IBM Cuts Prices for Upgrades to Power 595s

March 15, 2010 Timothy Prickett Morgan

The big iron boxes in IBM‘s Power-based server lineup have always tended to come to market later than midrange and entry boxes. With the AS/400 and its progeny being predominantly a midrange platform, and the RS/6000 and its progeny proliferating in the low-end and only gradually coming to be known as a big iron box, it stands to reason that Big Blue would start the Power7 launch in the middle, with the Power 750, 770, and 780 servers.

That said, when it comes to generating revenues and lots of profits, you just can’t beat the big iron boxes like the Power 595. The problem for both customers and IBM at this moment is that the cat is out of the bag that later this year IBM will bring a 256-core, 1,024-thread behemoth to market. And no one wants to be the last one to buy a Power 595 (topping out at 64 cores and 128 threads) at late 2009 prices.

So IBM has to wheel and deal to keep Power6-based Power 595s moving, and it even has to go so far as to cut prices on Power 595 machines, as it did two weeks ago in announcement letter 310-127. Those price cuts help reduce the price of a Power 595 for customers buying machines based on 4.2 GHz or 5 GHz Power6 processors–which helps customers who can’t wait until whenever this year the new Power 795, as I presume this Power7-based big bad box will be called, to come out. But those 30 to 32 percent price cuts on selected Power 595 processor books and CPU activations features don’t do a thing for customers who might want to upgrade from earlier 570-class or 595-class iron into the Power6 boxes.

Fear not, IBM figured this out, and last week in announcement letter 310-139 Big Blue cut prices for upgrading from prior generations of 570 and 595 machines into these two processor options for the current Power 595 machines. Memory upgrade prices were also cut for some memory conversions as customers change from DDR1 to DDR2 memory, a switch that is necessary as you move to the Power6 and Power6+ processors. (The Power7 machines use DDR3 memory, so that’s another shift.) Depending on the processor feature and machine a customer is starting with, the upgrade prices into Power 595s using the 4.2 GHz or 5 GHz cores have been cut from 10 to 32 percent. To help make your life easier, I built a table showing the feature conversions and price changes, which you can see here. IBM never gives descriptions for the features involved in price changes, and because I love readers of The Four Hundred, I went through the IBM sales manual and looked up every feature by hand. (Yes, this was enough to give a boulder a headache.)

You might be thinking that, given the price performance being offered by the Power7-based machines–IBM is promising twice the performance of Power6 systems for the same money–that these discounts are a bit stingy for new systems and upgrades alike. For those buying new systems, IBM had already slashed the cost of processors, memory, and upgrades from earlier 595-class machines to the Power 595 back in June 2009, as The Four Hundred previously reported. IBM cut memory activation prices in half for customers upgrading DDR1 to DDR2 memory modules as part of a move to a Power6-based Power 595, and sliced processor book and CPU activation prices by anywhere from 15 to 54 percent for upgrades from prior System i5 an System p5 machines.

But here’s what customers need to do. Regardless of what IBM says the new list prices are for processor books, processor activations, and memory, they need to find out what the list prices were in prior to all this rejiggering and cut them in half. This is where the new beginning negotiating point should be in any deal that a customer does between now and whenever the Power 795 machine ships. And given the economy, IBM’s desire to make sales, and its general unwillingness to cut system software prices, a case could be made for an additional 10 to 20 percent–easily–off this half-off price. That is where the Power 795s will be, after all. And no one should pay anything higher than this year’s price for last year’s model.

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