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IBM’s year-end is looming: time to plan your negotiation strategy – Part 1

IBM’s year-end in December is just around the corner, and it’s never too early to start planning your IBM roadmap and to decide on your future Enterprise License Agreement (ELA) strategy. To ensure you are able to negotiate the best deal for your organisation, you’ll need a defined strategy along with a clear visibility of any vulnerabilities within your IBM estate.

In Part 1 of ‘IBM’s year-end is looming: time to plan your negotiation strategy’, we’ll provide you with some guidance to help plan your next steps to ensure your IBM estate is optimised and future-proofed, looking at everything from the IBM renewal process to getting audit ready.

The IBM renewal process

There are a lot of factors to consider when renewing – or indeed exiting – your IBM ELA, but putting in the effort now to make sure you’ve ticked all the boxes, will put you in a good position when it comes to negotiations in a few months’ time.

To start off on the right foot, ensure that all stakeholders are aware that the contract term is coming to an end and understand the aims for any renewal. Thoroughly engaging every relevant person and bringing them on board throughout the whole process is key to staying on top of things and ensuring that your organisation is not working at cross purposes. .

Similarly, you must also be aware of and understand your current estate position. Creating an initial Effective License Position (ELP) is a crucial step in the renewal process where you’ll need to gather all deployment information, , which will tell you what your current position is and may help you identify whether you can technically optimise your license position.

If so, then you can set about technically optimising your deployments before moving on to your final ELP creation, which will form the basis of your contract negotiations. In addition, you’ll also need to provide correct, quarterly ILMT/sub-capacity reporting. It also pays to have a future roadmap in place so that you can head into negotiations confident of your future requirements with an ELP and estate that are still fit for purpose.

To exit or renew?

Whether you’re planning on renewing your ELA contract or thinking about calling it quits, the run up to either option should remain the same. Our approach at Livingstone Group is divided into two phases.

Phase One is focused on foundation analysis, essentially looking at your effective license position, both virtualised and mainframe. What do you have currently deployed in your estate? What are your future capacity and needs, based on your roadmaps? Have you looked at optimising your deployments so that the licenses are being used in the best possible way, or assessed whether a metric change may be of benefit?

Phase Two is all about having an optimal ELA solution. This analyses contractual and commercial terms, for example looking at value within the contract and what concessions can be made. It’s also important to establish a benchmarking contract and build a deal model before going to IBM so that you know what you want to get out of the conversation. Being this prepared will also give you significant leverage during negotiations.

When it comes to renewing or exiting your ELA, there are a few things to take into consideration, but to get yourself in the best position possible to make a decision, here are just a few steps to take:

  • Review your exiting contract and prices
  • Take stock of any compliance issues
  • Research vendor prices and licensing for any changes
  • Assess your current and planned future consumption to see whether you need to decrease or increase deployments
  • Look at whether you need to deploy any new technologies like the cloud as part of the next contract.

By doing this, you’ll create a control point, and a version of what your new contract would look like under current terms. Of course, it all depends on the offer, but if you’re well-prepared, you’ll be able to find some wiggle room, and if IBM requests that you reduce your demands, you’ll be in a good position to see where you could make changes, leaving you with favourable contract terms and an optimised BOM.

Are you audit ready?

Whether you decide to exit or renew, IBM will use audits as a lever in negotiations, so being prepared in the event IBM decides to pull the audit trigger is crucial.

To being with, you must understand your licence entitlement. Know how many you have and what exactly they give you rights to. Review all License Information documents for additional use rights, and check to see if there are any licensing grey areas you depend on, for example, do you understand how you designate non-production or standby systems, and how these are licensed or excluded from license requirements?

If there are areas of non-compliance identified, do you understand why it exists, and do you have a strategy for dealing with it? Maybe you just need to tidy up your user lists to remove inactive accounts or finally decommission those servers that haven’t been used for a while. If anything more complicated is required, make sure you plan to address this.

If you depend on sub capacity licensing it’s also vital to have an accurate and valid ILMT (IBM License Metric Tool) reports. This is an extremely important part of managing compliance and making sure that you are ready for negotiations. To use it effectively, it must be configured correctly, something which falls under your reporting responsibilities. Make sure it is properly installed and regularly updated, and that it’s connected to its virtual machine manager or you could see some discrepancies with the numbers you have compared to what IBM might give you.

In addition – as well as fulfilling contractual obligations of using eligible virtualisation and processer technologies – ILMT Audit Snapshot reports must be prepared and reported at least once per quarter and retained for a period of no less than two years. Failure to do this will result in you being ineligible for sub-capacity licensing terms, so it’s always best to be on top of your reports and ensure they best reflect your current position.

Part 2 and Part 3 are now available to view



Niall Eddery – Senior Consultant, IBM Practice Lead

Niall has worked in the IT industry for over 26 years and more specifically in Software Licensing for 16. His experience has taken him on both sides of the audit fence, having audited for KMPG and managed IT assets for EY and Macquarie Bank at a global level.

Niall has been a senior consultant at Livingstone for over 7 years, during which time has managed well over 100 audit projects.  His expertise is around IT Asset Management, Software Asset Management & Licensing and he has been involved in contract compliance for software licensing, royalty, service level agreements and channel compliance in the UK, Australia, Europe and Asia Pacific.

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