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New System i boxes take aim at Windows

By Davin Wilfrid
Friday April 13, 2007

IBM has officially announced two new entry-level System i servers priced to compete with low-cost Windows boxes in the small and midsize business (SMB) market. Insider Weekly first reported on the coming entry-level models two weeks ago (IW 3/30/07).

At an IBM event in Cambridge, MA on April 10, IBM executives heralded the release of the new System i 515 Express and System i 525 Express editions.

“This is the most important announcement for the System i since the AS/400 was announced 19 years ago,” said Elaine Lennox, VP of marketing, System i, IBM, Rochester, MN.

The new models feature user-based pricing instead of the CPW-based pricing that has swelled the cost of ownership of some System i models. Pricing for the System i 515 Express, which supports five to 40 user licenses, starts at $7,995. Pricing for the System i 525 Express, which supports 30 users and up, starts at $34,900 (more details on pages 2 and 3).

Lennox and Steven Solazzo, general manager of IBM’s SMB sales division, said the new boxes will allow IBM and its business partners to follow through on the promise of solution-driven sales.

Solazzo said the new server models fit hand in hand with initiatives like IBM’s System i Vertical Industry Program (VIP), in which IBM targets certain industries with strong System i-based solutions.

“Today’s announcement is very much an extension of that strategy. We find that many companies first move to a Windows strategy, and the overwhelming reason for that is initial cost. But if you look at downtime, protecting against viruses, and the requirements for staff, over time those costs outweigh the initial savings. When your fondest dreams come true and you grow, now you’re looking at 20 servers, 30 servers, maybe 50 servers,” said Solazzo.

Solazzo said offering an entry-level platform for less than $10,000 gives IBM and business partners the freedom to push solutions without worrying that hardware costs will scuttle potential sales.

“One thing we know for sure about small market clients is they don’t buy IT infrastructures — they buy applications. This is the first time in 10 years we have had this technology available in the marketplace for under $10,000. For my business, this is compelling,” he said.

Dan Bivona, sales director for IBM business partner Vormittag Associates, Inc., says the new box should give his company — which has traditionally catered to midsized businesses — the flexibility to offer its CRM, warehousing, and other applications to smaller companies in the manufacturing, distribution, and retail industries.

“I think we’ll now be able to compete with Windows on the total cost of acquisition,” says Bivona.

One analyst says the new server and marketing strategy could do a lot to speak to SMB executives in a language they understand.

“It is not an automatic win, but it is a well-advised strategy. Changing the pricing and licensing models, along with the lower hardware price, will make this system seem more ‘normal’ to the SMB community, especially on the lower end,” says Clay Ryder, VP and COO, Sageza Group, Union City, CA.

Another analyst says IBM is on the right track, but still hasn’t gone far enough.

“It’s good that the System i is going back to its roots, so to speak, by trying to come up with hundreds of locally produced industry solutions. That was the root of its original success in the marketplace. At the same time, I don't think the (System i) 515 is positioned quite low enough. The System i competes with Intel-based servers at the entry level that are priced much lower than that. When and if IBM comes out with a new ‘Model 505’ priced in the $2,000 to $3,000 range, I'll say they got it right,” says Bob Djurdjevic, president, Annex Research, Phoenix, AZ.

A closer look at the new models

The System i 515 Express offers the following features:

• Pricing starts at $7,995 for a 1-way Power 5+ processor with 5 user licenses for i5/OS V5R4. Additional i5/OS licenses are available in packs of 5 for $1,250.
  
  
• A maximum of 8 disk drives.
  
  
• A maximum of 16GB memory.
  
  
• A 90-day software maintenance agreement included. Longer agreements available as an upgrade.
  
  
• Windows integration available via iSCSI to System x and BladeCenter.
  
  
• Up to 20 partitions.
  
  
• Up to 20 popular configuration options available.
  
  
• Customers can upgrade from a 1-way to a 2-way within the system.

The System i 525 Express offers the following features:

• Pricing starts at $34,900 for a 1/2-way Power 5+ processor with 30 user licenses for i5/OS V5R4. Additional licenses are available in packs of 10 for $2,500.
  
  
• A maximum of 248 disk drives.
  
  
• A maximum of 32GB memory.
  
  
• A 1-year software maintenance agreement included. Longer agreements available as an upgrade.
  
  
• Windows integration available via iSCSI to System x and BladeCenter.
  
  
• Up to 20 partitions included.
  
  
• A full list of configuration options.
  
  
• Ability to upgrade from an iSeries Model 810 or a System i 520 into the Model 525 Express, and activate 2-way processor via Capacity on Demand.
  
  
• Available as System i 525 Capacity BackUp (CBU) edition.

For more information on the new low-end boxes, see www.ibm.com/ systems/i/hardware/.

A host of other IBM System i announcements IBM’s announcement of the new Express edition entry-level boxes was bundled with a rash of other announcements, including: An enhanced System i 595 with a 2.3GHz Power 5+ processor New Web-based query and reporting tools A new security policy management tool Support for 36GB, 4mm tape drives Enhancements to the disk controllers announced in February Insider Weekly will cover these announcements in more detail in coming issues. For more information, see IBM announcement letter #107-179.