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TFH
OS/400 Edition
Volume 12, Number 42 -- October 20, 2003

IBM Cuts iSeries Deals, Gives Discounts on Model 810


by Timothy Prickett Morgan

It's the fourth quarter, and, traditionally, that means it's time for IT vendors to sell and for IT organizations to spend. While there is some hope of a turnaround in the economy, and maybe even an uptick in IT spending, nothing much happens in a vague spending environment without wheeling and dealing. Last week, IBM announced a bunch of iSeries deals to try to get companies to spend some money.

None of these deals are a blockbuster; even when put together, they don't add up to much. But combined with negotiated prices, reseller and IBM value adds (like services) that are often thrown in to win deals but are not typically part of the price, as well as the lower prices that IBM has for the iSeries since January when it revamped the line, the first wave of deals for the iSeries and other products of interest to iSeries shops does make the idea of spending money now, rather than in 2004, a bit more palatable. I say first wave, by the way, because I think IBM may have some other deals up its sleeves, not specifically for the iSeries. A lot depends on how the next few weeks go. If the fourth quarter is peppier than the third, and IBM thinks it can meet its numbers for the fourth quarter, there will be as little wheeling and dealing as possible. If the fourth quarter starts heading south, however, IBM will pull out the stops--maybe not with the iSeries but certainly with other products.

In any event, here is what IBM announced last week.

Deal One: Trade-Ins for Vintage AS/400s

Customers with AS/400 4XX, 5XX, 6XX, and SXX generations machines, which were the first and second generations of RISC-based AS/400 servers, can get a trade-in credit toward the purchase of a new iSeries Model 810 or Model 825 running OS/400 Enterprise Edition. The AS/400 4XX and 5XX machines date from late 1995 and use the "Cobra4" and "Muskie" PowerPC AS processors, which have between one-tenth and one-twentieth the power of today's iSeries processors when the OS/400 governors are not holding them back. They are very long in the tooth, but are very reliable and still prevalent in the OS/400 server installed base. The 6XX and SXX models date from the summer of 1997 and use the "Apache" PowerPC processors, which are somewhat more powerful but are still quite outdated for modern workloads like Java and WebSphere. Under this promotion, IBM is giving customers who trade in a Model 4XX machine a $6,000 credit, a Model 5XX machine an $8,000 credit, and a Model 6XX or SXX machine a $10,000 credit. This deal expires December 31. There are no upgrades from these vintage AS/400 machines to the new iSeries line, so customers have to do a full box swap.

Deal Two: Model 7XX Discounts

IBM realizes that it can't get every AS/400 7XX shop to move to a new iSeries machine, and while it is no longer offering upgrades from Model 7XX machines to Model 8XX boxes, as of October 8, it still has some 7XX parts in its warehouses and in the channel that it wants to get rid of. To that end, IBM last week announced a 20 percent discount on all Model 7XX equipment, from base servers through memory cards, I/O cards, disk drives, and all other features associated specifically with the machine. This promotional discount runs only until December 19. A few weeks ago, just before the 7XX-to-8XX upgrades were withdrawn, IBM's U.S. unit chopped the prices of some 7XX-to-8XX upgrades by between 30 and 38 percent, depending on the model upgraded from and the model upgraded to. IBM has been warning customers that Model 7XX gear would be withdrawn since January, and has been using both carrots and sticks to prod these shops to buy.

Deal Three: An Entry iSeries High-Availability Server Rebate

While IBM officially launched its iSeries for High Availability servers in September, after talking them up since July, those machines were limited to configurations based on Model 825, 870, or 890 servers, which are big Power4-based servers. These special iSeries for high availability servers could only be configured with high availability clustering software from DataMirror, Lakeview Technology, and Vision Solutions; software from iTera and Maximum Availability were excluded from this offering. There were two problems with this. First, anyone who needed a smaller iSeries for high availability clustering didn't get an option. Second, iTera and Maximum Availability are legitimate high availability software suppliers for iSeries shops and should not be treated as second-class iNation citizens.

