Case Study – IBM Audit Defense U.S. Technology Firm Reduces IBM Audit Exposure from $82M to $600K
Background
A rapidly growing U.S.-based technology company, offering enterprise software solutions and cloud-native data platforms, was informed by IBM in late 2023 that it would be subject to a formal license compliance audit.
With a large hybrid infrastructure and customer-facing SaaS offerings, the company depended heavily on IBM technologies, including WebSphere Liberty, Cloud Pak for Integration, DB2, Tivoli, and Instana.
IBM assigned the audit to an external Big Four firm. The audit process uncovered discrepancies and deployment records that the auditors interpreted as non-compliant with the regulations.
The initial audit findings revealed a staggering USD 82 million licensing shortfall, primarily driven by full-capacity assumptions and legacy entitlements that no longer accurately reflected the company’s actual usage.
The company, alarmed by the scale of exposure and lacking in-house IBM licensing expertise, brought in Redress Compliance to validate the findings and lead the defense.
Within three months, Redress had dissected the audit report, remediated the technical environment, and negotiated the exposure down to just USD 600,000—a 99.3% reduction.
Challenges
This high-growth tech firm had invested heavily in IBM solutions during its early expansion but had not kept pace with IBM’s licensing complexity:
- Cloud-Native and Containerized Deployments: The company had deployed IBM software in dynamic Kubernetes environments, where metering was unclear and the licensing implications of containers were poorly understood.
- Poor ILMT Coverage: ILMT was only partially deployed across virtual environments, resulting in auditors defaulting to full-capacity pricing.
- Legacy License Mismatch: IBM entitlements were purchased years ago using PVU and RVU metrics that no longer accurately reflect the current product architecture or deployment patterns.
- Rapid Scale: Product teams frequently spun up new environments—often replicating software instances without tracking entitlement usage.
- Audit Inexperience: The company had never faced a software audit of this magnitude and lacked the necessary legal, procurement, and technical preparedness to effectively challenge IBM’s methodology.
With operations and investor trust at stake, the company turned to Redress Compliance to take control of the process and achieve a commercially viable outcome.
How Redress Compliance Helped
Redress Compliance implemented its IBM Audit Defense Framework tailored to dynamic software and hybrid-cloud environments.
1. Audit Findings Deconstruction
Redress began by reviewing IBM’s audit report and:
- Verified the auditors’ methodology for container-based deployments
- Reviewed PVU calculations and peak usage analysis across hybrid environments
- Analyzed full-capacity assumptions tied to missing or misconfigured ILMT agents
- Flagged licensing metrics that were incorrectly applied to Cloud Pak products
We found that many of the audit findings were based on flawed assumptions about container usage and entitled metrics,. Entire clusters were wrongly labeled as production systems when they were test or ephemeral environments.
2. Technical Remediation and Proof Preparation
Working with DevOps and infrastructure teams, Redress:
- Documented proper classification of environments (production vs. test/dev)
- Assisted in completing ILMT deployments across affected systems
- Reconstructed historical ILMT reports to demonstrate sub-capacity eligibility
- Re-aligned Cloud Pak components to their correct bundled entitlements
- Archived or decommissioned unused software instances are still being counted
We produced a detailed remediation packet, including screenshots, timestamped ILMT records, and internal change logs, to rebut IBM’s inflated figures.
3. Strategic Negotiation
Redress directly engaged with IBM and the audit firm to:
- Reject improper full-capacity assumptions
- Demonstrate that actual deployment volumes, after remediation, required only a fraction of the originally assessed licenses.
- Argue that IBM’s approach failed to account for the nature of cloud-native and containerized deployment.s
- Offer a limited, one-time settlement tied to corrected usage—not arbitrary audit assumptions.
Redress positioned the company as cooperative and compliant but unwilling to accept commercial overreach.
Outcome and Impact
Thanks to Redress Compliance’s leadership, the company achieved an exceptional outcome:
- Initial exposure: USD 82,000,000
- Post-remediation shortfall: ~ USD 2.5M
- Final negotiated settlement: USD 600,000
- Total avoided cost: USD 81.4 million (a 99.3% reduction)
- No reputational damage, and no backdated support fees
- Improved governance, including container license tracking and ILMT discipline
- SaaS platform stability maintained, with zero impact on customer delivery or operations
The client closed the audit confidently—with better control of their IBM footprint and no future exposure.
Client Quote
“We were blindsided by the IBM audit and the $82M claim. Redress Compliance stepped in and rewrote the entire narrative. They showed us what was wrong, cleaned up our licensing, and negotiated a result we never thought possible. Without them, we would have paid tens of millions more—or worse.”
— CFO, Anonymous U.S. Technology Firm
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