Inflation Finally Comes To IBM i Platform Prices
April 18, 2022 Timothy Prickett Morgan
With the inflation rates rising around the world, and particularly strongly in the United States, it was bound to happen sooner or later: IBM is raising prices on key software for Power Systems machines as well as on selected Power9 hardware.
With entry and midrange machines based on Power10 iron just around the corner – probably announced in May around the COMMON POWERUp 2022 conference in New Orleans from May 23 through 26 and shipping sometime in June – it might seem like a weird time to be raising Power9 hardware prices. But there could be a logic to it. As for raising prices on IBM i and AIX operating systems and on PowerHA clustering software and their Software Maintenance support, these run on older and newer equipment and have a broad base of customers. As IBM’s own people costs rise, the costs of ongoing development of the software (even that which is co-developed by third parties as PowerHA is) and its support are bound to be on the rise. But as far as we can tell, IBM’s price increases announced in recent days are higher than the prevailing inflation rate. And thus we think that Big Blue is perhaps being a little bit opportunistic here to boost its revenues and profits in the Systems group.
It is a temptation that many companies are succumbing to, and of course, IBM just announced price increases on Software Maintenance at the beginning of the coronavirus pandemic in April 2020, raising them between 10 percent and 19 percent. Previously, it had raised Software Maintenance prices in February 2013, by between 23 percent and 29 percent. We could go back further to get a historical trend, but you get the idea.
In announcement letter 322-379 dated April 13, IBM announced price increases on licensing charges for selected Power Systems software – namely IBM i, AIX, and PowerHA – as well as for Software Maintenance for these products. The price increases are outlined in this spreadsheet that Big Blue has put together.
The price increases for IBM i are a bit weird. They include a 10 percent increase in P05 though P60 software tiers for temporary monthly licenses and regular monthly charges for IBM i licenses on all kinds of Power5 through Power7+ iron. There is also a 12 percent increase in the Software Maintenance After License charges, which are fees to get current on back maintenance if you have taken a machine off maintenance. Software Maintenance fees for multiple terms (one-year and three-year schedules) are up by 12 percent, too, and there are a slew of Software Maintenance upgrade fees to, for instance, move from 9×5 business maintenance to 24×7 full maintenance or to move between OS/400 and IBM i software tiers which have higher or lower fees, depending. IBM i monthly prices for service providers rose by 5 percent in the P10 tier and by 14 percent in the P20 tier
AIX 7.2 licensing fees were increased by between 10 percent and 12 percent for machines in the Small or Medium designation by IBM and cut by between 4 percent to 12 percent for machines in the Large designation. Charges for IBM 7.3 rose by between 10 percent and 23 percent for Small and Medium machines; pricing for Large machines apparently remained the same.
Prices on the PowerVM server virtualization hypervisor, including the IBM i and AIX and the special Linux edition, were up by 20 percent, and PowerHA storage replication clustering for high availability also saw a 20 percent rise, and after license charges to get Software Maintenance current on PowerHA saw a 10 percent increase. PowerHA SystemMirror pricing wiggled around, with some features up and some features down.
These software and related maintenance price increases are effect May 7; there are some Software Maintenance services contracts won’t see their prices rise on July 1.
On April 7, in announcement letter 522-378, which we do not have access to because it is behind the PartnerWorld firewall, but we did manage to get our hands on the spreadsheet that lists the systems, features, and software price changes affected. You can see that sheet at this link.
The price increases are for DDR4 memory modules, 1 Gb/sec and 10 Gb/sec Ethernet adapters, and 32 Gb/sec Fibre Channel adapters for Power LC922, Power AC922, Power IC922, Power H922, Power L922, Power S924, Power E950, and Power E980 machines.
The big changes that will affect the IBM i base are for the Power S924, of course, and here, it is not just adapters and memory that have a price increase, but also the base system and processor cards, too. The 9009-41G base machine now costs $5,500, up 74.6 percent, and the 9009-42G machine with faster I/O now costs $12,000, up 31.1 percent. The feature EP10 four-core, 2.3 GHz Power9 processor feature, which is probably one of the most popular options at IBM i shops in the Power9 generation, now costs $3,099, up 70.7 percent. And the four-core feature EP16, which runs at 2.8 GHz, now costs $2,599 up 85.8 percent. Other processor features for the Power S924 machine were up by 20 percent. DDR4 memory prices for the Power S924 are up by 17 percent to 17.6 percent, depending on the capacity.
The Power E980 base system price has doubled to $60,000, and Power9 processor cards for this high-end machine, which are very pricey indeed, have been increased by 17 percent to 30 percent. Memory prices have increased by 35 percent, and networking features have a 10 percent increase.
The other machines listed in the spreadsheet do not run IBM i, so they are not material to the proprietary IBM midrange customer base, but they surely are material to IBM’s Power Systems business. They are on the same order as with the other machines – meaning much higher than the inflation rate in the US economy in recent quarters.
These hardware price increases are effective on May 7.
Aside from the obvious inflationary pressures, it seems odd that Big Blue would be raising prices at a time when new iron is around the corner – except if IBM wants to close the gap between Power9 and Power10 machines or, more likely, charge more for Power10 iron than it might otherwise do compared to the original Power9 system prices from nearly four years ago. This is an unusual tactic, and it gives us the impression that Power10 pricing might not be as aggressive as we might have hoped. But we will see.