Surprisingly, Big Blue last week rectified this situation at least partially, when it announced rebates on the four different versions of the Model 810 server, which is based on the S-Star PowerPC processor. The rebates are not the same thing as a price cut, which the iSeries for high availability has, since customers have to pay upfront for a Model 810 machine and then get some of their money back. But the rebate ranged from $15,000 to $40,000, so it is not an insignificant discount. To get the rebate, customers can buy DataMirror's iCluster or HA Cluster, iTera's Echo2, Lakeview's MIMIX dr1 or MIMIX V4 plus HA bundle, Maximum Availability's NoMax, or Vision Solution's Vision Suite Enterprise Edition, Orion Express, Orion, Professional, Orion Enterprise, or Orion Enterprise software. The Model 810 must be used as the target machine in a high availability cluster, it must be running OS/400 Enterprise Edition, and the production server at the OS/400 shop must be a Model 270, 7XX, or 8XX server.

Here's how the rebates break down on the different Model 810 machines:

  • The Model 810-2465, a uniprocessor that is rated at 750 CPWs of raw processing power, gets a $15,000 rebate. This is effectively a 27 percent discount off list price for the base server.

  • The Model 810-2466, a uniprocessor that is rated at 1,020 CPWs of raw processing power, gets a $20,000 rebate. This works out to a 26 percent discount on the server.

  • The Model 810-2467, a uniprocessor that is rated at 1,470 CPWs of raw processing power, gets a $20,000 rebate. This amounts to a 17 percent discount.

  • The Model 810-2469, a two-way that is rated at 2,700 CPWs of raw processing power, gets a $40,000 rebate. This rebate comes to a 17 percent discount against the base price of the Model 810-2469.

As you can see from the numbers, IBM is not apparently very keen on giving customers who choose a more powerful Model 810 server discounts that are comparable to what it is giving on smaller machines. Why this is the case is anyone's guess; it could be that IBM wants to push these customers to buy a Model 825 iSeries for high availability server. But, given that these machines are in the P30 software tier, compared with the P10 or P20 tier for the two larger Model 810s, this seems unlikely. If I were guessing, I would say IBM knows that customers who should buy these two larger Model 810 machines for high availability clustering will not be able to afford the Model 825 iSeries for high availability, and they will not be able to get by with the smaller Model 810s. So IBM has them right where it wants them, hence the rebates (and thus the effective discounts) are less impressive.

Many of you have known me for a long time, and you don't even have to guess how I feel about such dubious pricing practices. That said, I am glad that IBM is offering smaller iSeries shops a break on acquiring servers to support high availability clustering and is giving iTera and Maximum Availability a place at the table, too. This is progress, and it is important to say so in order to encourage IBM to behave better.

One last thing about this high availability offering: this promotion expires December 31. IBM should just bite the bullet and offer official Model 810 iSeries for high availability servers and be done with it. It may just be testing the waters to see if this is practical or desirable.

Deal Four: Low Financing Rates on eServer Iron

IBM Global Financing has put out another modified low-rate financing deal for eServer customers. Under the Power of Zero Plus deal, from Global Services, customers who spend between $25,000 and $1 million per IBM-branded product line, and who finance their acquisitions with fixed terms between 24 and 60 months, can get gear at an interest rate of 3.75 percent for all hardware except PCs, which carry a rate of 4.35 percent. Software is being offered at a rate of 3.15 percent. These low rates are effective until December 31, which is also the last day that customers can take delivery of their gear or software from IBM under this deal. All models and upgrades in the iSeries, pSeries, and xSeries servers can be financed under these terms, and the new zSeries z800 entry mainframe can be, too, but not the high-end zSeries 900s and 990s. All models of IBM PCs, IBM's TotalStorage tape and disk storage, printers, retails systems, and software sold on a one-time-charge basis can also be financed under the above terms.


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THIS ISSUE
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BACK ISSUES

TABLE OF
CONTENTS
IBM Cuts iSeries Deals, Gives Discounts on Model 810

Some Salaries at OS/400 Shops Grow, Others Decline

Bellwether IBM Sees Stabilization in Third Quarter

EDS, Opsware Propose Data Center Markup Language

As I See It: Dissecting Diversity

But Wait, There's More


Editor
Timothy Prickett Morgan

Managing Editor
Shannon Pastore

Contributing Editors:
Dan Burger
Joe Hertvik
Kevin Vandever
Shannon O'Donnell
Victor Rozek
Hesh Wiener
Alex Woodie

Publisher and
Advertising Director:

Jenny Thomas

Advertising Sales Representative
Kim Reed

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