IBM audits: price hikes, legacy OS, Cloud Paks changes

In the ever-evolving landscape of enterprise software, managing your licenses effectively has become even more a critical aspect of corporate governance. Among the myriad of software providers, IBM stands out as a prominent player, offering a wide array of solutions vital for businesses worldwide. Navigating IBM's software licenses can be a labyrinthine journey, especially when facing audits and grappling with price increases as announced by the tech giant. IBM has a historical practice of conducting software audits to ensure compliance. This trend continues to persist today. While compliance remains paramount, audits often reveal complexities and challenges that companies did not expect.

Price increases and audit impacts

At the end of 2022, IBM announced a substantial price increase in 2023, resulting in an increase of 24% as applied in certain countries. This sudden hike in list prices further exacerbated the financial burden on companies already navigating the challenges of audits and compliance.

Moreover, in 2024, IBM implemented a global price harmonisation strategy, resulting in an additional 6% increase in list prices across the board. These successive price increases compounded the challenges for companies managing IBM software licenses, forcing them to re-assess their budgetary allocations and licensing strategies.

During audits, companies face the significant challenge in the application of list prices by IBM regardless of the contractual agreed discount level originally negotiated. This means that even if a company has secured discounts on IBM software licenses, those discounts may not apply during audits, potentially leading to higher costs and financial strain.

Obsolescence of operating systems and virtualization technology

Operating system and virtualization obsolescence present critical challenges to IBM software licensing. When end user organisations operate on unsupported systems, they risk losing eligibility for SubCapacity licensing, leading to potential penalties and higher costs under FullCapacity licensing models. Even with accurate reporting through tools like ILMT, the presence of outdated technology undermines compliance efforts.

To navigate the risks associated with obsolescence and FullCapacity licensing, companies should consider the following proactive measures:

• Regularly update your operating systems: stay vigilant about the lifecycle of operating systems and virtualization technologies. Regularly check IBM website pages on the schedule of removing items from the list of subcapacity eligible technologies. Plan and execute timely updates to ensure eligibility for SubCapacity licensing conditions.
• Evaluate migration strategies: assess the feasibility of migrating to supported operating systems or virtualization platforms. This may involve comprehensive planning to minimise disruptions while maintaining compliance.
• Communicate your migration plan to IBM: with their Passport Advantage programme, IBM allows customers to communicate a migration plan and still benefit from SubCapacity licensing until the end of migration despite the technology not being eligible anymore.
• Explore alternative licensing models: consider exploring alternative licensing models that may better suit the evolving IT infrastructure.

The challenge posed by the obsolescence of operating systems and the continuous price increases in the context of IBM software licensing are nuanced issues that demands proactive attention. By staying informed about the lifecycle of IT components and IBM policies, regularly assessing the IBM software, implementing migration plans, and evaluating cost saving strategies, companies can mitigate the risks associated with IBM licensing. Navigating this challenge requires a strategic approach that combines technical expertise, communication with vendors, and a commitment to staying ahead of the ever-changing landscape of enterprise software licensing.

Cloud Paks licensing complexity

Over the last years IBM introduced a new software offering called Cloud Paks. Every customer should have been approached by IBM for the adoption of this offering. Whilst from a technological standpoint Cloud Paks come with a modernised solution to facilitate hybrid cloud transformation, the licensing complexity persists and presents the same well-known issues of FullCapacity licensing as for the PVU (Processor Value Unit) products.

Indeed, VPC (Virtual Processor Core) licensing comes with the same SubCapacity reporting obligations and includes specific rules to convert the single software bundled in the Cloud Pak into the VPC licenses needed. In short, modernising your IBM contract doesn’t mean simplifying the license governance. During the audits, these challenges may have a huge financial impact.