RE: ITJungle report on i5 pricing and marketing was: More COMMON

So in essence you & ITJungle are saying that having CPU On Demand makes
the machine "geared down"??  That's just not the case.  It's a feature
that is available to you, not a part of the machine capability you paid
for.  IMO it just makes it easier for me to tap into additional CPU
without having to perform a full upgrade, it's an available feature..not
a part of the "base" system.

From the same article:

The numbers in the table pretty much speak for themselves, and they
speak quite loudly, too. A base i5 520 Standard Edition machine costs
under $1 per transaction per minute (TPM), which is about what a fully
loaded i5 520 Value Edition or Express Edition machine (which has a
modest amount of 5250 processing capacity) costs. In this regard, i5 520
Standard Edition machines are offering pretty good value. Moreover,
compared to the iSeries line in 2003, where a similarly powerful box
might cost anywhere from around $2 to $4 per TPM running OS/400 Standard
Edition and the iSeries i5 line from 2004, where the first-generation of
i5 520 machines could cost around $2 per TPM, this is, again, a big
improvement. Even Enterprise Edition machines have come down in cost a
great deal. Back in 2003, an iSeries Enterprise Edition box in the same
power class could cost $10 per TPM, and by 2004, with the iSeries i5
line, that had dropped to $5 to $6 per TPM. So the roughly $3 per TPM
that IBM is charging for base boxes today seems like a big improvement. 

Seems that pricing is going down...so what's your beef?  Is amount per
transaction figured into your "pricing issues"?  I think not....




Thanks,
Tommy Holden


-----Original Message-----
From: midrange-l-bounces@xxxxxxxxxxxx
[mailto:midrange-l-bounces@xxxxxxxxxxxx] On Behalf Of Steve Richter
Sent: Wednesday, September 13, 2006 9:10 AM
To: Midrange Systems Technical Discussion
Subject: ITJungle report on i5 pricing and marketing was: More COMMON

On 9/13/06, Holden Tommy <Tommy.Holden@xxxxxxxxxxxxxxxxx> wrote:

 <snip>No mention
of price cuts or an end to the practice of gearing down the system.
</snip>

You keep on mentioning this...again I have to ask...where's the

numbers?

I have yet to see any proof (definitive or circumstantial to support

the

claim).  Anyone else notice no type of documentation or supporting
information that IBM is "gearing down" anything??

Tommy, read this recent report by ITJungle. It rips IBM for over
charging for the system.  The article uses the "geared down" term to
describe the i520 systems that most i5 customers are buying.

http://www.itjungle.com/tfh/tfh080706-story01.html

"...As I have said for many years, I think IBM's high prices for
configured machines--with or without 5250 support--are limiting the
appeal of the System i5 among the small and medium businesses that are
the bread and butter of this OS/400 ecosystem. ..."

---------------------------

Considering that the i5 520 now represents the vast majority of System
i5 sales--IBM sources said recently that in 2005, the i5 520 accounted
for 96 percent of sales--and that these machines have to win deals
against aggressively priced--some might say insanely priced--Wintel
and Lintel alternatives, you might think that IBM would have done more
to repackage and reprice the entry i5 520 servers when it rejiggered
the product line in late January with Power5+ processors.

To be fair,
IBM did invent the Accelerator for the i5 520 Value and Express
editions, which is a modestly priced golden screwdriver upgrade that
doesn't require a formal upgrade to boost a geared-down i5 machine
using a 1.9 GHz Power5+ chip to full speed.

And IBM cut the price of
adding i5/OS V5R4 to a second core on i5 520 machines to $21,000. But
IBM is, compared to new Intel Xeon Core and Advanced Micro Devices
Opteron platforms, charging a lot more for a bare-bones server in the
i5 line. IBM also charges somewhat higher prices for main memory (and
I am being generous by saying "somewhat") and charges ridiculously
higher prices for disk drives and expansion cages for disks. So when
you build a base system--even one without a lot of memory and
disk--the i5 520 Standard Edition machines are very pricey compared to
Windows, Linux, and Unix alternatives. And if you want to use the
processing capacity of the i5 520 to support green-screen
workloads--maybe you don't want to WebFace your applications or you
have done so already with a method that invokes i5/OS Enterprise
Edition and the Enterprise Enablement features that provide the
support for the 5250 protocol--look out. Prices are, by comparison,
very high.

