IBM Tempts HP, Sun Users With Power Price Cut

IBM is dramatically cutting the memory prices on its Power systems in an effort to lure more HP and Sun Microsystems to switch to its platform.

IBM will reduce memory prices 28 to 70 percent, believing that such a move will lure more customers onto the Power architecture, according to Scott Handy, vice president of worldwide marketing and strategy for IBM’s Power systems platform.

The price cuts were announced on Tuesday.

IBM is looking to press an advantage is sees over HP and Sun, which Handy said are dealing with questions from customers about the future of those platforms.

Those concerns have led to business for IBM, he said. In 2007 and 2008, IBM had seen about $500 million (£297 million) in new business for its Power platform, about 80 percent of which had come through migrations by HP and Sun customers, Handy said. Through the third quarter of this year, IBM has generated $400 million (£237 million) in new business.

“We’re poised to have a better year this year,” he said.

Handy pointed to the uncertainty surrounding Sun’s possible acquisition by Oracle, and the delays by Intel of its “Tukwila” next-generation Itanium processor – which powers HP’s Integrity servers – as key issues for IBM’s competitors.

IBM already offers a host of financial incentives to HP and Sun customers who migrate to Power – for example, Sun customers get $8,000 (£4,752) per core toward migration services, Handy said.

Memory price was an area that IBM officials identified as a way of increasing the enticements to customers looking to jump off HP and Sun platforms.

Oracle is currently waiting for European regulators to approve its proposed $7.4 billion (£4.4 billion) purchase of Sun. Oracle officials will argue their case 25 November to the European Commission, which has filed a formal objection to the deal in large part to concerns over MySQL.

In the meantime, Sun is losing money and customers are left to wonder whether Oracle will follow through on promises to invest in Sun’s SPARC platform.

Intel in May delayed the release of Tukwila until early 2010, the second time in 2009 that the chip’s release was postponed. The delay impacts HP, which is the primary user of Itanium. In addition, Intel is getting ready to release its eight-core “Nehalem EX” Xeon processor for systems with four or more chips. Intel has been driving up Xeon for scale-up computing environments.

For its part, IBM has said its Power7 processor will be releases in 2010, and Handy said he is confident it will be out before Tukwila.

Gordon Haff, an analyst with Illuminata, said IBM has done well with its Power architecture, but said there are other reasons why Big Blue would want to lower the price of its systems beyond taking business away from HP and Sun. IBM’s Power systems also are competing with x86 servers, which are encroaching into the higher end and are cheaper than Big Blue’s RISC systems, Haff said.

“It’s not untrue that what they’re doing is taking on Sun and HP, but everything they do is takes on Sun and HP,” Haff said. “But it’s not the whole story.”

In addition, while Sun is certainly having its problems, the Oracle deal will most likely go through, he said. Meanwhile, Itanium is still a solid high-end processor, and HP will continue to sell systems powered by the chip, he said.