IBM and HP offer big discounts to woo Sun customers

IBM and HP are trying to lure server and storage customers away from Sun Microsystems by exploiting uncertainty caused by Oracle’s pending acquisition of the company.


IBM and HP are trying to lure server and storage customers away from Sun Microsystems by exploiting uncertainty caused by Oracle’s pending acquisition of the company.

Sun’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 rumours that Oracle wants to sell off Sun’s hardware business and that Sun has cancelled development of “Rock,” a powerful server chip with 16 cores.

Sales programs specifically designed to lure customers away from rival vendors are commonplace, but vendors have become significantly more aggressive in making competitive moves against Sun since the April 20 announcement that Oracle would buy the company.

“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% this year and server revenue has dropped 24.5%, IDC has reported.

DiDio said Sun customers who make large-volume deals to switch to another vendor can likely secure discounts of 30% to 40% off list price, and negotiate for free training, services and software licenses.

Large customers generally don’t pay list price for hardware, but IT shops should take advantage of market conditions and try to negotiate bigger-than-usual discounts.

“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.

DiDio advises customers to enter negotiations with a specific plan, with messages such as “Here’s how much I have to pay. I’m looking for a discount of this much, and by the way can you give me X number of days of free training vouchers, and can you give me a price cap for the duration of my contract.”

“Customers have a lot more leverage than they know to drive price down and I’m surprised more haven’t done it,” she 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.”

On April 29, IBM doubled the value of its “Power Rewards” migration program for Sun Sparc customers from $4,000 to $8,000 for each processing core.

“For example, a Sun customer using a Sun Fire V890 system with eight microprocessors (or "cores") would now receive $64,000 in migration services, up from $32,000, to move the workloads to an IBM Power system,” IBM said.

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