IBM’s business model may be steadily shifting towards hosted applications but traditional on-site licensing still accounts for a significant proportion of their annual revenue. Even more important to IBM income however are the add-ons that accompany each license. Annual maintenance contracts, or “annuities” as IBM calls them are the true gold – which is why your IBM account manager pushes so hard for your signature come renewal time.
Unfortunately for IBM shareholders, customers (especially the larger ones) only typically review their maintenance agreements when they approach expiry – every one, three or five years.
IBM software audits as a revenue creation tool
With a business model based on shifting volumes of stock, how can IBM sell more maintenance contracts? By selling more licenses to existing customers obviously. But what if you have no plans for an upgrade?
That’s where an IBM audit comes into play. By sending auditors on site, IBM has a golden opportunity to check for a license count shortage and then sell you new ones to make up for the shortfall. More importantly still, each of these new licenses must then be added to a maintenance contract, tying you to IBM support for another possible three to five years.
Most likely, this new support contract will not run alongside your existing agreement. Instead it is likely to exist independently. Which helps to increase the amount of cash rolling into Big Blue.
A major headache for legacy software owners
If an IBM audit identifies a legitimate shortfall in licenses, it is absolutely right that your business makes up the difference. But what happens when the shortfall is related to a legacy system that no longer plays a role in line-of-business operations? Especially one that is due to be retired?
It is possible that you hold unused licenses somewhere in the organisation. If your business has completed a merger or acquisition for instance, the subsidiary company may have records that are yet to be merged with your own. You access the Passport Advantage account for each site to double-check – the IBM audit team will possibly overlook this factor when carrying out their own license count.
If there is still a shortfall, you will have to bite the bullet and buy the licenses – even if the system is being retired within the next six months. But you should not be sucked into the IBM maintenance trap. IBM will not offer you a temporary support agreement, the shortest term you can obtain will be twelve months. Which means that your business will be paying for six months support it doesn’t need and will never use.
Making the most of an IBM software audit
When it comes to legacy IBM applications, it makes little sense to pay a premium for OEM support – particularly when the system is due to be retired imminently. Far more effective for your business will be a flexible support agreement with an IBM third-party support provider like Origina.
We can offer a short-term maintenance contract that is not only cheaper, but which ends when you stop using the system in question. This immediately gives you greater control over your infrastructure.
An agreement with Origina also offers some protections in the event of a failed IBM audit. If you are found to have insufficient licenses in place, Origina will not charge any extra to add them to your existing maintenance contract. Obviously you will still have to pay IBM for new licenses, but there will be no corresponding increase in maintenance costs.
To learn more about easing headaches related to IBM software audits, and how Origina can help you regain control of costs and contracts, please get in touch with us.