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IBM smells red ink

The installed Solaris server base is much larger, with an estimated one million machines in the field, according to Handy. And IBM is jacking up the point rewards for companies that dump Solaris boxes for AIX machines because it smells red ink. That's akin to blood in the IT water. "Over the last 60 days or so, customers who have said consistently to us that they were loyal or dedicated Sun customers now say they want to get a backup plan. There are a lot of customers who have bought a lot of Sun iron over the years, but they are not buying now. We think these are rich targets."

In key accounts, Handy says Sun will discount its iron as much as 50 to 80 per cent off list price to try to keep IBM out. And at the higher discount levels, IBM walks away because it doesn't want to lose money on the deal and having Sun discount so deeply is, in a way, kind of a win.

During the 2001 and 2002 dot-com bust, IBM just walked in the door with a 50 per cent off initial offer to any Sun and HP customer site and then started the wheeling and dealing right there. IBM, which was the distant number three in the Unix space, was buying Unix market share (and doing so on the backs of its AS/400 customer base, which was gouged to near-death with higher hardware and software prices).

With Power Rewards, IBM is basically at the same discount level for the AIX iron, but the dough is locked into other IBM or business partner products and stays in the revenue stream, even if it does affect profits. Power Rewards maintains the top line better than straight discounting, which is why Handy says he has no intention of stopping the deal in 2009 or 2010.

Handy cites one Sun account, with over 8,000 servers (and presumably in financial services, but Handy did not divulge this), that is now interested in the possibilities of migrating Solaris workloads to AIX on logical partitions on Power6 iron. Such customers don't move all of their servers all at once, they do them 100 or 200 at a time, and in each case, they can do so using the Power Rewards program to build up points and then burn those points on Migration Factory services to do the deal.

The details of the 35 products and services IBM is offering is here, which burn anywhere from 1,000 to 95,000 points. These range from a low of 1,000 points for two processors' worth of IBM's Tivoli Enterprise Edition system management tools to migration workshops and services, to performance tuning, PowerVM hypervisor implementation, high availability assessment and workshops, data center thermal analysis, and various other "green" services to help data center managers cope with power, cooling, and performance issues.

The key service is for Unix shops is the 40-hour block of migration services, which burns 15,000 points. IBM said back in April that the points for the services were based on paying IBM consultants the going rate of $375 per hour for migration services.

Incidentally, the Power Systems division takes the profit and loss hit for the Power Rewards program - Handy literally cuts checks to IBM's Global Services or Software Group for the services and products provided as part of the migration. If an IBM reseller provides the service or sells the software, they get the dough.

Handy says that with Sun's financial difficulties (it just posted a $1.68bn loss in the first quarter of fiscal 2009) and Sun co-founder Andy Bechtolsheim leaving the company (more or less) for the second time to work at a networking startup, and with a Power6 server lineup that competes well with the Sparc T and Sparc64 VII servers that Sun and Fujitsu-Siemens are peddling, IBM's sales reps and business partners were chomping at the bit to go after Sun. Sun's own business partners, many of whom Handy says are facing declining sales, might also be persuaded to sell IBM iron at this point, too.

The first step is to identify Sun shops and do unsolicited proposals - what Handy calls "sparring and jabbing" - which has less to do with making deals than on identifying what things Sun or HP shops are thinking about and why they will or will not consider a migration to IBM gear. IBM has hundreds of these proposals in the works right now. And over the course of a year's worth of sparring and jabbing, they can generate billions of dollars in server, storage, software, and services revenue for Big Blue as part of actual migrations. ®

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