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IBM slashes chip animation, new server prices

'Please spend now. Not later'

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It is pretty safe to say that IT shops are a little hesitant to spend money these days. And getting companies to open up their checkbooks before 2009 is going to be something of a challenge. But no matter how bad the economy gets, you can always convince someone to spend now rather than later - so long as the deal is good enough.

This week, IBM launched a few deals designed to get customers to spend at least some money right away. One has to do with its System p and Power Systems products, which run AIX or Linux and sometimes i5/OS. The other concerns Opteron-based BladeWCenter blade servers.

On the Power server front, IBM knows that customers who have not already moved to its Power6-based Power Systems machines - which rolled out from July 2007 through April 2008 in stages - probably are not going to do so now unless they have a pressing capacity need.

The reason has less to do with iron and more to do with qualifying existing applications on a new release of AIX 6.1 or i 6.1. And in the case of the proprietary i shops, there is an application conversion process that is required when customers move to i 6.1, and while the earlier i5/OS V5R4M5 sub-release is supported on Power6 iron, unlocking all the features in the Power6 chip really requires this conversion.

So, IBM's marketeers - not being complete idiots - are trying to get customers who already have System p and Power Systems iron installed to buy some latent capacity they have sitting inside their boxes, which can be activated because these servers support so-called "capacity on demand" processor core activation. This capacity is by no means cheap. IBM charges a pretty penny for older Power5 or Power5+ cores as well as Power6 cores.

The capacity upgrade deal covers System p 570, 590, and 595 machines, which span a range from 2 to 64 processor Power5 or Power5+ cores across all three models, as well as on the Power Systems 570 machine, which is based on Power6 processors. Customers must have had processor cards installed as of November 7 to take part in this deal, and they only have until December 19 to place orders to activate latent processing capacity.

On the Power6-based 570 box, IBM is offering a 45 per cent discount off the cost of activating 3.5 GHz, 4.2 GHz, and 4.7 GHz Power6 cores. To give you an idea of the kind of money Power Systems customers pay for capacity, it costs $11,500 to buy a processor card with a dual-core Power6 chip on it running at 4.7 GHz, and then it costs another $23,000 to activate each core. So a 45 per cent discount is real money.

On older Power5 and Power5+ servers, IBM's pricing might be a little bit lower per core, but not much, and that means the price/performance of staying with the old kit is not as good as moving to the new kit, which has more oomph per core. But, there is a lot lower grief factor with just turning on a few cores in an older System p box.

That said, IBM wants customers to do it now rather than waiting, and that is why Big Blue is giving 60 per cent discounts off System p 570, 590, and 595 machines with 1.65 GHz, 1.9 GHz, 2.1 GHz, or 2.3 GHz Power5 cores and 1.9 GHz or 2.2 GHz Power5+ cores sitting idle. On the System p 570 machine, customers have to activate two cores at a time to get the discounts, but on the larger System p 590 and 595 boxes, customers can do onesies if they want.

The irony, of course, is that customers who do the easy capacity upgrade today on Power gear are all that much less likely to do an upgrade to Power6 next year. But if IBM thought there was a hope for that, it would have been giving discounts across the line on new Power Systems machines, and so far, at least publicly, it has not been that generous with the discounts. Any time Sun Microsystems and Hewlett-Packard are in on a deal, IBM is more inclined to give credits for services and software rather than do straight discounting. (See here for the company's current credit program for customers who jump from Sun or HP iron to Power machines.)

Back in early October, IBM launched a deal that gave customers buying Opteron-based BladeCenter LS21 and LS41 blade servers and System x 3755 rack servers some decent discounts, at 40 per cent off for the two-socket and four-socket blades and 45 per cent off for the four-socket rack machine. This week, IBM broadened the discounts to include a wider variety of configured LS21, LS41, and x3755 machinery, and on the blades, the discounts were jacked up from 41 to as high as 74 per cent.

Do you think IBM might be wanting to get rid of a little Opteron inventory ahead of the "Shanghai" quad-core Opteron server launch, widely expected later this week?

The Opteron server discounts expire on December 31. ®

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