The Challenge
One of the world's largest automotive manufacturers, headquartered in Japan, was subjected to a formal IBM software audit. IBM's findings produced non-compliance claims totalling ¥1.8 billion — a staggering figure that threatened to divert significant resources away from manufacturing, R&D, and global operations.
The company's extensive IT infrastructure supported a complex array of mission-critical functions across a global footprint:
| Operational Area | IBM Dependency | Scale & Complexity |
|---|---|---|
| Manufacturing | Production scheduling, quality control systems, plant automation | Multiple facilities across Japan, Asia, Europe, and North America |
| R&D | Design simulation, testing platforms, IP management | Global research centres with high-performance computing |
| Supply Chain | Logistics optimisation, supplier management, inventory tracking | Thousands of suppliers across a multi-tier global supply chain |
| Distribution | Dealer management, parts distribution, warranty systems | Global distribution networks spanning multiple continents |
IBM's audit findings cited three primary compliance issues:
| Compliance Issue | Root Cause | IBM's Claim |
|---|---|---|
| Sub-Capacity Licensing Violations | Decentralised IT across global facilities led to inconsistent ILMT deployment and reporting gaps | Full-capacity licensing applied across virtualised environments |
| Virtualisation Misconfigurations | Rapid adoption of hybrid cloud technologies without corresponding licence adjustments | Overstated PVU requirements for misconfigured virtual environments |
| Entitlement Mismatches | Global operations with multiple procurement channels and legacy agreements | Gaps between deployed software and documented entitlements |
Global automotive manufacturers are prime audit targets. The combination of decentralised IT structures across dozens of countries, rapid hybrid cloud adoption, virtualisation sprawl, and complex multi-entity licensing creates exactly the kind of environment where IBM's audit methodology produces inflated claims. The larger and more complex the global footprint, the greater the potential for discrepancies — and the higher the initial claim.
The automotive giant's decentralised IT and rapid adoption of hybrid cloud technologies had created a licensing landscape that was extremely difficult to manage internally. To protect its financial position and ensure uninterrupted global operations, the company engaged Redress Compliance.
The Process
Redress Compliance deployed a four-phase audit defence strategy tailored to the complexity of a global automotive manufacturer with operations spanning multiple continents, licensing jurisdictions, and technology environments.
Phase 1: Audit Report Review
🔍 Comprehensive Audit Analysis
- Conducted a detailed analysis of IBM's audit findings, identifying multiple errors in calculations and entitlement mappings
- Reviewed historical agreements — including terms for sub-capacity licensing and PVU metrics — to establish an accurate compliance baseline
- Cross-referenced IBM's claimed gaps against actual contractual entitlements across all global entities
- Identified where IBM had failed to credit existing entitlements or misapplied licensing rules
📊 Key Findings
- Multiple errors in IBM's PVU calculations — particularly in virtualised manufacturing environments
- Sub-capacity licensing rules misapplied across several global facilities
- Entitlements from legacy agreements and regional procurement channels not credited by IBM's audit team
- Significant underutilised licences that could be reallocated to close genuine compliance gaps
Phase 2: Data Collection & Validation
📋 Global Data Validation Process
- Collaborated with IT teams across global facilities to collect accurate usage data from on-premise servers, virtual environments, and cloud platforms in Japan, North America, Europe, and Asia-Pacific.
- Verified sub-capacity usage calculations against ILMT data across all regions, uncovering misapplied metrics and overestimations by IBM's audit team.
- Mapped actual software usage to entitlements across all global entities — identifying underutilised licences and opportunities for reallocation.
- Built a comprehensive global Effective Licence Position (ELP) — the definitive record reconciling what was owned versus what was deployed across every facility.
For global enterprises with operations across multiple countries, the Effective Licence Position (ELP) is exponentially more complex — and more valuable. Licensing agreements may have been negotiated at different times, through different IBM channels, and under different terms. Without a unified global view, IBM's audit team can claim gaps that simply do not exist when entitlements are properly consolidated. Redress Compliance specialises in building these cross-border ELPs.
