Talking Power Systems Deals With The Boss
October 25, 2021 Timothy Prickett Morgan
What a relief when you speak the same language with someone in the business. In any business. But particularly with someone in the AS/400 and IBM i business, who has been at it about the same time as you, has seen the same stuff as you, has the same frames of reference as you, and who knows what the hell you are talking about even if they don’t agree with you all the time.
That’s how it is with the boss at UCG Technologies, that being president and founder Jim Kandrac, who is proud of his city of Cleveland and who would fit right in on the streets of New York City or Chicago or in your rural town on the outskirts of a one of the NFL cities where AS/400s and their progeny are commonly used in the United States. I have known Kandrac for as long as I have been in the IBM midrange – which is a hell of a long time and yet I am still a whippersnapper in this market – and when I want to get a feel for what is going on in the market, his number is on speed dial. (Well, these days, with smartphones, everyone is technically on speed dial, but you get the idea.)
We wanted to get a read on what’s going on with Power Systems sales these days in the wake of IBM turning in some pretty weak numbers at the tail end of the Power9 cycle, which we report on elsewhere in this issue of The Four Hundred. The following short conversation to take the pulse of the IBM i-Power Systems market here as 2021 is winding down was quite a bit saltier than we can print in a family newsletter. But trust me, you wanted to be a fly on the wall because Kandrac is as much fun as he is dead serious about being successful selling and supporting IBM i shops.
Timothy Prickett Morgan: I’m bored as hell without new Power10 hardware right now. But I would be the first to admit that for many IBM i shops, and Power8 or Power9 server would suit their needs just fine, particularly if they are still on a Power7 or Power7+ machine. So, what are customers doing now? You are not going to get any customers buying a Power E1080 right now, IBM is chasing all of those big Power accounts itself. So, what are you seeing?
Jim Kandrac: Here’s what I see happening. We are way ahead of last year by probably 30 percent to 40 percent in our infrastructure sales business. I believe there’s been pent up demand because of COVID, when people were hunkering down. So now we have clients that are replacing production machines, replacing Capacity Backup machines, doing more with backup and disaster recovery. In the past three to four months, we have just seen a significant increase for cybersecurity training, which we have talked about separately here at IT Jungle.
TPM: Yeah, we covered that recently, so let’s drill down into what people are upgrading or buying, and why now instead of waiting until May or June next year when entry Power10 machines might come into the field.
Jim Kandrac: Customers are all going to Power9. They really haven’t given a care to date about Power10, and they are not going to wait for Power10. Why? Because you can have the same machines in the P05 and P10 software groups, and yes, these Power10 machines will have more feeds and speeds. But IBM keeps putting it off. Some people thought they would come this year, then some people thought Q1 2022, and then we are hearing Q2 2022. Who knows?
What really drives the customer’s decision is not IBM’s product roadmap, but how old their machine is. Can they upgrade to whatever OS level they need to for their applications? And then what can still prevent them from moving is if they can’t do a serial number change. Another big factor is hardware and software maintenance. We just did a deal with a client where literally their four-year TCO on two big machines was $850,000. UCG is putting in two brand new 9009 (P10) machines with a more performance and with a four-year TCO of $650,000 – they are saving $200,000. The maintenance on those two older machines was insane – it was $150,000 a year for production and $50,000+ for the CBU. And these were Power8 machines!
TPM: This is the same story we have seen for decades, man. Looking ahead, do you think that Power10 will be priced more aggressively per CPW unit of performance – we saw that with the initial PowerPC AS RISC machines back in 1995 when IBM was very aggressive – or will they just throw more CPWs in the box and keep the price the same at the various machine classes?
Jim Kandrac: My gut is that Power10 machines within each class will be about the same price and you just get some more CPWs and maybe some more other capacities – maybe some more flash, faster network, maybe a little more memory.
In the four-core, P05 class Power S914 machine, for instance, you are at a little more than 13,000 CPWs per core with a machine rated at a total of 52,500 CPWs across four cores that come in the box. Someone might be coming from a Power7 or Power7+ machine that might have only 6,000 CPWs in total. So even with a big performance bump, they might only be using one or two Power9 cores. What does a Power10 core with maybe 16,000 CPWs or 17,000 CPWs each do for this customer? They might only need 64 GB of memory, believe it or not, so Power9 is also fine. No sense in messing around, though, and with most of the deals that we are doing, we are putting NVM-Express flash drives in because they are less expensive than disk subsystems (SANs) and they are a ton faster than spinning disks.
