IBM, one of the leading global technology companies, has recently made a significant announcement that has sent ripples of concern throughout the industry. Effective from the end of 2023, IBM is implementing a significant 24% price increase across its range of software products.
This decision has left many customers thinking about the implications for their businesses and developing strategies to mitigate the impact. In this blog, we will discuss the reasons behind the price rise, explore its impact on customers in the UK and Europe, and provide practical tips on negotiating with IBM, planning for renewals, and considering alternatives to help navigate the forthcoming changes.
Over the past four years, IBM software prices have been on the rise. In fact, according to our analysis of industry data and statistics, prices have already increased between 17% to 42% in some countries. This significant increase can quickly add up for businesses that rely heavily on IBM software. It's essential to stay informed about the changes and plan accordingly to ensure your organisation is prepared for any potential impact on your software licensing budget.
To better understand the situation, let's take a closer look at the changes over the last four years. The table below illustrates the percentage price changes across a number of regions:
| Country | 2020 | 2021 | 2022 | 2023 | Total Increase % |
|---|---|---|---|---|---|
| Sweden | 10 | 5 | 3 | 24 | 42 |
| Norway | 7 | 5 | 3 | 24 | 39 |
| South Africa | 7 | 5 | 3 | 24 | 39 |
| United Kingdom | 5 | 5 | 3 | 24 | 37 |
| Europe | 3 | 3 | 3 | 24 | 33 |
| India | 5 | 10 | 3 | 15 | 33 |
| Japan | 3 | 3 | 3 | 24 | 33 |
| Canada | 5 | 5 | 3 | 19 | 32 |
| Australia | 5 | 5 | 3 | 8 | 21 |
| Brazil | 3 | 5 | 3 | 8 | 19 |
| Worldwide | 3 | 3 | 3 | 8 | 17 |
The IBM contract 24% price increase will have a profound impact on UK and European customers, particularly in the realm of IT services costs. With IBM raising prices, businesses will need to allocate more budget to meet their IT needs, and this is highly likely to affect their bottom line and overall profitability. Furthermore, higher prices might lead to reduced customer satisfaction, as clients may feel that they are not receiving the same value from IBM that they did previously. Many organisations may well look for alternative software supplier. Additionally, the 24% price increase may hinder innovation, as businesses may need to cut back on research and development due to constrained budgets. This could potentially impede long-term growth and even affect competitiveness across global markets.
To mitigate the impact of the price increase, customers can employ several strategies. Engaging in direct negotiations with IBM can help secure more favourable pricing or contract terms. Thoroughly researching and exploring alternative vendors and solutions might also lead to cost savings and increased flexibility. It is important to thoroughly research and vet potential vendors, and to consider factors such as reliability, scalability, support services and related costs. By planning for renewals well in advance and understanding changes in contracts, organisations can avoid last-minute surprises and ensure a smooth transition to the new pricing structure.
Negotiating price protection with IBM requires a strategic approach. Requesting long-term agreements with fixed pricing can provide stability and predictability in budgeting, while exploring volume discounts or incentives based on purchasing history enhances the value of contracts. It's crucial to have a robust plan for monitoring and managing IBM contracts to maximise benefits. IBM offers various agreements, including ESSO, ELA, UELA, and Subscription and Cloud Agreement. Each caters to specific business needs, offering options for streamlined license management, comprehensive licensing, unlimited software usage, and pay-as-you-go cloud services. Understanding these agreements empowers organisations to make informed decisions aligned with their operational and financial objectives, securing the best value from IBM partnerships.
Third-party support for IBM products can be a great option for businesses that want to save money and receive personalised support. One of the biggest benefits of third-party support is cost savings. Third-party providers often offer lower prices than IBM itself, which can help businesses reduce their IT expenses. However, there are also some drawbacks to using third-party support. For example, third-party providers may not have access to the latest IBM updates or may not be able to provide the same level of support as IBM. Additionally, when considering third-party support, it's important to do your research and choose a provider that has a good reputation and a track record of success. Look for providers that offer personalised support and have experience working with IBM products. It's also a good idea to read reviews and ask for references before making a decision.
To maximise the value of IBM software, organisations should focus on optimising usage and leveraging available resources and support. Ensuring that your organisation is using the software to its fullest potential, taking advantage of all available features and functionalities, will enhance its value.
Regularly reviewing usage patterns and making adjustments as needed will ensure that you are getting the most out of your investment. Additionally, by utilising IBM's range of resources and support options, including training programs, online forums, and dedicated support teams, businesses can ensure that their employees are fully trained and equipped to use the software effectively.
As technology continues to evolve at a rapid pace, it's crucial for businesses to stay ahead of the curve when it comes to IBM software. Emerging trends, such as the increasing use of artificial intelligence and machine learning in IBM products, offer opportunities for businesses to automate tasks and gain valuable insights from their data. The rapidly growing rise of cloud computing, with IBM offering a range of cloud-based solutions, can help businesses streamline operations and reduce costs. IBM is also exploring new product offerings and potential changes to pricing and licensing models, including subscription-based models that could offer more flexibility and cost savings for businesses. Staying informed about these trends and developments will allow businesses to position themselves for success in the ever-changing world of IBM software.
Firstly, you can leverage historical discounts as a benchmark to drive better pricing, taking past competitive bids or specials into consideration. A second option is to obtain written assurance that Support and Subscription (S&S) costs align with the net license price to avoid inflated maintenance costs. Third, take the initiative to negotiate a phased-in or step-up price schedule for S&S, allowing for gradual adjustments. Fourth, demand transparency with a clear breakdown of suggested retail price (SRP) versus discounted pricing. Finally, protect your budget by negotiating escalation caps on S&S increases. With these tactics, you can optimise your negotiations with IBM and secure long-term value for your organisation.
IBM's 24% price increase on software products demands careful consideration and proactive measures from businesses. While these changes may pose challenges in terms of costs and contract negotiations, they also present an opportunity for organisations to reassess their technology landscape and explore alternative solutions. By evaluating the implications and considering the potential benefits, companies across the world can make informed decisions to navigate these changes and optimise their investments in IBM products and services.
As an IBM customer, you might be affected by the IBM price changes. Reach out to SoftwareOne to understand how you can ensure the impact on your business is minimal and learn how to optimise your IBM investment. With strategic planning, proactive negotiation, and an eye towards emerging trends, businesses can effectively brace themselves for the upcoming price hike and continue thriving in the digital age.
Reach out to SoftwareOne to understand how you can ensure the impact on your business is minimal and learn how to optimise your IBM investment.
Reach out to SoftwareOne to understand how you can ensure the impact on your business is minimal and learn how to optimise your IBM investment.
