Reader Feedback on User-Priced System i Boxes
April 23, 2007 Timothy Prickett Morgan
It is hard to say for sure how the new user-priced System i 515 and 525 servers will do in the market. I am optimistic that the machines can do a better job of competing in certain situations, particularly among customers who might otherwise install ERP-style software on Windows machines or, worse still, move off the System i5 to a Windows box as part of an ERP upgrade. Having not done the math yet myself on how the boxes compare, I think it is appropriate to share with you some of the initial reader feedback we have received.
Oh, yes! No more games with CPW governors! Now my mind is reeling with possibilities of a bulletproof, virus-resistant server with my favorite OS (but using Tomcat, not WebSphere Application Server) to power a commercial, SOA Web site. However, without a business plan yet, my only question is: How do I convince my wife that we need a Personal 400?
On the serious side:
I assume the five-user limit means concurrent users signed on, and not user profiles declared. Neither your article nor any of the IBM Web site pages explicitly say “concurrent.” I am a little confused about the External Access license.
I once designed a small-scale (60-user) JSP intranet Web application for a Model 820 using Tomcat where I simply let employees login and establish their own database connections, storing the connection objects in their sessions. Crude, but it worked. I assume that approach would still work, subject to the concurrent user limit, right? Of course, the sixth user would be told to take a cold tater and wait.
If the application had been designed to use a connection pool, with maybe five connections created using an internal user profile, and borrowed for a second or two and then returned to the pool, would that work, or would the external license be required technically?
As you can tell, I’m not terribly happy about the extra $3,995 for an external license. I’m envisioning a business environment of one or two programmers, with a small-scale subscription Web service requiring database access to populate html pages, starting with zero users and growing as the business grows.
I assume that for $7,995 you get Java and PHP, but not RPG/COBOL compilers, correct?
Finally, does the Query Manager and SQL Development Kit offer anything useful beyond the STRSQL console? Although I like using it, I can live without it, using my own Java console app. Again, I assume that DFU and normal query functions (STRQRY, RUNQRY) are in the base, as well as Java JDBC drivers. Correct?
As far as I know, IBM counts users at the company who need a unique login and who need to authenticate against the machine. Any random query, say for a Web page that doesn’t require user authentication, does not need a user license. It is not a count of maximum concurrent users that can be on the system at once, but rather a count of all possible users, who may or may not be on the system at one time. The i5/OS External License is a way to get unlimited user licenses for Web-based users (rather than internal network users) who are on the other side of the firewall.
What I am not certain of is whether any external Web access from outside the firewall requires the acquisition of the i5/OS External License, or if you can simply say, for instance, “I want five i5/OS user licenses for my partners who are outside the firewall and ten for users inside.”
As a vertical application System i reseller, this new announcement did nothing for us. In fact overall, it’s a negative.
By the time you add some users, a one-year hardware maintenance contract, and maybe a QIC tape drive, the 515 costs every bit as much as the 520, and often more. But it now has users limits (both purchased users and the system maximum of 40).
The exact break-even numbers will come with some evaluation. But overall, this is very easy. The 515 will be an improvement if you need lots of horsepower and have very few users. If you either don’t need the horsepower or have 20 or more users, then the 515 is a step backward as far as price goes. The 40-user limit will force previous i5 520 Express Entry customers with 25 to 30 users or more to the 525. That will raise the price of the system by over $30,000. This is nowhere close to the competing Windows offerings, or the existing 520 offering.
The biggest problem IBM has with the entry market space is that its internal cost structure is so high that it can’t afford to sell the System i into the small business space. This is a shell game. Perhaps to some degree, it’s even an act of desperation by IBM. An added factor that isn’t visible in the list pricing is that IBM has substantially lowered the discount given to distributors, and, in turn, resellers. Just another part of the shell game.
Maybe I’m wrong on this, but I predict that the 515 (with its artificial user limit of 40) will not be a big seller for IBM with its current rules and pricing. Perhaps the saddest part is IBM will market the $8,000 offering, and customers will be disillusioned when those $8,000 systems actually cost $12,000 or more and have so many strings attached.
