For The Prices They Are A-Changin’
October 4, 2021 Timothy Prickett Morgan
Back in the day, when IBM made any price changes to products, we would see these things in the weekly summary reports that its announcement system had compiled and sent out to us on a weekly basis for several decades. Somewhere along the way, either our profile changed without our knowledge or IBM changed something about this email blast system behind the scenes and we stopped seeing all of these Price Change announcements.
Just for the heck of it on Friday, which was a quiet news day in IBM i Land, I logged into the Web front end of the IBM announcement system and decided to poke around using some search terms, just because I have not seen any price change stuff pop up for the Power Systems line in quite some time.
This would be a bit unusual, historically speaking, which is why I decided to look myself instead of relying on IBM’s indexing based on my interests. As we come to the end of one product line and we are getting ready to launch a new one, IBM starts gearing up the price increases on the older stuff. It is the carrot and stick approach we have seen so often. Moreover, and regardless of what the central banks in the major economies are saying, we are absolutely living in an inflationary environment. In our house, I joke that the $20 bill is the new $5 bill, and while I am exaggerating for dramatic effect, in a lot of cases the $20 bill is the new $15 bill. (No, there is no $15 bill in United States currency, but if we had one who would we put on it?)
With the new “Denali” Power E1080 in the field but not really shipping in volume until December of this year and maybe well into the first quarter of 2022, I don’t expect any price increases on the features in the older “Fleetwood” Power E980 systems that have been in the field since 2018 right now. But in the spring next year, absolutely. First, new parts will be scarce – how much so depends on how many spares Big Blue keeps in the barn for CPUs, memory, I/O, and storage for any given machine – and second, demand could exceed supply if Samsung can’t make Power10 chips in enough volumes. And third, for those customers who want to stay with a Power9 system, we expect for IBM to eventually make these machines and their components more expensive – if not formally through a pricing action, then informally by giving less of a discount on individual deals. But al lot of that depends on how well or poorly Samsung does in kicking out Power10 chips in volume – and at what price. As a general rule, IBM used to increase feature prices and maintenance prices on old gear every three or four years, but the pattern has not been normal in a while, and that is generally because IBM does not roll out new iron as frequently as it used to.
First and foremost, IBM is doing a “global price harmonization” price hikes to realign the pricing in US dollars for countries outside of the United States for products against pricing inside the United States, which you can see in announcement letter 321-014. There are just under 24,000 product SKUs listed in this announcement, so pardon us for not going through it in its entirety. The gist is, customers outside of the United States just saw modest price increases across of most of the IBM portfolio because of exchange rates.
On May 11, IBM cut the price on the entry tier for its Db2 Mirror for IBM i database clustering technology, as you will see in announcement letter 320-128. Oddly enough, the prices were quoted using the Small, Medium, and Large tiering used for Linux and AIX platforms, and we presume that the Small configuration corresponds to the P05 tier that we have been asking IBM to chip the price of since Db2 Mirror database clustering launched in April 2019. In any event, the price per core for entry machines is now $12,000, down 40 percent from the $20,000 it was charging for P05 and P10 machines up until now. We presume the P10 class is still set at $20,000 per core. Pricing on Software Maintenance for Db2 Mirror was similarly cut by 20 percent for the Small configuration, to $4,800 over three years for 9×5 business service and an incremental $504 to get 24×7 service over those three years (also down 40 percent from the $840 Big Blue was charging.) If you let your Db2 Mirror license lapse for three years, the after license charge is the same as getting a new license, and if you let it lapse for one or two years, it is $7,200 per year, also down 40 percent. This price cut was effective immediately, which is normal for Big Blue.
Also on May 11, in announcement letter 321-063, IBM increased memory prices in most of the Power9 system line, which we think was a mere reflection of supply chain issues with DDR4 main memory that all server makers are being hit by. This table shows the changes by server model, feature number, and capacity, and we have calculated the price per gigabyte to show you something interesting:
These memory price hikes went into effect on July 1, and as you can see were around 15 percent. The cost per gigabyte on the entry machines averages a little higher than $40 per GB after the price changes, but it is interesting that on the Power E950, which has a lot of slightly slower memory packed into the chassis, the cost per gigabyte is around $25 for skinny sticks and around $30 for fatter sticks. The Power E980 “Centaur” CDIMM buffered memory costs between $40 and $50 per gigabyte, depending.
IBM Japan had another memory price hike on September 15 for a lot of these same machines, which is supplemental and which will go into effect on October 154, which you can see in announcement letter 321-111. The details of this hike were not revealed, which seems unfair to customers.
Doing some more searches, we discovered that there were changes to IBM i 6.1 feature pricing that were announced on April 13 in announcement letter 321-039 and took effect on June 1. The price changes were for the user-based pricing components of IBM i 6.1 as well as for unlimited user licenses. The per-user charges went up by 20 percent, to $300 per seat, and unlimited user licenses on various machines rose by 20 percent as well. On the old Power 515 and Power M15, it costs $22,500 for unlimited users, on the Power 520 E4A with two cores and the Power 525 it costs $60,000, and on the Power 520 E4A with four cores it costs $90,000 after the price hikes, to give you a sense of it.
Finally, in announcement letter ZAEP1072B, we see that Big Blue is extending out the 2021 Power Systems Power9 Scale Out End User Bonus (Trade-In) Promotion – who writes these things? – which debuted back in January in Europe and is similar to other long-running promotions that IBM has on the books. Now, the rebates will be good for customers who buy certain Power9 configurations through January 18, 2022. Under this deal, if you replace an old AS/400, RS/6000, iSeries, pSeries, System i, System p, or Power Systems machine running IBM i or AIX with a Power9 box, then you get a rebate. Here is the table of rebates:
That period in the pricing is in the French and sometimes British style, and it is how we use commas. So the rebate ranges from a low of $500 to a high of $4,000, depending on the model of Power9 machine that customers acquire. IBM doesn’t care what machine you turn in as far as the rebate goes. (Sometimes, IBM had deals where what you got scaled with what you turned in as well as what you bought new.) We fully expect this deal to be extended if the launch of the scale-out Power10 machines stretch out into May or June 2022 – and maybe longer if customers decide Power9 is better for their needs.