The only issue that comes into play with the customers we see on these P05 and P10 machines is if they need more disk or flash capacity than is permitted in the main CEC. In those cases, we are putting on Storwize 5200s. In fact, we just did a $250,000 deal and consolidated both the new IBM i machines and the X86 server storage on a Storwize SAN and they are happier than a pig rolling around in . . . . well – you get the picture.
Here’s what is interesting about the client mentioned above in the $250,000 SAN deal, and this illustrates the principle of UCG putting the client first. We were asked by a customer to do the math on putting a Power9 machine into production and another one into a CBU disaster recovery box. They actually asked us a year ago if they should do a Power9 upgrade, and we told them that their maintenance was reasonable and it was best to wait another year. Instead, they had us take old IBM Storwize V3700 SANs attached to their IBM i production and CBU boxes that had even older Nimble storage (not provided by UCG) on their X86 servers – both Nimble and V3700s were at end of life – and replace both. We did a cost analysis and it ended up being a huge win to replace the two V3700s and Nimble with two IBM 5200 SANs with the very fast NVM-Express drives. In 2022, the client is primed to do a Power9 deal or wait for Power10, depending on when they need it. It might even make sense for them from the admin/ops standpoint to migrate to the cloud for IBM i. So, we really look at what the client has, what they really need, what is available in the market or around the corner, and what’s the best way to get them to where they want and need to be.
TPM: Do all of the IBM i shops that you do business with pay IBM maintenance? Or are there companies that are on third party maintenance or that might not be doing maintenance at all? If that is the case, then that TCO argument isn’t as strong because they’re not paying the IBM price for maintenance or any maintenance at all.
Jim Kandrac: I would say that 80 percent of our clients are on IBM maintenance. They just like it. Now, if the machine is end of life or if it is just way too expensive for their budget, they will sometimes go to third party. We utilize Park Place Technologies, which is based here in Cleveland, OH
TPM: Let’s talk about the take-outs happening right now. Are they mostly Power7 and Power7+ machines? What are they ripping out?
Jim Kandrac: It’s Power7s and Power8s and it is frustrating that they are worth zero dollars due to high maintenance. In most cases, we transfer the OS and LPPs to the new Power9. I’m shocked at how high the maintenance his gone up on mid to larger Power8 (P10) machines in the past 24 months.
TPM: And what do you do with machines you take out? Do you just take it to the crusher or does it end up back with IBM Global Financing?
Jim Kandrac: We take them to the Lakeside Yacht Club in Cleveland – just off E. 55th Street and use them as boat anchors. HA! Just joking – we used to do that with the old IBM System/34s and System/36s in the 1980s. (Still joking, that is environmentally uncool. . . . ) We were taking machines in trade for a long time, using them for disaster recovery, but here’s the problem: These old machines are huge. The Power7 and Power8 machines can be very powerful, but they take up 30U or more space in a standard 42U rack. I don’t want to use up three quarters of a rack with an old Power8, so we take out the valuable parts, if there are any, and we are disposing of them through a proper EPA regulated third party.
TPM: And there is no way for a disposed Power7 or Power8 to compete against Power9 or Power10 iron, of course. . ..
Jim Kandrac: Correct.
Now the question everyone asks – and a lot of times they have a predisposed notion of what they want to do – should I do cloud, co-location, or on premises? I had a call with a client today, they were ready for a new machine, and I gave them their options, and the CFO just said to me, you know, call me old school, but I like to have my arms around my assets. Unless you tell me otherwise, he says, I’ll just buy this thing and keep it for seven or eight years. I don’t have a good argument against that, but if they are running out of skilled employees or they don’t want to run a datacenter for whatever reason, we can help there.
All I know is that our hardware business was down 25 percent in 2020 and now we are back up to where we were pre-COVID plus 15 percent to 20 percent on top of that because there is pent up demand for new technology and lower TCO.
Speaking of which, reach out to UCG Technologies if you need to upgrade your system or to replace it with a new one, or even get your hands on a second-hand one of serious vintage. We can help you with any of these options.
Request a system analysis and upgrade to Power9, and do it on-prem, in a co-lo, or in the cloud.
Jim Kandrac is founder and president of UCG Technologies.
This content was sponsored by UCG Technologies.