Contact Us Book Meeting

IBM’s year-end is looming: time to plan your negotiation strategy – Part 2

In Part 1 of ‘IBM’s year-end is looming: time to plan your negotiation strategy’ we looked at how you could plan your next steps to ensure your IBM estate is optimised and future-proofed, looking at everything from the IBM Effective License Agreement (ELA) renewal process, to getting audit ready.

In Part 2, we’ll take a look at creating a watertight Effective Licensing Position (ELP) and your ELA pricing options.

Effective License Position creation process

Creating your ELP is a key step in the IBM renewal process as it’ll give you a clear view of your current position and how you want to proceed moving forward. Here’s a quick overview of how to go about putting your ELP together:

Entitlements review – This needs to cover everything from contracts, order documents and vendor quotes, to ELA declarations and third-party agreements. There’s a lot of ground to cover when gathering your entitlements, but in doing so, you’ll know where your stand from the outset.

Inventory collection – In this step you are looking at where exactly all of your IBM software is deployed. Look at who owns them and which parts of the business uses them. This includes collecting information from software and hardware inventory tools, virtualisation tools and your sub capacity reporting tools to validate your information.

Non-instance collection – Once you know your entitlements, what metrics you have, and where the software is deployed, you can go about non-instance data collection. This means gathering all the data your inventory tools won’t tell you about. This can be as simple as understanding your Disaster Recovery roles or requesting lists of authorised users, but in many cases can involve complex reviews of application architecture and scripts and commands to be run from management consoles. The License Information documents specify how the products should be licensed, but don’t tell you where to get the information and data from in order to count the license requirement.

Data gaps assessment – Once the above information has been collected, it is then time look at any gaps and their associated risks. Review all data sets provided, process entitlements, assess data accuracy, and define secondary data collection. Being able to assess the completeness of what you have will put you in good stead for your first ELP draft.

Draft ELP – To produce your draft ELP, it’s time to set about merging data sets, calculating usage against licensed metrics and calculating capacity levels. You can also document any assumptions and caveats, and while this may generate more questions, once you’ve filled in the gaps, you can move onto the final version of ELP.

Final ELP – Finally, confirm your assumptions, investigate any risks and mitigate where possible, and above all, optimise your license assignment. Apply these changes to your ELP and you have your final version.


There are some new license metrics and pricing options that you may not have seen before

Cloud Paks, introduced in Jul 2019, are structured by bundling a variety of different IBM products together into one ‘pak’, which is typically licensed on a virtual processor core (VPC). One benefit to this option is that it removes the need for ILMT (IBM License Metric Tool), which is no longer needed to calculate any of the products on a virtual processor. It is important to note however, that it can take a while for organisations to fully move to this model as they might have both VPC and Processor Value Unit (VPU) products in play, so don’t plan to get rid of ILMT just yet. However, it may be a useful conversion if you have significant deployments that are not eligible for sub capacity.

Designed for cloud and containerisation, the Cloud Pak model does come with additional use rights, as well as a specific ‘conversion per product’ rate, which you need to be aware of. MQ Advanced for example, has a conversion rate of two deployed VPCs to one license, whereas MQ is four to one. There are some non-VPC to VPC conversions as well. Cloud Paks also Includes Red Hat Enterprise Licenses (RHEL) and OpenShift, so if you’re going down the cloud path, make sure you understand the implications for your RHEL agreement. One thing to note, is that IBM will try to make sure that contractually you can’t reduce existing RHEL subscriptions, but you may me able to take advantage of these for growth.

Another benefit is allowing a bit more flexibility when it comes to product transitions. For example, if you currently have an estate with a lot of MQ, that you want to upgrade to MQ Advanced, you don’t need to buy a new product, but instead you can use the same licenses and buy additional ones to make up what you need.

When it comes to value conversions, this is really dependant on the deployments in question and needs to be done on an individual scenario analysis as the benefits need to be analysed separately. The July price increases have shown that IBM’s attitude seems to be to make Cloud Paks more commercially attractive by increasing the prices of non-Cloud Pak options.

Tailored Fit Pricing is a relatively new mainframe option. Introduced in 2019, with significant programme updates in 2020, this model works by moving from a per product peak rolling four-hour average to a cumulative MSU basis. Pricing is based on your previous 12 months MLC usage.

This pricing model doesn’t really make any significant cost-savings on a like for like basis, but this option is much easier to administer, can make growth cheaper, and increases flexibility for previously MLC products as the likes of capping is not required. Keep in mind that it may impact One Time Charge products on some LPARs, and though easier to manage, it still requires a Z14+ mainframe or higher.



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.

Related Services

Alternate Text

Mega Vendors