On 28 July 2009, IBM announced a series of changes to improve the total cost of ownership (TCO) for running new workloads, particularly Linux workloads, on System z:

• Integrated Facility for Linux (IFL) list prices will fall from $125,000 to $75,000 per engine for the System z10 EC, and special package pricing can reduce the price further. IBM also reduced hardware maintenance prices for the IFL.
• IBM extended a special offer of $2,250 per GB for incremental z10 memory, originally limited to the acquisition of specialty engines.

Similar price actions should be expected outside North America.

IBM's Linux on System z business has delivered better results than IBM's overall mainframe business. IBM has indicated that in 1H09, total IBM mainframe capacity shipped fell 5% compared to 1H08, while IFL MIPS (millions of instructions per second) capacity rose 18%. Though the number of Linux-only mainframe shops remains small, IBM has succeeded in getting workloads running on distributed platforms consolidated to mainframes using IFLs. IBM particularly targets Sun server customers, trying to exploit the uncertainty posed by the proposed acquisition of Sun by Oracle.

$75,000 is the starting point for an IFL on a z10 EC system, with volume discounts available. In addition, IBM has put together offerings for various nontraditional workloads it wants to attract to the mainframe, which likely will include further price reductions. Buyers should also check with Novell and RedHat on promotions for Linux support.

IBM did not reduce the price of the other specialty engines on the z10 EC, or adjust the price on its z10 BC ($47,500).

This price reduction likely reflects the general pricing pressure across the market for hardware running Linux and reflects the need for IBM to continue to improve the mainframe's TCO.

Normally, IBM charges $6,000 per GB for incremental memory on its System z10. IBM introduced a special offer in October 2008 that lowered the cost to $2,250 per GB (to a maximum of 16GB per specialty engine) when memory was acquired at the time a user procured one or more specialty engines. This latest announcement extends this discounted pricing to a broader set of workloads and makes it possible to get the lower price even when acquiring general-purpose capacity if they support workloads that would meet the qualification for IBM's z New Application License Charge pricing for z/OS.

IBM customers:

• Ensure that any proposals for System z10 EC from IBM reflect the new lower prices.
• Consider procuring memory when you acquire additional specialty engines or add new workload.
• Revisit the merits of Linux on z if you have not looked at it lately. The lower pricing and broader portfolio of applications may now make it a viable offering.

• "New IBM Mainframe, the System z10 Business Class Family, Targets Lower-End Market” — IBM System z10 Business Class server is an attractively priced low-end mainframe with a wide range of performance capacity settings. By John Phelps and Mike Chuba
• "IBM Introduces zNALC Program” — In January 2007, IBM announced the zNALC pricing metric designed to replace NALC and z/OS.e. By Frank DeSalvo and Mike Chuba

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