Case Study – IBM Audit Defense: Leading New York Financial Institution Avoids $198.8 in IBM Licensing Exposure
Background
A top-tier financial institution based in New York—serving global banking, investment, and asset management clients—was notified by IBM in early 2023 of an upcoming license audit.
The company operated a massive technology environment featuring IBM products, including DB2, MQ, WebSphere, ILMT, and various mainframe components, deployed across global data centers and virtualized platforms.
While the institution had a mature IT and procurement organization, its IBM licensing model had evolved over time through multiple acquisitions and infrastructure transformations.
The company suspected there were blind spots in its compliance position and decided to proactively bring in Redress Compliance to prepare for and manage the audit.
The result: a potential $200 million USD license shortfall was reduced to just $3 million through remediation, and Redress negotiated a final settlement of only $1.2 million—representing a 99.4% reduction in initial risk exposure.
Challenges
As with many global financial institutions, IBM licensing complexity had accumulated over time:
- Sub-Capacity Compliance Gaps: Virtualized infrastructure running IBM products lacked complete ILMT (IBM License Metric Tool) coverage, a key compliance requirement for sub-capacity pricing.
- Legacy Entitlements: Older licenses purchased under different entities or agreements had become disjointed and difficult to map accurately to current deployments.
- Unmonitored Growth: Some business units had independently scaled IBM software usage without validating entitlements or license metrics (e.g., PVU/RVU).
- Mainframe Exposure: MLC (Monthly License Charge) pricing models were driving escalating costs, and some product usage could not be fully tracked due to outdated reporting.
- Audit Readiness: The internal team lacked confidence in handling the audit without risking over-disclosure or being outmaneuvered by IBM’s auditors.
The institution faced a potentially catastrophic settlement demand—unless it could quickly and defensibly reduce the apparent shortfall.
How Redress Compliance Helped
Redress deployed its IBM Audit Defense Framework, which combines technical remediation, licensing expertise, and negotiation strategy to protect enterprises from aggressive audit outcomes.
1. Pre-Audit Licensing Assessment
Redress immediately began a comprehensive internal review before engaging with IBM:
- Collected all IBM contracts and entitlements, including historic acquisitions
- Validated license metrics and support terms
- Cross-referenced installations across virtualized and physical environments
- Rebuilt an accurate Effective License Position (ELP) from the ground up
This revealed an initial license shortfall of over USD 200 million, largely driven by the assumption of full-capacity licensing in areas where ILMT was missing or misconfigured.
2. Technical Remediation
Redress collaborated with IT and infrastructure teams to implement a fast-track remediation plan:
- Corrected ILMT deployments across all affected servers
- Retrofitted usage reporting to retroactively demonstrate sub-capacity eligibility
- Decommissioned or consolidated underused instances
- Reallocated entitlements from inactive environments to active usage clusters
- Documented all actions in audit-ready form, including timestamps and contractual coverage
By the time IBM’s auditors formally engaged, the effective shortfall had been reduced to USD 3 million—a 98.5% reduction before negotiation even began.
3. Negotiation and Audit Management
Redress then took the lead in managing audit interactions:
- Responded to all audit inquiries using contract language and technical justifications
- Pushed back on IBM’s attempts to apply punitive interpretations of licensing terms
- Presented a complete license remediation report to establish a cooperative but firm stance
- Negotiated the settlement directly with IBM’s audit and commercial teams, focusing on contractual fairness and the documented remediation effort
Outcome and Impact
Thanks to Redress’s strategy, the institution achieved a dramatic reduction in exposure:
- Initial risk: USD 200 million
- Remediated exposure: USD 3 million
- Final negotiated settlement: USD 1.2 million
- Total avoided cost: USD 198.8 million (a 99.4% reduction)
- Zero compliance exposure moving forward
- ILMT fis ully deployed, eliminating future sub-capacity risk
- Audit closed within five months, without reputational damage or legal escalation
- Internal licensing governance enhanced with new policies and dashboards
Redress transformed a high-stakes vendor audit into a controlled, strategic outcome.
Client Quote
“Redress Compliance saved us from a disaster. Without their intervention, we would have faced an unmanageable audit outcome. Their licensing knowledge, technical support, and negotiation strategy reduced a $200 million exposure to just over $1 million. More importantly, they gave us control and confidence throughout the entire process.”
— CIO, Anonymous U.S. Financial Institution
Call-to-Action
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