature 5079 and 5294 1.8 meter towers increased by 4.7 percent to $2,121 per month. Across all of the features for 9402, 9404, and 9406 machines, maintenance fees went up by an average of 37.6 percent and about 120 bucks a month.

IBM's 3581 LTO tape loaders saw a price increase for monthly maintenance that ranges from 15 percent to 25 percent, now ranging from $1,709 to $2,479 per year. IBM raised maintenance fees on 3583 LTO tape libraries by 15 percent, but cut prices on 3584 LTO libraries by 17 percent. The 3590 tape drives, which predate LTO technology, saw maintenance prices rise by between 9.3 percent and 10.7 percent.

As we previously reported, IBM raised maintenance fees on iSeries servers back in February 2006, raising prices on various peripherals and expansion boxes by between 17 and 19 percent. Then, in April 2006, IBM announced that it was raising maintenance fees by around 9 percent on selected vintage AS/400 servers. Specifically, prices went up on 9401 Model 150, and 9402 and 9404 deskside AS/400s in the E, F, 3XX, 4XX, 5XX, 6XX, and SXX families, as well as for the 9406 Model 170, 250, and 270 deskside machines; they also applied to bigger 9406-class boxes in rack-mounted and standalone big tower servers in the same E through SXX generations as well as on the more recent Model 7XX servers that are more or less concurrent with the Model 250 and 270 deskside machines. This 9 percent price hike on server maintenance went into effect on July 1, 2006.

You'll notice that first and second generation iSeries machines from 2000 and 2003 were exempt from maintenance fee price hikes last year. If 2007 is like 2006, then the price hikes on maintenance fees will come first--as they did last week--and then there will be a price hike on iSeries boxes themselves coming, maybe after the first quarter ends. IBM must be sorely temped to raise iSeries maintenance fees to try to encourage customers to move to System i gear. The company could even further raise maintenance fees on vintage AS/400 gear, too. I would not be at all surprised if Software Maintenance fees, which roll SupportLine tech support and hardware maintenance into one, went up sometime early this year, too.

IBM does not raise maintenance prices on servers very often. Maintenance fees for AS/400 machines went up in March 2003, when IBM jacked up prices across the board on AS/400 B, C, D, E, F, CISC AS (2XX and 3XX), first generation RISC AS (4XX and 5XX), AS/400e SXX and 6XX, and AS/400 7XX machines by 5 to 6 percent. Vintage AS/400s also saw maintenance prices increase by 9 percent in 1999, and in April 1996, IBM raised maintenance fees on System/36 gear by 15 percent and on vintage AS/400 gear by 9 to 13 percent.

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