When IBM unveiled new eServer i5 systems earlier this month, it did more than just expand the performance range of the product family. The computer giant also made big changes to the way that it packages and prices most eServer i5 models. Those changes give customers new options for configuring the servers in ways that meet their needs more effectively.

While Big Blue adjusted some prices on July 13--the day that it announced the new eServer i5 models--it reserved the most significant changes for a conference call that it held with its Business Partners last week. On that call, IBM made two important announcements. First, it dropped the requirement that all of the active processors on the n-way eServer i5 models must have i5/OS licenses loaded on them. Instead, each n-way model will come standard with a minimal number of active processors running i5/OS. The remaining active processors will have no operating system license, leaving customers free to decide what OS to deploy on them.

Second, IBM announced flexible policies under which owners of selected eServer i5 Enterprise Edition models can acquire the 5250 application throughput that they need. Put simply, the new policies will allow customers to pay for maximum 5250 capacity on some rather than all of their processors. This could allow many companies to pay less than they expected for 5250 capacity on the new servers.

Parsing the Packaging--A Closer Look

While the new policies provide customers with greater flexibility to configure the eServer i5, they also require a good deal of explanation. With that in mind, I have prepared the following table to help you understand the packaging changes. Please note that the column entitled "Enterprise Enablement Features" represents the number of processors that are authorized to run 5250 applications at full capacity on the i5 Enterprise Edition models.

* Total includes the additional processor activation provided in the Enterprise Edition.
** Additional i5/OS licenses are available for $45,000 per processor.
*** Additional Enterprise Enablement Features may be purchased if required.

As you can see from the table, both the Standard and Enterprise Editions no longer come with one i5/OS license for every active processor. Instead, IBM offers one i5/OS license on every server up to the Model 570 2/4-way and four i5/OS licenses on the larger models. To compensate for the smaller number of i5/OS licenses, IBM is deducting $45,000 from its list prices for every i5/OS processor license that it has dropped. (Since IBM has not published prices for the Model 570 servers that it announced on July 13, the deductions are only implicit on those models.) Customers can either buy the additional i5/OS licenses they need at $45,000 per processor or purchase AIX and Linux licenses for their remaining active processors.

The new packaging could make the eServer i5 a more flexible and attractive option for consolidating workloads in some data centers. Imagine, for instance, that your company needs one POWER5 processor to run your existing OS/400 workloads--including some 5250 applications--and one processor to consolidate Linux workloads running on Intel servers. You could support all of those workloads on a two-way Model 520 Enterprise Edition. Until last week, however, the Enterprise Edition of that model included two i5/OS licenses. You only need one license. IBM's new Enterprise Edition for this model includes just one i5/OS license and deducts $45,000 for the dropped license. Your company could spend those savings on Linux software and services to migrate your Linux workloads.

In addition, IBM has repackaged its support for 5250 applications on the eServer i5 Enterprise Editions. On today's iSeries models, an Enterprise Edition gives its owner the ability to use the full capacity of every processor to run 5250 applications. In reality, most owners of larger iSeries models use a fraction of that capacity. As such, IBM has modified the Enterprise Edition licenses on selected i5 models so that they authorize only some of the processors to run 5250 applications. These authorizations are known as Enterprise Enablement Features, and each feature authorizes one processor to run 5250 applications up to the processor's maximum capacity. As the table shows, the Model 520 2-way has one Enterprise Enablement Feature, giving it maximum 5250 capacity on one processor. The larger Model 570 servers all have four of these features, giving them full 5250 capacity on four processors.

If customers need more 5250 capacity than the new Enterprise Editions provide them, they can buy additional Enterprise Enablement Features at a cost of $50,000 per processor for the Model 520 and $150,000 for the Model 570. There is also a "maximum Enterprise Enablement Feature" that turns on the 5250 capacity of all processors on a Model 570 for $250,000. By the way, IBM revised prices for its Enterprise Editions to reflect the fact that they offer less 5250 capacity than in the past. For instance, Big Blue cut $50,000 from the cost of the two-way Model 520 Enterprise Edition because it now provides maximum 5250 capacity on one rather than two processors. This means that the cost of 5250 capacity remains the same as before. However, customers can buy that capacity in single-processor increments.

This new way of packaging 5250 bandwidth could benefit many customers that have modest needs for such capacity. Let's return to your hypothetical company that needs just one POWER5 processor to run its OS/400 5250 applications and another processor to run Linux workloads. As I stated before, running all of these workloads requires a two-way Model 520 Enterprise Edition. Until now, you paid for maximum 5250 capacity on both of the server's processors even though you needed the capacity of just one processor. Under the new packaging, you pay for 5250 capacity on one processor and save $50,000 in the process. Of course, you could always turn on the 5250 capacity of the second processor by purchasing an additional Enterprise Enablement Feature for that same $50,000.

I will admit that the example I have shown you is an ideal one. In many or even most cases, customers will spend just as much on an eServer i5 as they would have before this announcement. What the announcement does, however, is partially unbundle i5/OS licenses and 5250 capacity from the cost of the i5. That gives customers the choice to redeploy those savings to new workloads and operating systems. IBM is betting that many of them will do just that.

Sweating the Small Stuff

Besides announcing big changes to its server packaging last week, IBM also helped its Business Partners understand the smaller changes that it made to feature code prices on July 13. As you may remember, July 13 was the day that IBM announced its new eServer p5 models. As it turned out, the folks that managed that announcement decided to price some of the eServer p5's feature codes differently than identical feature codes on the eServer i5. To maintain identical prices for feature codes that are common to both servers, IBM adjusted the i5 feature code prices. The adjustment reduced prices on a number of memory cards, disk drives, and adapters (click here to see the announcement). However, it increased the price for activating a standby i5 Model 570 processor from $4,400 to $7,700. Given the added flexibility and potential savings of the new packaging model, however, this will probably be a minor consideration for most customers.

If IBM's new packaging and pricing terms have you interested, you should know that they take effect on July 30. You can place orders before then, but distributors will not be able to price the orders under the new terms. Also, be aware that these terms will not apply to any existing eServer i5 orders. If you have already placed an order and think that the new terms could benefit you, call your distributor or IBM representative immediately. While you may be stuck with the old terms, it never hurts to explore the options with your vendor of choice.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology.

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