As I have said for many years, I think IBM's high prices for
configured machines--with or without 5250 support--are limiting the
appeal of the System i5 among the small and medium businesses that are
the bread and butter of this OS/400 ecosystem.

It is a very cynical
IBM that is willing to risk alienating over 200,000 customers by such
pricing practices, and it shows once again how modern corporations
just run in 13-week cycles and often do not, regardless of what they
profess to the contrary, engage in true long-term pricing and
competitive strategy.

But eventually, as Sun has done in the past two years, you have to
shift gears and get a truly competitive product to market if you want
to fight the X64 onslaught. Sun understands this, and may go broke
trying to get with the program. It is my fervent wish that IBM would
do the same for entry i5 servers.

The comparisons I have put together
for entry i5/OS, Windows, Linux, and Unix servers suggests that IBM is
milking the OS/400 community and thinks they won't do the math--or
even if they do the math, they can't afford to not pay because the
pain of jumping to a new platform is too great.

The Metrics of Comparison

Because the i5 520s are so important to i5 sales these days, this
story only focuses on how four different configurations--two running
i5/OS Standard Edition and two running i5/OS Enterprise Edition--rank
against similarly powered Windows, Linux, and Unix machines. When I
was putting together this comparison, I noticed that you could get a
base Standard Edition machine with either 3,800 CPW (in the P10
software class) or a machine with a base 3,800 CPWs expandable to
7,100 CPWs if you pay $1,800 to activate the second Power5+ core, plus
another $21,000 to add i5/OS. By the way, doing so bumps the machine
up to the P20 software tier. This latter machine comes in an
Enterprise Edition version, too, but there is no 3,800 CPW,
single-core i5 520 running Enterprise Edition in the P10 software
tier. If you want a P10 machine running i5/OS Enterprise Edition and
only want to have one core in the box, then your options are a 1,200
CPW or 2,800 CPW box. And if you want to get these geared-down
machines running i5/OS Standard Edition, forget it. You can't. Why? I
dunno. Ask IBM why this makes sense.

IBM's i5 product line is too complex, and it is too expensive. There
are too many issues for buyers to weigh--upgrade paths, what kind of
5250 support there is, what kind of granularity there is for generic
and 5250 workloads, and how these features are all packaged and
priced. If IBM wanted to give its own sales force and those of its
reseller channel a more difficult product line to sell, it would be
hard to imagine how IBM could "improve" upon the scheme it has
created. To be fair, and to IBM's credit, the price/performance of the
iSeries and i5 line has improved over the years, but the packaging is
a nightmare. No one can keep this straight any more, and the packaging
and pricing of the i5 line is out of whack with how the industry at
large is doing servers.

In terms of the software stack on these basic servers, I have added an
operating system and a relational database management system, and
unlike in past years, I have thrown in virtual machine or logical
partitioning hypervisors, since I think people are going to start
using these in production. The i5 has had such software embedded for
years, and to make it a fair comparison, this functionality should be
added to X64 servers as well. For the heavy configurations of the
Windows and Linux machines in the table, I added in VMware's
top-of-the-line ESX Server 3 with all of the bells and whistles. And
for the cheapo configurations, the Windows boxes have Microsoft's
freebie Virtual Server 2005, while the Linux machines, which are
configured with Novell's just announced SUSE Linux Enterprise Server
10, have the integrated and free Xen 3 hypervisor from XenSource. I
put SQL Server 2005 Workgroup Edition or Standard Edition on the
Windows machines, and Oracle Standard Edition One on the Linux boxes.
The Unix boxes running HP-UX use HP's own Virtual Server Environment
partitioning, the IBM p5 boxes use the Virtualization Engine
hypervisor also used with the i5, and the Sun boxes use Solaris
containers. I know that the latter is not as sophisticated as some of
the other hypervisors--since containers have a shared Solaris kernel
and file system underneath virtual machines--but if you want, you can
put VMware ESX Server 3 on the Opteron boxes. In some cases, this will
make a big, big difference in the price/performance of a
Solaris-Opteron box. ESX Server does not run on the Sparc T1 "Niagara"
servers.