I guess the good news is that the IBM System i marketing team can’t market their way out of a wet paper bag.
Ah, IBM is getting sensible: Here’s an offering that does not kick previous buyers in the teeth too much, but still represents a much needed gasp of air in the AS/400 market. It really made no sense breaking a 1.65 GHz processor core to 20 percent, and I am happy to see that this crying shame has ended. Still one gripe: $8,000 becomes 8,000 euros in EMEA, which is a hard-to-swallow markup of 34 percent. The fact that 1 euro is more expensive than $1 seems to hurt some prides as much as that it hurts EU exports to the U.S. Would it then be reasonable to use this difference to finance an action to aggressively mop up existing machines that perpetuate the “old architecture” myth of our beloved platform?
Hope this becomes as big a success as GreenStreak was. (At least!) And developers should jump on this.
All I can say is: Be glad that your currency is strong, and I wish the dollar was doing a little bit better, too. But the way the United States is importing everything but corn, music, healthcare, and software from overseas, I don’t have a lot of hopes for the U.S. dollar strengthening and therefore IBM lowering its overseas prices a bit. I suspect that no other vendor does, either. They get about five percent added to the top line right now, and sometimes more, from currency exchange rates alone each quarter.
I am not an economist, but I have this suspicion that this is what happens when you stop building things and become a service economy that runs on a giant American Express card. For my part, I wish IBM had a high volume factory in Rochester that could make your System i5 machine in such quantities that the price would drop to $5,000, not $8,000. This would have only been possible if the Power chips used in entry servers were also used in PCs and workstations, too, and therefore became a low-cost, high-volume product. IBM’s game console chip business helps, but not enough.
Can you explain how IBM came up with the $7,995 price for the i515? It seems as arbitrary as the pricing from the per-user-based pricing era.
The p5 starts at $2,995 and $3,717. Add five i5/OS users at $250 per user and you get what a true user-based pricing base price would be: $4,245 and $4,967.
Is there an improved system performance and/or i5/OS functionality justification for not running i5/OS on the p5? If not, then the i5 execs are continuing to play their “maximize the revenue of a market-share-losing system” games.
i5/OS and DB2/400 do not cost $250 per user in combination. To add the users to the system, you still have to pay for a base, integrated i5/OS and DB2/400 server license, which is not broken out by IBM, but it is nonetheless there. And based on your math, I would say that this base charge is somewhere in the neighborhood of $4,000 to $4,500. How much of this is for the base i5/OS and how much for the base DB2/400 is unclear, but in the Unix and Windows worlds, the database is the more expensive bit.
Windows and its related middleware and databases are no different. The base license costs a few grand and then you add seats for $40 a pop. The fees are lower, to be sure. I will be doing the math myself to see what the comparisons are. First, I will go through how IBM positions it, and then I will do my own comparison.
You know that I live for this sort of thing. That, and kisses from my kids, the love of a good woman, and beer.
Timothy, two things that I can point out that I absolutely hate about this announcement are:
I was thrilled to first hear this, but now that I am getting deep into the announcement, it feels like Rochester is doing a rope-a-dope on us.
For around $6,000, I have a very powerful 270 machine. The base box costs around $3,000 and then I added WDSc and maintenance, which is the rest of it. That pretty much is everything I need as a developer. I’m at the latest V5R4 release.
The obvious question is when competing with Intel/Windows, we’re talking developer boxes with all the software I can possibly want for well under $7,000. As I’ll continue to say, it’s the developer stupid!
IBM does not get this. It’s understood that some market penetration will be made, but not at the level [that could be attained] if developers could get a box with everything cheaply.
Better than nothing, I suppose, and it certainly may cause the used-machine market problems.
But the overriding question I have is: How much will it cost to get the box up to snuff with all of WDSc, PHP, and other tools, just to begin using it as a developers box? I’m not sure, but I think Zend Technology is charging for the tools a developer really needs for deployments, so once again what is the total cost?
If I read this right, I’m starting at $8,000 without maintenance and tools.