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IBM Raises AS/400, Other Maintenance Prices by Timothy Prickett Morgan Every couple of years, IBM raises maintenance prices on vintage computing equipment that it is supporting. On March 18, IBM once again raised prices on various vintage AS/400 machines. The minimum monthly maintenance price increases that affect AS/400 gear are effective on July 1. The price increases have two purposes: to try to get AS/400 shops to move to the iSeries and to wring more money out of those shops that stay put. 
The price increases range from 5 to 6 percent on vintage AS/400 machines in the 9402 entry, 9404 deskside, and 9406 enterprise server classes, and spans equipment from the 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. The price increases cover the base servers and individual processor features of the equipment. The maintenance price increases cover standard monthly maintenance agreements and enterprise service agreements (ESAs). While most prices were raised, some were lowered, and these lower prices became effective March 18. Price increases on warranty service agreements under the ESA go into effect on April 1. All other price increases go into effect on July 1. IBM has traditionally given customers about three months' warning on maintenance charge increases. To see a full listing of the price increases IBM has set for maintenance, click here. (Warning: This is a very large file. If you just want the raw data, instead of my math added to this data, you can read IBM's announcement letter on maintenance price changes and the letter on changes in the ESA contracts. Almost exactly a year ago, IBM raised maintenance prices on various peripherals and mainframe equipment, and instituted monthly fees on some expansion chassis and other AS/400 and iSeries gear that did not have maintenance fees associated with them. IBM also jacked up usage fees on various printers popularly used at midrange sites this time last year. As with the changes announced last week, IBM upped charges on the same equipment when covered under its ESA contracts. In late March 1999, IBM raised maintenance prices on what were then vintage AS/400 and RS/6000 midrange machines by 9 percent. Specifically, the price increases affected 9402, 9404, and 9406 AS/400 machines in the B, C, D, E, and F vintages. IBM also increased monthly maintenance fees on Model 200 and 400 systems, 40S servers, Model 236 and 436 Advanced 36 systems, and Model 620-2175 and 620-2179 systems. And IBM instituted fees on some 50XX expansion frames that did not have fees. In June 1998, IBM lowered prices on maintenance for the AS/400 620 and S40 by 11 percent and 34 percent respectively, and it increased maintenance prices on the processor features associated with them enough that it more than offset the decreases. In April 1996, IBM increased maintenance fees on System/36 equipment by 15 percent (a stick to help encourage customers to move to AS/400 equipment) and raised prices on vintage AS/400 equipment by 9 to 13 percent, and instituted new maintenance charges on selected processors and other features for AS/400 equipment. Raising maintenance prices is the oldest trick in the book for IT vendors when it comes to trying to boost their revenues and profits in a down economy. And it is particularly useful as a carrot-and-stick marketing tactic when you consider that, on AS/400 servers, the amount of maintenance money that companies spend per month for a given amount of CPW power is a lot higher on an old piece of equipment than on a new one. Let's take one example. The Model F95 system is a four-way machine that was announced ten years ago, in the first quarter of 1993. It is rated at about 112 CPWs of processing power and was announced with a minimum monthly maintenance charge of $3,500. So, when you do the math, the maintenance on the F95 box (not including expansion, disk, and tape features) originally came to $42,000 per year on the $1 million machine, which works out to $376 per CPW per year. After the price increases announced last week, monthly maintenance on the F95 has increased to $4,207, which comes to $50,484, or $452 per CPW per year. The smallest Model 800 in the new iSeries line has a minimum monthly maintenance fee of $58. That works out to $28 per CPW per year based on the 5250 OLTP performance of the box (25 CPWs) and to just over $2 per CPW per year based on the raw performance of the box (300 CPW). This is a huge disparity in maintenance pricing. Even the largest iSeries machine available today--a 32-way Model 890 server--has a base maintenance of only $2,175 per month and offers anywhere from 20,000 to 37,400 CPWs of power. That's half the price for monthly maintenance for a machine that has anywhere from 180 to 335 times the performance, which works out to well under a dollar per CPW per year for maintenance. Maintaining old equipment is ridiculously expensive, and that's why many OS/400 shops have long since taken their machines off maintenance. With this older equipment, it is far less expensive to buy a whole second-hand machine and store it on-site, especially since IBM is no longer supporting OS/400 V3R2 or V3R7 on the equipment. The customers who run these machines are part of the OS/400 community, to be sure, but they are as different from iSeries customers as System/36 customers were distinct from the go-go early AS/400 adopters in the late 1980s and early 1990s. The net effect of the price increase might be a slight increase in iSeries sales because of the economics, but there is an equally likely possibility that customers will just buy cheap second-hand vintage AS/400 equipment, maintain their gear themselves, and stay one more time out of the new generation of OS/400 servers that IBM has announced.
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