IBM i Licensing, Part 3: Can The Hardware Bundle Be Cheaper Than A Smartphone?
June 27, 2022 Timothy Prickett Morgan
How many monthly iPhone bills is a Power10-based entry server worth?
Let me ask this another way: Which will be more expensive: Providing a seat for a corporate user of an IBM i system, with a complete set of hardware and systems software, or providing an iPhone 13 Pro Max with a data plan and cellular service to each end user? Both are premium products with premium features.
We don’t know, but as the July 12 Power10 announcements are approaching, we are getting closer and closer to finding out.
Let’s talk about the iPhone 13 Pro Max first because we know all of the details about what it costs. I am still using my iPhone X, but because I paid my device off as soon as I financed it several years ago, I am eligible to an upgrade to the iPhone 13 Pro Max through Verizon, which is the only carrier that works well in western North Carolina. The retail price of this shiny new phone, with 128 GB of flash storage (scalable up to 1 TB!). the Super Retina XDR display, a 6.7 inch screen, and a claimed 28 hours of video playback and 95 hours of audio playback capacity on its battery, a killer set of cameras with telephoto lens, is $1,100. (Well, technically, it is $1,099.99, but that is a stupid price for something so I am going to toss them the penny, which costs 2 cents worth of copper because the world doesn’t make sense sometimes here in the 21st Century. But let’s ignore that for the moment.) That works out to $30.55 per month over 36 months to finance it, with 0 percent APR financing. (Not everyone can get that, I presume.)
If you are adding a new line at Verizon on this device right now, and are trading in an old machine, you can get up to $800 off the cost of the iPhone 13 Pro Max, and if you are switching from other carriers such as AT&T and T-Mobile and you pay off the phone monthly (and thus are effectively promising to stay with Verizon for at least 36 months, a kind of reserved capacity plan on its network), you can get a $200 gift certificate on top of that. These are pretty sweet deals. I like my iPhone X and I don’t like changing my phone or my PCs so I am not tempted by any deal. When I run out of storage or when Apple starts messing with my line speed, I move.
Under my current Verizon plan, where I somehow have unlimited data, it costs me $20 for a line plus $15 for Global Calling Plus and another $4.99 for the Verizon Smart Family add-on for parental controls – why I put parental controls on my own phone, which as far as I know I have never activated for any of the lines on my account, I don’t know. But this just proves that people don’t read the cable or phone bills, and they won’t read the monthly system bills all that carefully and vendors know that. Anyway, add it all up, and for a mere $79.21 per month, I can provide myself with a shiny new iPhone 13 Pro Max and full services.
I can remember when you “reached out and touched someone” for $1 per minute and had to talk to Grandma and Grandpa real fast on holidays and birthdays because no one could afford the phone bill if the long distance charges were too high. In college, sometimes I had to choose between calling my girlfriend and eating, and I chose the girlfriend. Competition and the advancement of technologies is a real force. We don’t even think about our phones, although I could pay for a top-of-the-line Ford F-150 Lightning pickup truck with what I pay for phone and cable for my family each month.
Based on what we know about subscription pricing for the IBM i stack, which we covered back on June 13, in the P05 software tier, over a three year term, it costs $12,105 for software licenses that cover 25 seats. That includes access to the software and Software Maintenance for updates, and that works out to $13.45 per month per seat for the systems software. When you say it that way, it really doesn’t sound like all that much, does it? My data plan on my phone – which is the closest analogy to a software license – costs 3.6X that much.
So what is the monthly hardware and maintenance cost for an entry Power S1014 going to cost? We don’t know, but we have caught a little more wind of IBM’s thinking about the IBM i software-hardware-maintenance subscription pricing, which the company first started talking about during tis May 3 announcements.
We have talked about all of the reasons to do this until we were blue in the face, and we think this will be a wildly popular option for a lot of small and medium businesses with modest capacity needs but definite preferences to preserve capital and keep IT off the balance sheet.
You will notice there is no pricing in the chart above. But let’s work it backwards. To match the monthly cost of an iPhone platform, we have $65.76 per seat per month to play with after paying the $13.45 per seat per month charge for three years of the IBM i license.
We are not so sure that the hardware will be amortized in a three-year period, and we reckon it will probably be at least five years, but for fun let’s see how it works out over 36 months. Let’s say that a configured P05-class Power S914 system with 64 GB of memory, a 1.6 TB flash drive, four 283 GB disks, and a four-port 10 Gb/sec Ethernet controller costs $23,509. (You can play with the IBM i configurator for this machine here.) So assume IBM will charge a slight premium for a Power10-based Power S1014 machine. Call it $25,000. That will work out to $27.78 per IBM i seat per month. Add in the $13.45 per seat per month for the IBM i subscription, and you are talking about $41.23 per seat per month. Give IBM some extra money for using its balance sheet. Call it $50 per seat per month. Or even $60, or even $75.
It is less than the $79.21 per month I would pay to upgrade to the iPhone 13 Pro Max with my current data plan. Even if you use the extra money to beef up the Power S1014 configuration to push the price up to $75 per seat per month, this is not going to be a hard sell to the chief financial officer or business owner. If you walk into the meeting room and ask for $67,500 to buy a new system, of which $14,295 is for a perpetual license and Software Maintenance for three years for the IBM i stack and the remaining $53,205 is for the hardware and its maintenance, they are going to hem and haw until the disk drives fail on your current system.
It’s not the money that has them nervous, it is the upfront money that does. Why shouldn’t the cost accrue along with the benefit as it is used? That is the real benefit of the cloud, even if you are building one inside of your own datacenter.
It is entirely conceivable that the hardware-software-maintenance bundle per IBM i seat costs less than a premium smartphone. At which point, everyone can stop complaining and get on with modernizing.