Phase 3: Negotiation with IBM
Armed with accurate global data and a defensible ELP, Redress Compliance engaged IBM's audit team directly:
| Negotiation Tactic | Details | Impact |
|---|---|---|
| Dispute Inflated Claims | Presented detailed evidence and corrected data challenging IBM's PVU calculations and entitlement mapping errors | Eliminated the vast majority of IBM's claimed exposure |
| Correct Sub-Capacity Violations | Demonstrated that ILMT data supported sub-capacity licensing where IBM had defaulted to full-capacity calculations | Removed entire categories of claimed non-compliance |
| Leverage Long-Standing Investment | Highlighted the company's significant ongoing investment in IBM technologies and proactive compliance efforts | Secured IBM concessions on remaining disputed items |
| Apply Licensing Policy Expertise | Leveraged deep knowledge of IBM's licensing policies to counter aggressive interpretations across multiple product families | Reduced financial exposure by 95% |
Phase 4: Compliance Optimisation & Future Strategy
🔧 Remediation
- Reallocated unused licences across global operations to address immediate compliance issues — without additional purchases
- Closed all genuine compliance gaps identified during the internal review
- Final settlement of ¥90 million covered only additional licences required for new deployments — zero penalties
🛡️ Global Governance
- Implemented a centralised global licence management strategy with real-time tracking tools
- Deployed automated compliance checks across all global facilities
- Delivered IBM licensing training for IT and procurement teams worldwide
- Established governance practices to prevent recurrence across all regions
The Outcome
| Metric | Before Redress | After Redress | Result |
|---|---|---|---|
| IBM Audit Claim | ¥1,800,000,000 | ¥90,000,000 | 🟢 95% reduction |
| Savings Achieved | — | ¥1,710,000,000 | 🟢 ¥1.71 billion saved |
| Penalties / Retroactive Fees | Risk of full penalties | $0 | 🟢 Zero penalties |
| Settlement Composition | — | New deployment licences only | 🟢 Forward-looking only |
| Operational Disruption | Risk to global production | Zero disruption | 🟢 Manufacturing unaffected |
| Future Readiness | Decentralised, manual tracking | Centralised real-time monitoring | 🟢 Global compliance governance |
Facing a claim of this magnitude was daunting, but Redress Compliance turned it around. Their expertise saved us billions and ensured our global operations remained unaffected. They resolved the immediate issue and gave us the tools to manage licensing more effectively going forward.
— IT Director, Leading Japanese Automotive Manufacturer
Why This Case Matters for Global Enterprises
This case demonstrates a pattern we see repeatedly in IBM audits of global manufacturers: the initial claim bears little resemblance to the actual compliance position. IBM's audit methodology — particularly when applied across decentralised, multi-country operations — systematically produces inflated figures. The 95% reduction achieved here was not the result of negotiation theatrics; it was the result of accurate data, expert analysis, and a thorough understanding of IBM's licensing policies applied across a complex global environment.
Key Takeaways for ITAM Professionals
✅ IBM Audit Defence Lessons — Global Operations
- Centralise your global licence position before IBM does. Decentralised IT structures with multiple procurement channels create exactly the gaps IBM's auditors exploit. A unified global ELP is your primary defence.
- IBM's audit methodology inflates claims in virtualised environments. PVU calculations across virtualised manufacturing and R&D systems are routinely overstated. Independent verification with accurate ILMT data is essential.
- Legacy entitlements are often uncredited. When multiple agreements exist across regions and time periods, IBM's audit team frequently fails to credit all entitlements. A thorough contract archaeology exercise can eliminate entire categories of claimed non-compliance.
- Unused licences can close compliance gaps for free. Global enterprises almost always have over-provisioned or underutilised licences that can be reallocated — avoiding the need for additional purchases entirely.
- Implement global governance before the next audit. Real-time tracking, automated compliance monitoring, and centralised licence management are the most cost-effective defences against future audit exposure.
- The final settlement should be forward-looking. In this case, the ¥90 million settlement covered only licences required for new deployments — no penalties, no retroactive fees. This is achievable when you have the data and expertise to challenge IBM's initial position.
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Redress Compliance has defended global enterprises against multi-billion yen IBM audit claims — and delivered 95%+ reductions. Our team includes former IBM employees with 200+ years of collective IBM licensing experience. We operate globally with offices in the US, Ireland, and Dubai.
Fredrik Filipsson
20+ years in enterprise software licensing. Former IBM, SAP, and Oracle. 11 years as an independent consultant advising 500+ enterprise clients — including numerous Fortune 500 companies — on Oracle, Microsoft, SAP, IBM, Salesforce, and ServiceNow licensing, contract negotiations, and cost optimisation.
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