Such trade in credits are a standard tactic from IBM in pushing its pSeries and iSeries. Trade-ins are preferable to plain, old discounts because they allow IBM to book revenue today and then send the credit back at some future date. IBM gets to grease the skids now, but doesn’t have to pay for the grease until some future date, in this case, when it cuts the trade-in credit.
These trade ins are also popular with Big Blue because they take machines that might otherwise end up in a secondhand server market and put them under its control. IBM can sell the assets that come back as part of a trade through its Global Services unit, or it can sit on them. IBM also gives rebates (not in this particular deal), which offset the cost of a server but which do not come back as cash, but as a form of funny money that can be used to buy other IBM goods and services.
Under this Power4-to-Power5 promotion announced this week, customers looking to get rid of their Regatta pSeries 670 or 690 servers and move to p5 590 or 595 servers can get a trade in credit that ranges from $60,000 to $320,000. The pSeries 670 topped out at 16 of IBM’s Power4 processor cores, while the pSeries 690 has 32 of them. The machines that customers upgrade to under this promotion support a maximum of 32 (p5 590) or 64 (p5 595) processor cores. The p5 trade-in promotion runs until December 23, and IBM doesn’t cut the trade in check until the replaced machine is back in its hands.
There is a big wrinkle in this deal, however. Customers have to buy a p5 590 or 595 machine that has as many processors activated as they had inside the pSeries 670 or 690 box, whether those pSeries engines were activated or not. So, for instance, if you had a pSeries 670 with eight engines turned on and eight engines mothballed, you have to buy a p5 590 with 16 engines turned on. IBM then turns around and cushions the economic blow of forcing that doubling of processors, but in an odd way.
IBM provides customers with an additional processor activations for free on top of the trade-in credit (in this example, eight free activations). In the end, the customer ends up with 24 processors where they started out with 8 engines. That is a lot more processing power for what could be a lot less money, considering it costs $32,000 to activate a Power5 processor core on these high-end p5 machines. Still, asking a company to absorb three to four times the computing capacity, even with a big discount, is asking a lot.
IBM is also restricting this promotion to customers, and any company that intends to resell or lease the p5 590 or 595 cannot acquire these machines through this deal. Customers have until January 24 to accept delivery of the new p5 box.
