Reader Feedback on Quad Core i5 Processor Modules

Published: October 23, 2006

I found your article on quad processors quite interesting. We have two applications: JDE OneWorld and Datatex J2EE ERP system running on the i5.

We have been disappointed in the performance of our two i5 520s. It is clear to me that the amount of memory you need to run WebSphere is so high--we estimate you need 40 GB of main memory for a few hundred users--and the cost of the hardware so expensive that we are no longer investing in this platform. Our future direction is Intel.

We, like Apple, find the Power architecture, as used in the iSeries, way underpowered versus what they claim for true Web applications. It screams at green screen, but is a dog when it comes to Web applications.

Currently, we have to run the Web applications on Intel servers (using both JBoss and WebSphere) and use the iSeries as just a database machine. It is too expensive to be that, but too underpowered to do much else. For the same amount of money I have spent on the iSeries, I should be able to host twice as many users on Intel.

I agree with your candid comments.

--Jon [Last Name Withheld],
Vice president of planning and development, [Company Name Withheld]

Thanks for the insight, Jon. I find myself in the unusual position of arguing IBM's case for it rather than trying to coerce behavior out of IBM to make it easier for the company to argue its own case.

Life is funny, eh?

Since you sent me this e-mail a few weeks ago, IBM has launched the i5 520 Solution Edition boxes with 20-user and 40-user caps. These machines have full cache and run at the full 1.9 GHz clock speed, and offer processing, memory, and disk capacity at much lower prices. The smaller i5 520 Solution Edition may only support 20 users, but it is 67 percent less expensive than a regular i5 520 Standard Edition with the same performance.

It seems to me that what we need to do is convince IBM to work its pricing backwards, all the way to zero users. And then start charging a per-user fee for concurrent i5/OS users. The 20-user machine has an estimated street price of $12,250 by my reckoning, and the 40-user box costs around $22,800 (that is without activating the second core and putting i5/OS V5R4 on it). The incremental 20 users going from one box to the other is nearly linear, which implies that IBM's pricing, on the user-capped boxes, is really free hardware and around $600 per user.

This is not exactly how I would do it. I would have priced up the hardware in such a way that the i5 520 would have a base price exactly equal to a discounted System p5 520 Express server with the same 1.9 GHz Power5+ chip. Call it $6,000 for the 4 GB of memory and four 35 GB disks on the larger box. That leaves $420 per user for i5/OS and its integrated DB2/400 database. It is worth noting that during the mid-1990s, when IBM offered user-based pricing for OS/400 and DB2/400, it charged $400 per user plus a base fee.

The problem with this scenario, of course, is that with a few hundred seats, you would rack up $80,000 in software fees on a small i5 520 box. This is great for Software Group, but a very expensive sell. The trick is to get the per-user fee low enough so customers can grow their users and not feel like the user-based fees are a punishment, but high enough so IBM can make money on the System i5 line. If IBM can't make money, that won't work, either. The good news is that profits on software are much higher than profits on hardware. So this would be a relatively easy sell.

My gut feel is that $400 per user is the right number, but that IBM should try to amortize it over three years and charge a rental fee for this. There are probably somewhere around 20 million seats out there in i5 land--it may have slipped as slow as 15 million seats, but it used to be around 22 million seats at the end of the 1990s, compared to around 25 million seats for the mainframe. Imagine if IBM switched the whole base over to a rental model. Call it 15 million seats and $200 a year per seat. That would be $3 billion in software fees. And then, the hardware in addition to that, if priced exactly like the p5, could be maybe $1 billion a year if the change in strategy pumped up volumes by a factor of three or four.

This would be a business IBM's bean counters and its elusive chairman might even say something nice about.

--TPM

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