The i5 515 and 525: IBM’s Competitive Analysis
April 30, 2007 Timothy Prickett Morgan
If the new user-priced System i 515 and 525 servers that were announced on April 10 show anything, it is that IBM is at least aware that it needs to compete against Windows-based X64 servers if it hopes to remain in the small and midrange server market. In years gone by, as each server successive AS/400, iSeries, and System i5 line has been announced, Big Blue has always compared the new generation of OS/400 or i5/OS server to the prior generations. This obviously missed the point.
This time around, the presentations that IBM is giving to partners and customers reckon the new entry machines line against prior System i5 gear as well as Windows machines. And while the data is a bit thin in the presentations, the competitive analysis that I have seen shows what most of us have known to be an obvious fact of life in the SMB market–even with impressive performance improvements, a geared-down Power platform, even one that is less expensive than last year’s model, just is not competitive with a Windows setup in many ways.
But, with the user-priced i5 515 and 525 machines, IBM is starting to market based on the total cost for a certain number of users, not based on the raw performance of the iron, while at the same time taking the governors off of the System i5 entry machines so the performance gap between an X64 server and a Power5+ server is not enough to bother worry about in many cases.
The effect of removing the governors is substantial, particularly on workloads that use interpreted languages like Java and PHP, and presumably also for RPG and COBOL programs that have legacy modernization middleware sitting between the database and the client screens making them look pretty. This was something that the IBMers who briefed me on the announcements wanted to make clear from the beginning. And rather than talk about Commercial Performance Workload (CPW) performance and how it would be radically improved (in the case of the entry i5 line, from 600 CPWs to 3,800 CPWs on a box with a single core activated), IBM wanted to talk about Java performance and how new-fangled applications–presumably the kind that new SMB customers will use–was being unlocked on these boxes. Take a gander at this chart, which shows the performance of two machines based on the SPECjbb2005 Java benchmark from the System Performance Evaluation Corporation, which has been doing system benchmarks for a very long time:
As you can see from this chart, IBM’s internal tests show an i5 520 Express machine, with a throughput of 3,000 SPECjbb2005 operations per second, and a new i5 515 Express, which weighs in at 20,000 operations per second and has a base list price of $7,995. That’s a factor of 6.7 times more Java performance with a 33 percent decrease in the base price of the system, which works out to a factor of 10 improvement in the bang for the buck. While I have seen a lot of complaining about how these new user-priced i5 servers don’t fit well with many existing customers, that is a very big improvement and it can and will help IBM get new customers. However, as I have said from the get-go when considering user-based pricing, the entire i5 line needs it. Any customer who catches wind that this price/performance is only available in a single socket machine with a dual-core processor and who figures out that larger machines are a lot more expensive than these user-priced boxes will walk away from the deal. There is just no question about that. The user-priced i5s need to be a full product line, and IBM is too stubborn to see that. At least for now. Now is the time to start complaining to your resellers and reps, people.
To help explain the competitive positioning of the new user-priced machines versus Windows boxes and existing unlimited-user i5 520s, IBM gave two examples; unfortunately, the company did not provide detailed feeds and speeds for the comparisons. (But I will do so in a future story in this newsletter when I do my own competitive analysis comparing the new machines to existing i5s, my proposed System iWant boxes (which I wrote about last year), and Windows, Linux, and Unix alternatives.
The first comparison that IBM made was for the hardware necessary to support a five-user ERP system at a distribution company. Take a look:
This is a single server setup on all fronts, and it is only supporting a single application, so there is no server virtualization involved. IBM reckons that an X64 server using Intel‘s dual-core “Woodcrest” processors loaded with Windows Server 2003 would cost $5,800. An i5 520 box with the Accelerator feature on to active let the single 1.9 GHz core go at full speed could cost $25,950–a factor of 4.5 times as expensive as the Windows box. But the new i5 515, which has no governor and therefore does not need to be accelerated, will deliver the same performance and do so in a base configuration that costs $8,563. While this is still 48 percent more expensive than the Windows setup, the i5 515 is a much more competitive alternative to the Windows server in IBM’s comparisons.
In the second configuration, IBM is comparing a bunch of Windows servers to two i5 520s and a single i5 525. In this case, the comparison is for a community hospital that needs to support 100 users for its financial and clinical applications:
In this case, IBM is leveraging the benefits of the integrated server virtualization inside the i5/OS V5R4 operating system to carve up an i5 525 into two parts–one partition to run the financial applications on one processor, and another partition to run on the second activated core in the i5 525 to run the clinical applications. The base i5 525 in the comparison cost $89,770 to support 75 financial application users, and activating the second processor and licensing another 25 users to give them access to the clinical applications costs an additional $15,649. That brings the total cost for this hospital for its base system to $105,419.
Using the existing i5 520 line (not the Express machines, but the ones without the governors), the hospital would have to choose an i5 520 server with i5/OS Enterprise Edition on it to run the financials, and that machine would cost $109,257 all by itself. A second i5 520 machine using i5/OS Standard Edition would be necessary to run the clinical software, which does not need 5250 capacity. By making green-screen software a part of the base hardware instead of an add-on or a for-free feature, IBM was forcing the hospital to buy two machines instead of one, which is all it needed based on the raw capacity inherent in the boxes. But, by playing games with 5250 capacity and raw capacity, IBM was trying to get this organization to spend $157,619 for the basic hardware to support 100 users on the financial and clinical applications. That’s 50 percent more money than it costs for the single i5 525 that can actually do the work.
The four Windows servers and SQL Server 2005 database that is supporting the core financials at this hypothetical hospital cost $62,000, and an additional two servers are needed to support the clinical software, which costs another $18,000. That brings the total Windows system bill to $80,000, and that requires the hospital to manage six servers even if the resulting setup costs 24 percent less. There is value to having a single, virtualized environment. The question is whether or not it is worth a 32 percent premium. What seems obvious to me is that for many customers, the i5 setup that predates the user-priced i5 515 and 525 was only going to be worth the 97 percent premium IBM has been trying to charge for a very small set of customers.