How the i5 520 Measures Up

The numbers in the table pretty much speak for themselves, and they
speak quite loudly, too. A base i5 520 Standard Edition machine costs
under $1 per transaction per minute (TPM), which is about what a fully
loaded i5 520 Value Edition or Express Edition machine (which has a
modest amount of 5250 processing capacity) costs. In this regard, i5
520 Standard Edition machines are offering pretty good value.
Moreover, compared to the iSeries line in 2003, where a similarly
powerful box might cost anywhere from around $2 to $4 per TPM running
OS/400 Standard Edition and the iSeries i5 line from 2004, where the
first-generation of i5 520 machines could cost around $2 per TPM, this
is, again, a big improvement. Even Enterprise Edition machines have
come down in cost a great deal. Back in 2003, an iSeries Enterprise
Edition box in the same power class could cost $10 per TPM, and by
2004, with the iSeries i5 line, that had dropped to $5 to $6 per TPM.
So the roughly $3 per TPM that IBM is charging for base boxes today
seems like a big improvement.

The problem is that the Wintel and Lintel markets are offering much
better bang for the buck. Like ridiculously better. The i5 is on a
Unix system pricing curve, selling against Wintel and Lintel boxes
that now have many of the same virtualization and database features
and that offer compelling value and performance. Even loading up the
most expensive Windows stack--Windows Server 2003 Enterprise Edition
and SQL Server 2005 Enterprise Edition--with the very pricey VMware
ESX Server hypervisor results in a machine that costs 62 cents per TPM
using a very modest dual-core 1.86 GHz "Woodcrest" Xeon 5120
processor. Switching to the faster 3 GHz Xeon 5160 Woodcrest chip and
putting two processors in the box instead of one more than triples the
performance of Intel machine, but only increases the cost of the box
by 60 percent because the software pricing doesn't change. So the bang
for the buck on this larger Woodcrest box is a stunning 29 cents per
TPM. Moving to a cheaper Windows stack--Windows Small Business Server
2003 and SQL Server Workgroup Edition--cuts the price of the same
systems roughly by half. Moving to a Sun Galaxy Opteron-based server
running the Windows stack doesn't change the pricing at all. Woodcrest
machines pretty much match the current Rev E Opteron machines. (Rev F
Opterons, due in a few weeks, better have some performance
advantages.)

Linux and the cheaper Windows stack are about the same cost (which is
no accident, but the way Microsoft is being aggressive), as the table
shows, and if you really want to save money, you move to Novell's SUSE
Linux Enterprise Server 10 and use the integrated Xen hypervisor,
which drops the bang for the buck down to 14 cents per TPM on the
larger configuration--the one where the i5 Standard Edition costs 84
cents per TPM. That is better price/performance by a factor of six.

If you want Unix and you like Sun's Galaxy Opteron servers, Solaris 10
plus Oracle 10g Standard Edition One costs about the same as the SLES
10-Xen stack running the same database. IBM's new Power5+ p5 510+
Express and 520+ Express servers cost 21 cents and 23 cents per TPM,
respectively, with an AIX stack, Virtualization Engine Hypervisor, and
Oracle 10g SEO. And for all the talk about how great the "Niagara"
Sparc T1 multithreaded, multicored processors are, these machines
offer comparable performance to an i5 520, but cost around 45 cents
per TPM when configured up. (I am guessing the performance of the
Niagara boxes based on other benchmarks, since Sun is too stubborn to
run the TPC-C tests on its Galaxy and Niagara even though it has great
numbers. Go figure.)

Finally, for Unix servers, I threw in two Hewlett-Packard Itanium
boxes for comparison's sake, but HP is weeks away from revamping its
Integrity product line and these are not exactly fair comparisons. The
rx2620-2 will be replaced with a new machine based on the "Titan" zx2
chipset later this year, and the rx4640-2 server shown is really a lot
bigger than the i5 520 in terms of expandability. I threw in the
rx4640 because HP ran a test on this box using the new dual-core
"Montecito" Itanium 9000 processors, and I wanted to show that even a
single, dual-core chip was capable of doing a lot of work--and from
the looks of things, almost as much work as IBM's new 2.1 GHz Power5+
chips for the p5 machines. And, by the way, these new Power5+ chips
are not coming to the i5 line--at least not now.