Originally posted by: TonyPearson

Last week, I was in Austin, and had dinner at [Rudy's Country Store and BBQ]. They offer their self-proclaimed "Worst BBQ in Austin!" with brisket, sausage and other meats by weight. I got a beer, some potato salad, and creamed corn, all at additional cost, of course. When I went to the cashier to pay, I was offered all the white bread I wanted at no additional charge. Are you kidding me? You are going to charge me for beer, but give me 8 to 12 complimentary slices of white bread (practically half a loaf)? Honestly, I consider bread and beer to be basically the same functional food item, differing only in solid versus liquid form. I chose to have only four slices. The food was awesome!

I am reminded of that from my latest exchange with EMC.It didn't take long after IBM's announcement yesterday of IBM's continued investment in its strategic product set, IBM System Storage DS8000 series, that competitors responded. In particular, fellow blogger BarryB from EMC has a post [DS8000 Finally Gets Thin Provisioning] that pokes fun at the new Thin Provisioning feature.

Interestingly, the attack is not on the technical implementation, which is straightforward and rock-solid, but rather that the feature is charged at a flat rate of $69,000 US dollars (list price) per disk array. BarryB claims that recently EMC Corporate has decided to reduce the price of their own thin provisioning, called Symmetrix Virtual Provisioning (VP) on select subset of models of their storage portfolio, although I have not found an EMC press release to confirm. In other words, EMC will bury the cost of thin provisioning into the total cost for new sales, and stop shafting, er.. over-charging their existing Symmetrix customers that are interesting in licensing this feature.

BarryB claims this was a lucky coincidence that his blog post happened just days before IBM's announcement.

(Update: While the timing appears suspicious, I am not accusing Mr. Burke in anywrongdoing of insider information of IBM's plans, nor am I aware of any investigations on this matter from the SEC or any other government agency, and apologize if my previous attempt at humor suggested otherwise. BarryB claimsthat the reduction in price was motivated to counter publicly announced HDS's "Switch In On" program, that it is not a secret thatEMC reduced VP pricing weeks ago, effective beginning 3Q09, just not widely advertised in any formal EMC press releases.Perhaps this new VP pricing was only disclosed to just EMC's existing Symmetrix customers, Business Partners, and employees. Perhaps EMC's decision not to announce this in a Press Release was to avoid upsetting all the EMC CLARiiON customers that continue to pay for Thin Provisioning, or to avoid a long line of existing VP customers asking for refunds. In any case, people are innocent until proven otherwise, and BarryB rightfully deserves the presumption of innocence in this regard. I'm sorry, BarryB, for any trouble my previous comments may have caused you.)

Let's start with what EMC previously charged for this feature. Software features like this often follow a common pricing method, based per TB, so larger configurations pay more, but tiered in a manner that larger configurations pay less per TB, combined with a yearly maintenance cost.

(Updated: EMC has asked me nicely not to post their actual list prices,so I will provide rough estimates instead. According to BarryB, these are no longer the current prices, soI present them as historical figures for comparison purposes only.)

Holy cow! How did EMC get away charging so much for this? To be fair, these are often deeply discounted, a practice common among the industry. However, it was easy for IBMers to show EMC customers that putting SVC or N series gateways in front of their existing EMC disks was more cost effective. Both SVC and N series, as well as IBM's XIV, provide thin provisioning at no additional charge.

HDS offers their own thin provisioning called Hitachi Dynamic Provisioning.Hitachi also offers an SVC-like capability to virtualize storage behind the USP-V. However, I suspect thatfewer than 10 percent of their install base actually licensed this capability because it cost so much. Under the cost pressure from IBM's thin provisioning capabilities in SVC, XIV and N series, Hitachi launched its ["Switch It On"] marketing campaign to activate virtualization and provide some features at no additional charge, including the first 10TB of Hitachi Dynamic Provisioning.

Last week, Martin Glassborow on his StorageBod blog, argued that EMC and HDS should[Set the Wide Stripes Free]. Here is an excerpt:

HDS and EMC are both extremely guilty in this regard, both Virtual Provisioning and Dynamic Provisioning cost me extra as an end-user to license. But this is the technology upon which all future block-based storage arrays will be built. If you guys want to improve the TCO and show that you are serious about reducing the complexity to manage your arrays, you will license for free. You will encourage the end-user to break free from the shackles of complexity and you will improve the image of Tier-1 storage in the enterprise.

Martin is using the term "free" in two contexts above. In the Linux community, we are careful to clarify "free, as in free speech" or "free, as in free beer". Technically, EMC's virtual provisioning is neither, as one has to purchase the hardware to get the feature, so the term "at no additional charge" is more legally correct.

However, the discussion of "free beer" brings me back to my first paragraph about Rudy's BBQ. Nearly everyone eats bread, with the exception of those with [Celiac Disease] that causesan intolerance for gluten protein in wheat, so burying the cost of white bread in the base cost of the BBQ meat is reasonable. In contrast, not everyone drinks beer, and there are probably several people whowould complain if the cost of beer was included in the cost of the BBQ meat, so charging separately forbeer makes business sense.

The same applies in the storage industry. When all (or most) customers of a product can benefit from a feature, it makes sense to include it at no additional charge. When a significant subset might not want to pay a higher base price because they won't use or benefit from a feature, it makes sense to make it optionally priced.

• For the IBM SVC, XIV and N series, all customers can benefit from thin provisioning, so it is included at no additional charge.

• For the IBM System Storage DS8000, perhaps some 30 to 40 percent of our clients have only System z and/or System i servers attached, and therefore would not benefit from this new thin provisioning. It may seem unfair to raise the price on everybody. The $69,000 flat rate was competitively priced against the prices EMC, HDS and 3PAR were charging for similar capability, and lower than the cost to add a new SVC cluster in front of the DS8000. IBM also charges an annual maintenance, but far lower than what others charged as well.

  (Note: These list prices are approximate, and vary slightly based on whether you are on legacy, ESA, Servicesuite or ServiceElect software and subscription (S&S) service plans, and the machine type/model. The tables were too complicated to include here in this post, so these numbers are rounded for comparison purposes only.)

  TBs Licensed	150	100	25
  IBM flat rate	$69,000	$69,000	$69,000
  Software Maintenance per year (approx)	$2,000	$2,000	$2,000
  Number of years	4 years	4 years	4 years
  Total Maintenance	$8,000	$8,000	$8,000
  Software License Cost (4 years)	$77,000	$77,000	$77,000

Pricing is more art than science. Getting the right pricing structure that appears fair to everyone involved can be a complicated process.

technorati tags: IBM, Austin, BBQ, thin provisioning, EMC, Virtual Provisioning, SEC, SVC, XIV, N series, Martin Glassborow, HDS, Hitachi, Dynamic Provisioning, System z, System i, DS8000