IBM Boosts Prices Even Further Outside The United States

December 9, 2024 Timothy Prickett Morgan

Back on November 4, we told you about a price increase that IBM instituted across its Power Systems, storage hardware and storage software, and Software Maintenance services. These price increases were supposedly announced on September 3, but IBM’s system did not notify us of them until October 29, and we told you about it in the subsequent edition of this newsletter. The delay didn’t matter much because the price changes are not effective until January 1, 2025.

And now, the rest of the world is going to get an extra taste of inflation, as you will see in announcement letter AD24-2321. The price increases announced here are above and beyond the price increases that came out (so they say) on September 3, and they apply to countries outside of the United States. We do not know how much of this increase is opportunistic and how much of it is driven by current and future exchange rate differences between the US dollar and other global currencies. IBM can’t lose revenues just because the dollar is strong, and there is no reason to believe it will not strengthen as the US economy is doing well and during a Trump administration in particular.

The foreign exchange uplift for Power and Storage hardware – again, above and beyond the September 3 – varies by geography and country, as follows:

China, 0.1 percent
Indonesia, 0.2 percent
Canada, 1.3 percent
India, 1.4 percent
Brunei, 2.0 percent
Singapore, 2.0 percent
United Kingdom, 2.0 percent
Switzerland, 2.1 percent
Malaysia, 2.2 percent
Thailand, 2.4 percent
Philippines, 2.4 percent
Australia, 2.5 percent
Norway, 2.6 percent
Denmark, 2.8 percent
European Union, 3.8 percent
Japan, 4.1 percent
Poland, 4.8 percent
South Korea, 5.2 percent
Sweden, 5.7 percent
Czech Republic, 5.8 percent
New Zealand, 5.8 percent

This increase is added to prices for Power Systems and Storage wares above and beyond the September 3 increases, and if you look at the spreadsheet covering this second international wave of increases, there are specific and further additional (or rather multiplicative) increases in prices for DS8000 (DS8K) and Elastic Storage Server (ESS) disk arrays, FlashSystems all-flash arrays, and various enterprise tape drives and libraries. The September price increase saw a 6 percent price hike across various storage as well as various base Power E1050 and Power E1080 servers as well as IBM i software and SWMA.

With the second set of price hikes announced on December 2, the DS8K and its features have an additional price hike outside of the United States, with some features being doubled in cost (memory and expansion units). There are bigger hikes on Fusion HCI and ESS systems (which are based on Power iron) as well as on storage drives and memory used in these machines. The price increases range from 5 percent to 111 percent. The TS77XX tape library had an 8 percent additional hike, and the Diamondback and Jaguar tape drives had a 5 percent additional increase for non-US firms. Tape cartridges had a 20 percent increase. NVM-Express and SSD flash for FlashSystem arrays had non-US price increases ranging from 7 percent to 42 percent.

Good luck doing all of the math to show what the price increases will be on January 1. Hopefully, IBM is not going to make customers and business partners figure this out and it will all be updated automatically in the IBM sales catalog.

We will try to get a sense of where pricing is at in the new year when the catalogs are updated, but we can’t promise anything. It is very difficult to compile all of this information. Even partners can’t see the whole Power Systems price list like they used to be able to do. (And we were able to see, too.) We miss the days of pricing transparency, and it is a pity that more pricing information is not widely available across the IT sector.

We think there is a tremendous amount of opportunistic price hiking going on out there in the world, and not just in the IT sector. And with many companies unable or unwilling to do price increases in the past, it is not a surprise that they are being aggressive now when they have the air cover of broader inflation as expressed by the Consumer Price Index here in the States. The sad thing is that this wave of opportunistic price increases might cause another wave of inflation if too many companies act this way.

We also think that IBM will do this once a year from now on in an effort to make up for lost services revenues across its Power Systems and System z mainframe lines. The tech support revenues for its platforms has been declining for a very long time, and there is no reason to believe this will not continue.

To give you a sense of the scale of the decline, in Q1 2019, IBM had $1.66 billion in infrastructure support revenues, and in Q3 2024, the latest quarter for which data is available, infrastructure support was $1.32 billion. That is a 20.5 percent decline over four and three-quarters years. IBM has to counter that decline somehow. But raising its prices, it may push away customers who are currently paying, too.

It is a tricky thing, pricing.

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