The Four Hundred

OS/400 Edition
Volume 11, Number 25 -- June 24, 2002

IBM Rejiggers WebSphere Development Studio Toolkit Prices, Tweaks Deals

by Timothy Prickett Morgan

We're playing a little catch up with IBM's flurry of price changes and deal tweaks in the past few weeks. IBM has significantly changed prices for the WebSphere Development for iSeries toolkit. IBM is also offering discounts to customers who buy selected development tools through its Web store. Finally, IBM has added the new iSeries Model 890 "Regatta" server to a number of existing deals, while at the same time tweaking other terms in those deals.

The price changes in the WebSphere Development Studio for iSeries toolkit appear to be aimed at encouraging more small OS/400 shops to buy into WebSphere Development Studio, while at the same time extracting a little more money from larger OS/400 shops that do not feel the budget pinch in bad economic times quite the same way as small companies do. IBM has sold more than 50,000 licenses to WebSphere Development Studio in the past year, and it probably wants to sell another 50,000.

Here's how prices for the core WebSphere Development Studio for iSeries program, number 5722-WDS, line up after IBM's June 11 price changes:

For servers in the P05 tier, the base WebSphere Development Studio for iSeries program costs $2,650, down 27 percent.

In the P10 tier, the price is unchanged at $8,200.

In the P20 tier, the price is unchanged at $22,900.

In the P30 tier, the price rose by 26 percent, to $56,600.

In the P40 tier, the price also rose 26 percent, to $84,300.

In the P50 tier, again, the price rose by 26 percent, to $112,300.

Prices in the new P60 tier were set at $134,800.

If you play around with the numbers above and estimate the distribution of WebSphere Development Studio licenses that IBM can ship in each software tier, it looks like IBM can generate about $250 million in revenue for every 10,000 new WebSphere Development Studio licenses--these numbers do not take into account customers who are on Software Subscription and who, provided they have previously bought the right development tools, can upgrade to WebSphere Development Studio for free. I think IBM has come to the conclusion that it has to stimulate demand for WebSphere Development Studio at the low end, where most developers have a machine, and that it can raise prices at the high end to fund the price cut at the low end. My guess is that these price changes will stimulate enough demand that IBM might be able to boost WebSphere Development Studio sales overall. If IBM's price changes can boost WebSphere Development Studio shipments at the low end by as much as I reckon they can, WebSphere Development Studio-related revenues (for new licenses sold) could increase by 50, or maybe even 60, percent. This only makes the iSeries look better to Software Group, and that is important.

Over at the developer's section of IBM's Web store, IBM is offering customers in the United States a 20 percent discount on development tools and systems software bought online and delivered in an electronic format. A 10 percent discount is available for customers who buy online and then ask for real manuals and hard media delivery of the programs. On the iSeries, the interesting programs that are covered under this promotion are the various Lotus Domino servers (mail, application, and enterprise) and Lotus Domino connectors for popular ERP suites and WebSphere Development Studio for iSeries. IBM's DB2 UDB database for Windows, Linux, and Unix are also available under this promotion.

The eServer iSeries Server Consolidation and Rebate promotion, which IBM announced in February, has been updated to include the Model 890 server; it also includes Model SXX and 7XX servers as replacement machines. The rebate amount for customers purchasing Integrated xSeries Adapter (IxA) cards has increased to $2,000, and customers can get a rebate on each IxA card they buy. This deal also offers a rebate of 5 percent for replaced IBM machines or 8 percent for replaced non-IBM machines to customers who are buying a new Model 8XX server. Customers consolidating workloads from multiple AS/400 and iSeries machines to a Model 8XX can get a 5 percent rebate as well.

The Model 890 server has also been added to the eServer iSeries Dedicated High Availability Server rebate, a special packaging that was announced for target high-availability servers back at the spring COMMON midrange user group meeting in Nashville. As we explained in a prior issue of this newsletter, this high-availability rebate has the distinction of being the first $1 million rebate I have ever seen from IBM, or indeed from any other server vendor. On Model 820 machines the rebate was $235,000, on Model 830s it was $450,000, and on the Model 840 it was $1 million. The rebate on the Model 820 machine has been dropped to $200,000, reflecting lower charges in Model 820 servers that IBM announced at the end of April. The $1 million rebate was also extended to the Model 890 server. The companion eServer iSeries High Availability and Implementation Services rebate gives a 10 percent rebate to customers who acquire a new Model 8XX server for high-availability clustering and who buy at least $1,000 of services, and gives a 5 percent rebate to customers buying an upgrade to a Model 8XX machine.