IBM Wheels And Deals For Power Linux, But Where Is IBM i?

October 30, 2017 Timothy Prickett Morgan

The whole point of the convergence of the RS/6000 and the AS/400 families of systems – including pSeries and iSeries and System p and System i – was not only to get a common, converged hardware platform that made IBM’s life easier, but to also – or so we have always believed – give a consistent deal to customers using AIX or OS/400-i5/OS-IBM i.

“A foolish consistency is,” as Ralph Waldo Emerson put it, “the hobgoblin of little minds.” While that may be true, a smart consistency is the Spider-Man of great minds. Or at least those that think alike. Like we all do out here in IBM i Land.

IBM i customers need a deal, something to get them excited about modernizing their platforms and moving ahead.

For a while there, when the final Power Systems convergence happened and Linux was not yet a big force on the Power platform, there actually was a kind of technical and economic balance for the AIX and i personalities on the iron. Software was shared between AIX and IBM i, and the basic elements of compute, memory, storage, and networking for the Power machinery were the same and, importantly, were priced the same. And then Linux had to come along and screw it up. Or, more precisely, the executives running the Power Systems division had to artificially lower the cost of Linux on the box by making Linux-only machines, and keep the pricing on iron that is designated to run AIX or IBM i as high as possible.

This pricing dichotomy – mirroring the one that the RS/6000 line had over the AS/400 line for many, many years as you well know – is as unfair as it is predictable, given the circumstances. With the OS/400 server base cut essentially in half and its revenue stream probably down by three quarters since the peak in 1998 (that is a rough guess) and the Unix business on the ropes for the last decade and now a quarter of its size as well in terms of sales (but IBM has dominant share of it, which it did not two decades ago when Unix was the top dog, so IBM’s Unix business is only down by half), IBM needs to make revenue and profit from all of its Power Systems. So, higher volume Linux iron at lower prices is helping stem the decline in revenues and AIX and IBM i, with their higher prices, are helping prop up the profits.

The Power Systems and Storage Technical University was held last week in New Orleans, and there was a slew of sessions on all things Power and, er, all things storage. And one of the speaks was making the now familiar case that the systems of engagement – meaning our various client devices running Windows, Linux, or iOS (the Apple one) – were growing and there is an epic battle going on there. But the systems of record – those backed by relational databases for the most part with ERP and related application running on top of Unix, z/OS, Windows, and sometimes Linux – were not really seeing a lot of growth in the datacenter. The real action is for systems of insight, those that run analytics and machine learning, and that almost universally run Linux.

IBM cited data from IDC that showed annual server revenues by operating system, with data starting in 2015 and being forecast out to 2019. Windows machines drove nearly half of revenues and were, in this somewhat dated set of information, going to reach 50 percent of revenues by 2019. Linux, which is growing at a compound annual growth rate of 8 percent in the forecast period, would rise from about 32 percent of worldwide server revenues in 2015 to 38 percent of a somewhat larger market of close to $65 billion in sales (including hardware and operating systems) by 2019. Linux itself will grow from $19 billion in servers in 2015 to $25 billion in 2019, according to the cited data. z/OS platforms are going to decline according to this forecast, from about $4 billion in 2015 to $3 billion in 2019, and Unix as a whole will decline from about $5 billion to $4 billion in the same period. i5/OS was not broken out separately, but the “Others” OS line was pretty damned skinny in this chart.

Here’s my point: I understand full well that IBM needs to chase Linux and beat Intel Xeons and defend against the incursions of AMD’s Epyc X86 server processors and the possibly entry of ARM server chips from Cavium and Qualcomm, too. And still keep Oracle Sparc M and Fujitsu Sparc64 systems at bay, too.

But still, it annoys the heck out of me – imagine I used stronger language there – that IBM is giving deals to Power System LC customers – who already get a price break compared to IBM i and AIX shops – and not giving any kind of deal, as far as I can find, to IBM i and AIX shops. Take a look:

Granted, the price breaks of 10 percent to 25 percent on the Power Systems LC iron, which expire on November 15, are not huge. But at least Linux shops are getting something. The prices shown above are not the discounted prices for the Power S821LC, Power S822LC, and Power S822LC for Commercial Computing systems. With such low prices, it is tempting to try to talk people into hacking IBM i onto them just to prove a point to Big Blue.

Without knowing when the entry Power9 machines will launch, and what performance they will have, and what pricing IBM will set, it is hard to argue what kind of deal customers should be making with IBM at this point in the tail end of the Power8 product cycle. But it is a hell of a lot more than 10 percent, and 25 percent seems like a good starting point with something closer to 45 percent to 50 percent being a good ending point for Power8 iron immediately before the Power9 iron starts moving. And not just for the processor, but for the memory and I/O features that may not make the jump.

All I know is, back in the day, IBM did a lot more wheeling and dealing to all of its customers. It actually seemed to understand that it had to sell hardware to sell everything else, and for IBM i customers in particular, they want an integrated system and while they don’t mind paying a premium for it, there has to be some give to market forces with Intel “Skylake” Xeon SP systems out and Power9 systems expected for commercial customers early in 2019.

Something has got to give, and that something is IBM.

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