See you in court. Are we about to see more IBM® software licenses being challenged?

June 29, 2018
Tomás O'Leary

Like much of the traditional IT hardware and software market, IBM® finds itself in a difficult position. Lured by infinite infrastructure flexibility without any upfront investment, customers are deserting the traditional on-site data centre. As a proverbial box-shifter, IBM® is seeing their potential user base shrink year after year.

The long-term solution is for IBM® to reposition itself as a credible player in the Cloud marketplace. These efforts are already paying off – IBM®’s Cloud solutions were worth $17 billion in 2017, 21% of total revenue.

In the meantime they will continue to extract revenue from the usual channels – including software maintenance.


Keeping customers locked in – and paying

Some might say that IBM®’s Cloud services division should be a major success – they have been extracting huge amounts of money from their clients every year for maintenance contracts after all. IBM® are not the only ones using this “pay more for the same (or less)” approach to software support either.

Unsurprisingly, OEMs are doing whatever it takes to keep customers tied into maintenance contracts and upgrade cycles - including the use of complex software licenses, written to be deliberately confusing. Make the legal document difficult to understand, and some SAMs will simply relent and renew.

IBM® has another important revenue generation tool at their disposal - the dreaded IBM® audit. Using the authority of the Federation Against Software Theft (FAST), IBM® are able to demand that your business submits to a mandatory audit of the software you do (and don’t) use.

Changes to the Passport Advantage small print makes it even harder for your business to escape an IBM® software audit unscathed;


If client's records are inadequate to determine IBM® Subscription and Support or Selected Support charges, IBM®'s charges for any excess usage will include two years of associated maintenance and IBM® Subscription and Support or Selected Support.


Essentially you must prove that you are compliant, or IBM® has the right to charge an almost arbitrary maintenance penalty. And this is despite the fact that any IBM® audit uses your Passport Advantage account as the definitive record of license counts and entitlement.

Questions about license legality

But after years of sitting back and accepting diminishing levels of support in return for even more money, some customers are fighting back against the software industry at large. Updating contracts mid-term, like the Passport Advantage example, is a dubious business practice – the sort of move that makes customers begin to question whether these changes are even legal.

Software vendors are no strangers to court action, but usually only in relation to accusations of patent infringement. It is becoming slightly more common to see customers suing their OEMs for questionable contract terms and service delivery failures however.

Drinks giant Diageo recently sued SAP over the ambiguous language contained in their software licenses. By enabling API access to their SAP ERP system, Diageo unknowingly ran up additional fees of more than £54.5 million. Diageo took the case to court, claiming that their use was entirely legal and already covered by their terms of their license.

Eventually the court sided with SAP – but the judge noted that the terms of the agreement could have been interpreted in two ways. A definite failing for a legal document.


Everyone is at it – but things may yet change

SAP is not the only company using ambiguity in their contracts – even IBM®’s agreements could be misread at great cost to the customer. Emboldened by the experiences of other businesses however, we expect to see more businesses taking OEMs, including IBM®, to court to challenge the status quo.

The current licensing model appears to be designed specifically to gouge customers at every opportunity. Hopefully we will see more legal challenges mounted, so that users begin to see more value from their investments.

In the meantime, your business should seriously consider the use of IBM® third party support from Origina to assist. Not only will you get the service you need to keep IBM® applications running reliably, but we can help you cut through the legal jargon to properly understand your software entitlements – and avoid falling victim to ambiguous terms and conditions.

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