The Four Hundred

If you get IBM's announcement letters, you might have thought that Big Blue raised prices on entry iSeries Model 800 servers on September 5. It sure looked that way when I saw the announcement. But apparently the $4,000 price hike on two entry iSeries models is the result of a misunderstanding.

I'm convinced that, if anyone had read this announcement before the COMMON conference, the top brass on the stage at the iSeries Nation Town Hall meeting would have gotten an ear full. No one did, though, since the announcement went out while most people were traveling to the conference. The $4,000 price increase is significant, and if people misunderstood what IBM was doing, they might have come to the conclusion that such an increase could hurt the competitive position of these smallest OS/400 servers in an already harsh server environment. But the situation is not as bad as it looks.

IBM has not raised the price on the smallest of the new iSeries line, the iSeries Model 800, with the Value Edition configuration. The Value Edition includes a small iSeries box with a 540 MHz S-Star PowerPC processor, 256 MB of base memory, a single 17.5 GB disk drive, 25 CPWs of 5250 green-screen processing capacity, and a rating of 300 CPWs on non-5250 workloads. The Value Edition includes full licenses to OS/400 V5R2 and its integrated DB2/400 database, all for $8,795. This machine offers pretty good bang for the buck compared with other iSeries machines running non-5250 workloads, at $29 per CPW for a base configuration, but is pretty pricey at $352 per CPW on green-screen workloads in a base configuration. And it probably doesn't have enough memory or disk capacity to be useful. Not to mention that it doesn't have a tape drive, which is also a necessity for most customers.

And that is apparently the point of confusion. You see, many of us were under the impression that the next two bigger iSeries Model 800s had a tape drive included, which would at least partially justify their much higher price tags. I know I thought that myself after talking to IBM in January, and I wrote as much. However, although a tape unit was apparently mandatory on the Model 800 Standard Edition and Advanced Edition machines, the cost of the unit was not included in price of the base machine. Oops! The confusion probably got some customers riled up when they saw the bill for a tape drive. Now a 30 GB QIC or 80 GB VXA-2 tape drive is part of the base server price, which has been raised by $4,000 on these two machines.

Here's the deal. The Model 800 with the Standard Edition configuration adds a 2 MB L2 cache card to the processor (which helps performance even though IBM's relative CPW ratings do not reflect this), plus a second disk drive, another 256 MB of main memory, and a 30 GB quarter-inch-cartridge (QIC) tape drive. The Standard Edition also includes WebSphere Express, Performance Tools/400, and DB2 Query Manager and Development Toolkit/400. However, IBM keeps the governors on it at 25 CPW for 5250 workloads and at 300 CPWs for other workloads, and now, after a $4,000 price increase, it costs $18,860, including the mandatory QIC or VXA-2 tape drive. That's 27 percent higher than what you thought you had to pay if you thought the tape drive was included.

Ditto for the Model 800 Advanced Edition, which is the same machine but with the generic workload governors removed, so it can do 950 CPWs of processing, or with the 5250 governors doubled, to deliver 50 CPWs of power. As with the Model 800 Standard Edition, the Advanced Edition now has the mandatory 30 GB QIC or 80 GB VXA-2 tape drive feature bundled into its price. The price of this server with the tape drive included is now $38,363, an increase of 12 percent, for a base configuration with 512 MB of main memory and two 17.5 GB disks.

Here is an updated table that shows the entire iSeries product line, with base prices. (I also fixed an error in this table concerning the CPW ratings of the Model 800 Standard Edition: I kept thinking that the machine had a rating of 950 CPWs on raw workloads, but it doesn't.)

IBM could have just eaten the cost of the QIC drive. They can't cost Big Blue more than a few hundred bucks each. A 160 GB VXA-2 drive from Exabyte costs under $1,000 at retail but doesn't include the electronics to talk iSeries or OS/400. Given this, I think $4,000 is a harsh price to pay for an entry tape drive. I have heard rumors that IBM is concerned about the profitability of the entry iSeries machines, so this might have something to do with it. Moreover, by explicitly including of the cost of the tape drive in the configuration, IBM can drive out alternative tape drive suppliers, including eStorage and GST. I think jacking up profits on entry iSeries machines and driving out competition is what this price "clarification" is all about.

You don't have to stand for it, of course. If you don't want IBM's tape options, or the prices for them, knock $4,000 off the Model 800 price, negotiate as you normally would, and tell IBM to keep its expensive tapes. Then talk to eStorage or GST and see if they can do better by you.