In a radical new move aimed at the small and medium enterprise, IBM has slashed the starting price on two brand new entry-level System i boxes, changed its low-end pricing model, and turned loose the full power of the System i processor.

Today, IBM is unveiling the 515 Express and 525 Express. The 515 is a 1-way, 1.9 GHz POWER5+ processor, upgradable to a 2-way processor, and the 525 is a 1-way with 2-way activation available via Capacity on Demand. In both of the new systems, IBM is no longer cobbling the processor down to the previous entry-level 520's 600 CPW — that's right, IBM is letting the processors run at 100 percent capacity.

"This isn't new hardware — it's the very best and the latest System i hardware, but that's not the point," notes Ian Jarman, IBM System i product manager. "We're changing the way we're going to market . . . and it's a major change."

The new 515 Express now starts at $7,995, which is $4,000 less than the previous entry point on a 520. Not only is the 515 a much better deal in terms of the cost of acquisition but also because the processor runs at 100 percent, which far exceeds the 520's previous dismal Java and WebSphere-related performance.

It turns out that IBM System i General Manager Mark Shearer meant business earlier this year when he hinted that IBM was working on some new entry-level boxes.

User-Based Pricing

As for pricing, IBM is breaking with tradition and is now offering user-based pricing on its entry-level models. Essentially, it's $250 per user. On the 525 model, which now includes Client Access licenses, it saves small- and medium- business customers $274 on Client Access licensing costs they might have had to pay previously.

Basically, IBM has adopted the model of internal versus external user access on these new models. If you're a business that has employees accessing the System i, you pay for those employees. If you have customers accessing the System i — for example, if you're a small community bank with clients who use online banking — you pay a flat $3,995 fee that covers all your external use.

Opening SMB Doors

IBM is targeting small businesses with the 515 and mid-sized businesses with the 525, which is much more expandable than the 515. For the first time, the 515 is playing in the same ballpark as a competitive entry-level Windows Intel server solution. While a Wintel solution might come in at $5,800, IBM says, the 515 now comes in at $8,563 — which is a massive leap forward over a similarly powered 520, which came in at $25,950.

IBM simply couldn't compete for small businesses with the 520. On the 525, competing for larger customers, IBM is throwing down similar numbers: $34,900 for 30 users, $59,900 for 150 users, and $79,900 for unlimited users.

In addition, here's a competitive scenario for financial and clinical applications for a 100-user community hospital:

• To have a Windows server running on four Intel 3.0 GHz Xeon processors to handle core financials, IBM says the price tag comes in at $62,000. To run the clinical solutions, you'll need two more Intel servers, which will cost another $18,000, for a total of $80,000.
• To run the same financials on a System i 525 with i5/OS on a POWER5+ 1.9 GHz processor, the price comes in at $89,770. To get the clinical solutions, you'd activate the second processor, adding any necessary users, for an additional $15,649, bringing to the total cost of acquisition (TCA) to $105,419.

Before today, a similarly configured 520 would have resulted in a price tag of $161,000.

Although the new 525 TCA price tag is still higher than a Windows-based solution, it's much improved and is close enough, particularly when you start talking about lease rates, to make it competitive. In addition, these boxes will be sold by IBM and IBM Business Partners who will go after sales situations in which businesses want total-package solutions that mostly run themselves. They will surely talk about the System i's superior total cost of ownership (TCO).

Another Reason Why VIP Will Kick Butt and Take Names

All of this plays into IBM's new Vertical Industry Program (VIP), which is targeting specific industries around the world. The combination of IBM's focus on developing new niches for the System i, along with new boxes that are priced competitively right from the start, is particularly good news for IBM Independent Software Vendors who have been struggling to gain new sales due to higher acquisition costs and difficulty running new Java-based workloads on the 520 models.

More for Existing Customers

For existing customers, IBM has a handful of other cool announcements coming out today.

New Application Server License: Previously, no matter what you did, if you wanted i5/OS, you had to pay a premium price for the included DB2 database.

"What we're introducing on the 550 and above is an Application Server license that says, 'If you want to run WebSphere, you won't have to pay for the database component of i5/OS,'" Jarman notes. "We now have a special price for the i5/OS Application Server."

So, right now, i5/OS on a 550 is $41,000 while a new i5/OS Application Server license is only $14,000. For a 570 or 595, the two costs are $59,000 and $19,000. The details are unclear at the moment, but it seems that in order to get this pricing, you would need to run the full i5/OS with DB2 in a separate partition, with i5/OS Application Server running in the same box.

Speed Boost at High End: The 595 now runs with POWER5+ 2.3 GHz processors up to 216,000 CPW, which is a 17 percent increase over the predecessor.

New Web-Based Query and Reporting Tool Product Preview: IBM plans to deliver a web-based query and report-writing product that replaces IBM Query for System i. It includes report and graphing tools and spreadsheet integrations, web-enables Query/400 reports, comes with advanced query capabilities (for dashboards, DB2 Federate Queries, Online Analytical Processing), and data integration for ERP systems, as well as database, cube, and mining connectors. For more information, check out http://www.ibm.com/systems/i/db2.

New Security Policy Tool: IBM is introducing a "Secure Perspective" tool for helping businesses create enforceable security policies using natural language terms. In addition to implementing your security settings, it also helps you demonstrate compliance to your policy. For more information, check out http://www-03.ibm.com/systems/i/security.

New Disk Pricing: Perhaps because IBM must offer less expensive disks to make the 515 and 525 affordable, the company is slashing disk prices across the System i line by up to 50 percent.

General availability for all of these announcements begins April 20.