IBM Tweaks Flex System And PowerLinux Prices
January 7, 2013 Timothy Prickett Morgan
It is difficult to tell what any IT vendor is thinking as a year comes to an end, much less a year with the kind of economic uncertainties that we all were facing as 2012 came to a close. But after The Four Hundred went on hiatus and before the new year got rolling, IBM did a few nips and tucks and tweaks to pricing for its latest servers that indicates it is not happy with its competitive position. The changes were made to price lists in the United States and Canada, and the products not affected by changes are as significant as those that were.
In announcement letter 312-140, which came out on December 18, Big Blue took the red pen to a slew of features in its Flex System modular servers. The Flex System machinery, which debuted last April, is at the heart of the PureFlex infrastructure cloud configurations as well as the PureApplication and PureData application system configurations. The price cuts in the United States for various Flex System iron only applied to the Flex x220, x240, and x440 server nodes, which are based on Intel‘s Xeon E5 processors.
You will notice I did not say that IBM was cutting prices on its Power-based Flex x260 and x460 server nodes and all of the features such as processors, memory, disk, and peripheral adapter cards that plus into them. I would like to say that, and I was prepared to say that, but alas, I looked high and low for price cuts on Power-based Flex System nodes in December and no can do.
What IBM did do was cut prices from as little as two-tenths of a point to as high as 28.8 percent across processor, memory, disk, and other features on those three different Xeon-based server nodes for the PureSystems iron, as you can see below:
Significantly, the deepest price cuts come from what IBM is charging for single units of Intel’s Xeon E5 processors, and presumably IBM is getting some kind of deal from Intel that allows it to cut its prices on those processors without sacrificing too much of its own System x profit margins. Then again, IBM’s was losing market to Dell, Cisco Systems, and others in the third quarter in the x86 racket, and the Flex System machinery is supposed to help IBM fight back against these and other vendors with converged server-storage-networking stacks. Cisco’s growth is slowing, but these seems to be more of a natural limit of large numbers and market penetration of an upstart rather than a reaction to IBM’s PureSystems launch last April. My guess is that the processor, memory, and disk price cuts announced for U.S. customers on December 18 are aimed at making it easier for the IBM direct reps and channel partners to make sales against Dell, Cisco, and Hewlett-Packard without having to do each deal on the back of an envelope. As we all know, very few customers pay IBM list price for servers, and this is particularly so for those buying x86 iron in volume, but a list price is a ceiling from which a floor can be established.
To the north, IBM’s Canadian subsidiary was tweaking prices as 2012 came to an end as well, and in this case prices were going up as well as down.
In announcement letter 312-143, IBM actually raised prices on the base PowerLinux 7R2 rack-based server, which is designed only to run Linux and which cannot run IBM i or AIX, as well as on numerous features that go into this server. The PowerLinux 7R2 was launched last April near the PureSystems launch, and this two-socket box is essentially a Power 730 with slightly different processor pricing and significantly lower disk and memory prices, that has one goal: making the Power-Linux combo competitive against Xeon-Linux machines. The price change upwards is therefore a bit perplexing, particularly to my neighbors in the Great White North. It probably has as much to do with the conversion rate between the U.S. greenback and the Canadian loonie as anything else. Here are these PowerLinux price changes, which went into effect on December 19:
The price hikes for the dual-socket PowerLinux 7R2 iron in Canada range from 12 percent to 15 percent, with the average somewhere around 13.5 percent. It is important to note that IBM did not up the prices on the single-socket PowerLinux 7R1, launched in July 2012, or the PowerLinux p24L, which is the Linux-only variant of the Flex System p260 server node.
In announcement letter 312-144, IBM Canada raised a few prices here and there and then trimmed to slashed prices here and there for the Flex System x240 server node and its features. Check it out:
As you can see, many of the features that had their prices cut in the United States in greenbacks on December 18 had their prices increased in loonies for Canadian customers on December 21. Processor price hikes were steepest. Fat memory configurations and fat disk drives had the biggest price decreases for Flex x240 iron in Canada last month, and skinnier features had some modest price increases.
IBM never explains itself, so we are left to pondering what this all means. But as I said, there were no price changes for plain vanilla Power Systems or Flex System p260 or p460 machines, so it looks like Big Blue is pretty happy with its competitive position–and discounting levels–with these machines. That could, of course, change in the first quarter, which we are now in.