If you have been wishing IBM would offer a System i that could truly compete with servers running Microsoft Windows, your wish is granted. Today, IBM is announcing the biggest change in how it prices and packages the System i in almost a decade. The company is unveiling System i Express, new models for small and medium-sized businesses. Prices are based on the number of users they support rather than interactive or batch CPW ratings. Just as importantly, the prices for these models make them potent competitors to Windows servers clear down to the five-user level.

A New Pricing Model for a New Era

As long-time users of the System i and its predecessors know, IBM decided in 1998 to price its servers differently based on whether or not they support interactive "green-screen" applications. This decision led the company to create complicated portfolios of models with varying levels of interactive and batch performance. To create these configurations, IBM had to put firmware-based governors on its one-way systems to limit their otherwise powerful processors.

While IBM's decisions may have been logical when it made them, that logic has been gradually losing its relevance. Over the last several years, hundreds of System i solution providers have modernized their products so that they no longer require interactive performance. At the same time, SMB organizations have (thanks to Microsoft) grown used to paying for their software on a per-user basis. When they compare the System i to Windows servers, IBM's arcane language about CPW ratings and hefty acquisition costs make for a tough sale.

To make the System i appealing to SMB firms, IBM is taking a radical action. It is announcing two new models that are nearly identical to the Model 520 from a hardware perspective but are entirely different in their packaging and pricing. These systems—the Models 515 and 525—are 1- and 2-way systems that have no performance governors on them. Each system offers the full capacity of its POWER5+ processors running at 1.9GHz. The Model 515 meets the needs of small businesses that need support for up to 40 users of i5/OS applications. The Model 525 accommodates medium-sized businesses with 30 or more i5/OS users. It also functions as the new upgrade path for 810 and 520 owners. The following table provides a high-level overview of the new models.

As the table indicates, IBM is clearly targeting the Model 515 at price-conscious small companies that are new to the System i. The system comes standard with support offerings that are typical for Windows servers, such as "next business day" hardware warranty service. Customers can upgrade to "enterprise class" support levels as an option.

An aggressive price of $7,995 entitles buyers to five named i5/OS users. Companies can then add increments of five users at a cost of $250 each. This per-user price is competitive with what most companies spend for similar functionality in a Windows environment. For example, Client Access Licenses (CALs) for Windows Server Standard Edition cost $40 each, while CALs for SQL Server (Microsoft's alternative to DB2, the integrated System i database) cost between $146 and $162. That puts the per-user cost of an "equivalent" Windows environment at $186 to $202 versus $250 for the System i Express. However, i5/OS packs significantly more systems management functionality under the covers than Windows does. Adding that functionality to a Windows server and "hardening" it to make it as reliable and secure as a System i would easily put the per-user cost over $250.

While the Model 515 is a great system for new customers and a worthy opponent to Windows servers, it lacks the configurability needed by most current customers. That is where the Model 525 comes in. Unlike the 515, the 525 supports multiple terabytes of disk storage, expansion cabinets, Integrated xSeries Servers and Adapters, and all of the other features available on the Model 520. It also supports logical partitions (LPARs) out of the box and comes standard with 24x7 same-day hardware service. It is the system that companies should get if they are upgrading from an older system or need to support more than 40 users.

By announcing the Models 515 and 525, IBM is essentially moving its entire SMB product lineup to per-user pricing. While the computer giant will continue to market the Model 520, it is advising its sales force and resellers that the 515 and 525 collectively replace nearly all 520 configurations. The only exceptions are Model 520 Solution Editions being offered by selected application vendors with discounted prices. In addition, IBM will continue to offer the other Model 520 editions to customers that require i5/OS V5R3, as the 515 and 525 require i5/OS V5R4.

There is much more that I could say here about the System i Express, not to mention other important announcements that IBM is making today. That is why I will offer further coverage in an article that will appear next Monday. For now, suffice it to say that the new offerings put IBM's midrange platform on an entirely different competitive footing with Windows servers. The Models 515 and 525 provide SMB customers with a simple way to measure the value of the System i and compare it to that of Windows servers. When those comparisons include any of the thousands of modernized applications now available for the System i, many companies will conclude that the value proposition finally tips in IBM's direction. While the System i Express is not a Windows killer, it definitely has the chops to be a Windows nemesis. That makes it a powerful catalyst for reenergizing IBM's System i business.

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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