IBM’s hybrid-cloud strategy and cost challenges: The role of third-party support

IBM’s hybrid-cloud strategy offers significant opportunities for businesses seeking flexibility, scalability, and efficiency. This strategy can however also represent challenges, particularly when a company's IT roadmap does not align with IBM’s vision. Recent cost increases and repricing strategies for IBM’s Cloud Pak solutions may result in increased financial pressure on end-user organisations. This article provides insights into the challenges end-users may be facing and explores how third-party support can mitigate cost increases in certain scenarios.

Challenges of reducing costs with IBM’s repricing strategies

During the annual renewal process, end-user organisations often try to optimise or reduce the quantities of licenses and products in scope, to lower costs. However, it is common that these efforts do have little to no impact on reducing the annual costs. In many situations, prices go up instead of down. This is because end-user organisations typically lose their volume-based discounts. This phenomenon exacerbates the financial burden on end-user organisations, making it a challenge to effectively manage the IT budget.

In addition, many end-user organisations feel they are wasting money by paying annual increases or adopting new Cloud Pak offerings without fully benefiting from IBM’s maintenance services. IBM Support & Subscription includes access to software releases (majors’, minors’, patches, and fixes) and IBM’s technical support. But what happens when an end-user organisation is not upgrading their software or is underutilising technical support services? There are several scenarios possible that highlight the inefficiency of these costs.

1. Phase-out plans and annual cost increase

End-user organisations often create plans to phase-out their legacy systems while transitioning to different solutions, or they may make plans to completely phase out their legacy software. During this period, end-user organisations continue to incur annual cost increases for IBM’s software, even though their usage of the IBM programs is winding down. These rising costs can strain budgets, particularly when the phase-out plans span multiple years.

2. Supporting end-of-service (EOS) versions

Many end-user organisations still rely on older versions of IBM software that have reached their end-of-support (EOS). Maintaining support for these versions, typically requires additional fees on top of standard software and support (S&S) costs. This scenario can also lead to substantial financial burdens as end-user organisations pay extra fees to keep outdated systems operational while they plan for upgrades eventually.

3. Misaligned roadmaps and limited value

In case its IT roadmap does not align with IBM’s hybrid-cloud strategy, the end-user may fail to fully benefit from advanced solutions like IBM Cloud Pak or AI-based solutions. Even if the phase-out period of legacy systems takes more than three years, these organisations may not gain the efficiencies and innovations offered by IBM’s latest technologies. Consequently, these organisations continue to incur high costs without reaping the corresponding benefits.

Mitigating price exposure with third-party support

Third-party support offers a viable solution to mitigate the financial impact of IBM’s cost increases and repricing strategies by reducing the recurring costs up to 40-50%. Let’s have a look at how it can help in the different scenarios:

Scenario 1: Phase-out plans

For organisations in the middle of their phase-out plans, third-party support can significantly reduce costs. By opting for third-party support services, organisations can reduce recurring annual fees 40-50%. These savings can be reinvested into new technologies and application modernisation initiatives. This approach ensures continued support for legacy or stable systems, without the financial burden of IBM’s annual price hikes.

Scenario 2: Supporting EOS versions

Organisations deploying older versions of IBM software can benefit greatly from third-party support. These providers offer comprehensive support for EOS versions without the need to pay additional fees, unlike IBM’s standard model. This not only reduces costs but also provides the necessary technical assistance to maintain system stability during the transition to newer solutions.

Scenario 3: Misaligned roadmaps

For organisations whose roadmaps do not align with IBM’s hybrid-cloud strategy, third-party support can offer a lifeline. Instead of paying for advanced solutions like Cloud Pak (that are not fully utilised), organisations can leverage third-party support to maintain their current systems cost-effectively. This strategy allows them to pace their application modernisation efforts according to their own timelines without incurring excessive costs.