IBM Doubles Up Rebates On Power Systems Trade-In Deal

January 21, 2013 Timothy Prickett Morgan

I told you so. It is the new year, and as I said in the opening issue of The Four Hundred, IBM would be doing some wheeling and dealing to move Power Systems machinery ahead of the rollout of the rest of the Power7+ systems in 2013.

So if you are looking to upgrade a vintage AS/400, iSeries, or System i box, their RS/6000, pSeries, or System p equivalents, or any number of non-IBM server iron, listen up. Because IBM has just doubled up the rebates on its long-running, on-again-off-again, Power Systems Trade-In Program.

Actually, if you sift through the IBM announcement letter database (which has a new interface that makes it hard to use and which also has an email system that doesn’t always faithfully send email notifications about announcements in my experience), you will see that Big Blue tweaked this trade-in rebate deal back on December 4 in announcement letter 312-136. At that time, IBM added new the Power 770+ and Power 780+ machines (based on the Power7+ chip) to the list of machines that companies could buy to take part in the deal, and it removed some truly aged Power, X86, and Itanium systems from the list of machines that could be replaced with the iron.

These changes were no big deal, although with all the talk about PureSystems, I am a bit surprised that IBM has not added the p260, p260+ (also using Power7+ chips), and p460 server nodes as replacement machines to the other iron as part of this trade-in deal. It seems silly that PowerLinux machines, in their rack and Flex System variants, are also not included, but then again PowerLinux customers are getting such a good deal compared to AIX and IBM i shops that, well, they can just zip it. I don’t think it is healthy to jack up prices on AIX and IBM i customers to pave IBM’s path to glory in Linux, any more than I ever believed it was smart to squeeze AS/400 shops until they screamed to pay for the discounts IBM gave to AIX shops as it tried to knock Sun Microsystems and Hewlett-Packard down a few pegs in the Unix racket. There was a way to do that while preserving both the AS/400 and RS/6000 customer base.

But I digress.

In this case, the good news is that in announcement letter 313-003, IBM has doubled up the trade-in rebate amounts to customers buying any eligible Power7 or Power7+ machine–with the exception, for some reason, of the Power 770 and Power 770+ servers, for which IBM feels that its rebates, ranging from a maximum of $4,000 to $40,000, are sufficiently sweet.

Under this deal, whose basic structure hasn’t changed in many years, IBM gives you a trade-in rebate on the machine you are trading based on the box you are buying, and then sets a ceiling on the aggregate amount of rebates you can collect on the new system. The deal is designed to not just accommodate box-for-box replacements, but the highly more likely scenario of server consolidation where many boxes with perhaps different operating systems are converged and virtualized on the shiny new server. Anyway, the rebate ceilings range from a low of $500 on a PS700 with the lowest-power 3GHz quad-core Power7 chip all the way up to $240,000 on a wonking 256-core Power 795 beast.

On the OS/400 and IBM side of the deal, trade-in rebates range from a low of $250 on entry 9406-150, 170, 250, and 270 machines–remember those boxes?–to a high of $40,000 on a Power 595 with anywhere from 56 to 64 Power6 cores. The rebates are often slightly better for equivalent pSeries and System p iron for reasons I neither understand nor make me feel calm. (Grrr….) The trade-in rebates are also considerably better per unit of performance on Sun, Fujitsu, and HP iron, which stands to reason given IBM’s desire to take revenue away from Oracle and HP, and I tell myself that anything that makes the Power Systems biz stronger is a good thing. IBM says that the trade-in rebate amounts are reflective of fair market value of the systems plus an additional incentive. And the reality is that if IBM could normalize the trade-in rebates based on some non-arbitrary performance metric, customers jumping from Sun, Fujitsu, and HP iron would expect a slightly better deal because they are coming to the IBM fold.

Just because the world works this way doesn’t mean I have to like it. Sometimes, being fair means treating everyone the same. But, like I said, twice as much of a rebate is better than half, which has happened to this Power Systems trade-in deal in the past and which will no doubt happen again if IBM is very aggressive with Power7+ system pricing as the rest of the line rolls out later this year.