IBM Uses Discounts To Woo Sun Customers
Added 31st Jul 2009Sun's customer base includes many government agencies, financial firms, telcos and other large enterprises highly coveted by rival vendors. Competitors believe Sun's customers are anxious about Sun being purchased by a software company, as well as rumors that Oracle wants to sell off Sun's hardware business and that Sun has canceled development of "Rock," a powerful server chip with 16 cores.
"We're very focused on the top tier of Sun customers, which have been the hardest to crack in the past," says Scott Handy, vice president of marketing, strategy and sales support for IBM Power Systems.
But Sun customers were already showing a willingness to switch. "We made the decision to stop purchasing Sun hardware long before the [Oracle] agreement was sealed," says Rick Scherer, a systems administrator at the San Diego Data Processing, which provides IT services to the San Diego municipal government. Scherer has been phasing out Sun hardware in favor of HP x86 servers running VMware.
Sun users who consider switching hardware providers would do well to realize they have considerable leverage to negotiate prices much lower than the original discounts offered by vendors such as IBM and HP, says Laura DiDio, lead analyst with Information Technology Intelligence.
Multiple vendors are competing for the attention of Sun customers, and they are desperate for new sales in this economy. Worldwide, disk storage revenue has dropped 18.2 percent this year and server revenue has dropped 24.5 percent, IDC has reported.
"If we're looking at this from a customer-centric angle, there's never been a better time to make a deal. The vendors are hungry for business," DiDio says.
IBM uses a healthy dose of FUD in its pitch to Sun customers, saying "the undefined future of Sun's hardware plus Oracle's lack of experience in running a hardware business puts your infrastructure at great risk for forced migration and increased cost."
The only limit is that the value of the free migration services cannot exceed 50 percent of the negotiated price of the hardware, Handy says. Those negotiated prices can be quite low when a customer agrees to move a workload from a Sun box to an IBM machine.
HP also does not require customers to trade in their Sun hardware to obtain discounts, but if they do trade in old machines they can receive further credits and rebates, says Paul Gottsegen, vice president of marketing for HP's enterprise servers and storage.
HP announced the "Sun Complete Care program" that combines discounts with financing options and free migration and TCO assessments.
Those assessments can be pricey when not discounted. For a customer with 1,000 employees, the assessment would cost "certainly five figures or more," Gottsegen says.
HP offers to Sun customers include zero-percent leases and deferred payments for up to 90 days on new HP leases; a 15 percent trade-in credit when replacing Sparc with Integrity and ProLiant servers; 30 percent off training and support; and 50 percent to 85 percent off the HP-UX 11i operating system with a Solaris trade-in.
Since the Oracle deal was announced, Handy says IBM has converted about 100 Sun server customers and 100 Sun storage customers, although some single customers are counted in both of those groups. Handy predicted that IBM will be able to lure away many of Sun's biggest customers and said "our third-quarter pipeline is gigantic." HP's Gottsegen says his company has converted more than 100 Sun customers in the past six months and that sales teams are seeing a "lot of activity" since the Oracle/Sun acquisition was announced.
