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i5 pricing option mirrors IBM on-demand strategy

Users looking to run multiple operating systems on their i5 server now have greater flexibility in purchasing. But will it end up costing them more in the long run?

In a move that could accelerate acceptance of IBM's on-demand computing strategy, eServer i5 users will now only have to pay for the operating systems they want, when they want them.

In May, IBM introduced the next generation of its iSeries, the eServer i5 -- the first server based on the Power5 chip and the first mid-range server to run multiple operating systems. Technology called Hypervisor, which has been embedded into the mainframe for years, allows the i5 to run Linux, AIX and Windows, as well as OS/400 and OS/i5.

For users running multiple operating systems on one server, the new options could be significant.

The model is similar to Capacity Upgrade on Demand (CUoD) pricing – you just pay for what you activate. But the operating systems aren't actually loaded onto the system, like a processor or memory would be, said Ian Jarman, iSeries product marketing manager. You have to license them. In addition, users have to buy a minimum number of i5/OS licenses with the server, but after that they can add whatever configuration of operating systems they want.

Now, for example, clients can buy a 16-way eServer i5 570 with four processors for i5/OS and mix and match the remaining processors for AIX 5L and Linux workloads.

One of the advantages, said Jarman, and where there's a sizable price benefit, is in the "mix and match" capability it offers.

IBM has talked for sometime about running an on-demand environment and is now introducing a pricing option that matches that strategy, said Jarman.

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On-demand concept still stumps users

Jarman said, as IBM expanded its on-demand strategy , it had to introduce the same kind of flexibility into the way it priced systems as it did process capacity.

Customers are beginning to understand the "vision" of on-demand and want to "mix and match" operating systems on the same system, he said.

"This whole pricing structure that we have is part of IBM's strategy for on-demand business," said Jarman. "It's easy to understand capacity on-demand. But what we mean [by on-demand] being flexible, adjusting systems to meet new opportunities -- that's broader than adding capacity. This structure fits that strategy."

"Expanding the concept of capacity on demand to the operating system is a good thing," said Wayne Kernochan, president of Infostructure Associates, Wellesley, Mass.

However, he's not sure it's necessarily the best thing for the user. It could turn into what he refers to as the Gillette model of pricing: Sell the razor for next to nothing but charge inflated prices for the razor blade. It really depends on what IBM charges for the OS, he said. "In the long run, the only way it will benefit users is if the charge [for the OS] is minimal."

This move is one of a string of aggressive pricing strategies IBM has put into place in recent months. Most notably was the announcement in May of new low pricing for the iSeries and i5 servers. The core of IBM's new economic model is a radical pricing strategy that reduced the prices of some iSeries models and memory by as much as 80%. The new i5 models start at prices that are less than half of what a comparable iSeries would have been before the price cuts.

Let us know what you think about the story; e-mail: Kate Evans-Correia, Senior News Editor

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