Case Study: IBM Audit Defense for a US Defense Supplier in the Northeast
Challenge
A major US defense supplier in the northeastern region faced an IBM audit with claims totaling $40 million in alleged non-compliance fees. The company’s IT systems supported critical operations, including defense manufacturing, supply chain logistics, and secure data management. IBM’s audit findings highlighted discrepancies in sub-capacity licensing, entitlement mismatches, and overages in virtualized environments. Given the sensitive nature of their work and the high stakes of maintaining compliance with government contracts, the company engaged Redress Compliance to manage the audit and mitigate potential financial and operational risks.
The Process
- Comprehensive Audit Review: • Redress Compliance thoroughly analyzed IBM’s audit findings, identifying overestimations and errors in licensing calculations. • Reviewed historical agreements and entitlement data to establish a clear baseline for compliance.
- Data Collection and Validation: • Collaborated with IT and operations teams to gather accurate data from physical servers, virtualized environments, and secure cloud platforms. • Validated sub-capacity metrics, uncovering significant inaccuracies in IBM’s reported usage. • Identified underutilized licenses and misaligned entitlements that could be optimized to close compliance gaps.
- Strategic Negotiation with IBM: • Presented IBM with a corrected compliance report backed by validated data and a clear interpretation of licensing policies. • Highlighted the company’s proactive measures to maintain compliance and the critical nature of its work for national defense. • Engaged in strategic negotiations to secure significant concessions, reducing financial exposure and avoiding penalties.
- Optimization and Compliance Management: • Reallocated unused licenses within the organization to address immediate compliance gaps without additional costs. • Implemented a compliance framework with real-time monitoring tools and periodic internal audits to ensure long-term adherence to IBM’s licensing terms. • Provided IT and procurement teams training sessions to enhance understanding of IBM’s licensing requirements and governance practices.
Outcome
Redress Compliance reduced the company’s financial liability by 97%, lowering the $40 million claim to $1.2 million. The settlement covered only the cost of additional licenses required for future scalability, with no penalties or retroactive fees. The defense supplier maintained uninterrupted operations throughout the audit process, ensuring compliance with government regulations and secure handling of sensitive projects. Enhanced compliance processes were implemented to minimize the risk of future audit challenges.
Quote from the CIO:
“Facing such a significant audit was daunting, but Redress Compliance’s expertise saved us millions and ensured our critical operations remained unaffected. Their guidance has strengthened our compliance framework and prepared us for the future.”
Key Results:
- Initial Audit Claim: $40 million.
- Final Settlement: $1.2 million (97% reduction).
- Compliance Enhancements: Centralized license management and real-time monitoring systems.
- Operational Continuity: Ensured uninterrupted defense manufacturing and logistics operations during the audit process.
This case demonstrates Redress Compliance’s ability to deliver exceptional results for defense suppliers, safeguarding financial stability and operational integrity during complex IBM audits.
