Negotiating with IBM can feel like a high-stakes game of chess. As a CIO, you need to play it hard and smart. This expert guide delivers blunt, no-nonsense advice on four critical fronts of IBM negotiations: license deals, audit settlements, cloud contracts, and Support & Subscription (S&S) renewals.
The tone is tough and realistic—exactly what IT leaders need when dealing with Big Blue. Each section breaks down common IBM tactics, strategic moves for CIOs, internal prep steps, real-world examples, and traps to avoid. There is no vendor spin here—just candid guidance to protect your budget, reduce risk, and keep the upper hand.
IBM License Negotiations
IBM’s Playbook: IBM’s sales teams are seasoned in complex license deals. They often bundle products and use end-of-quarter pressure to push you into a quick agreement. Expect offers of “package deals” mixing critical software with nice-to-haves you didn’t ask for.
IBM reps might flaunt a huge up-front discount – but watch out, because they can recoup it later through high maintenance fees or price hikes. It’s common for IBM to emphasize its vast product portfolio, suggesting an Enterprise License Agreement (ELA) that covers everything and locks you in.
To their advantage, they may also exploit ambiguity in licensing metrics (e.g., PVUs, RVUs, user counts), making it hard to pin down costs. In short, IBM will use complexity, bundling, and timing to your disadvantage.
CIO Strategic Moves: Come to the table prepared to counter IBM’s tactics head-on:
- Unbundle and Prioritize: Don’t accept a bloated bundle. Insist on itemized pricing for each product. Pick apart IBM’s proposal and remove shelfware – you only want to pay for what you will use. Have IBM justify each line item.
- Leverage Competition: Even if you’re an IBM shop, demonstrate that you have alternatives. Compare IBM’s proposal with those of competitors (such as Oracle, Microsoft, and AWS) and be ready to show where IBM’s is too expensive or unnecessary. If IBM thinks you must buy from them, you lose leverage.
- Time Your Negotiation: Align negotiations with IBM’s fiscal year or quarter-end to maximize discounts. IBM reps chasing quotas are more likely to cave on price if you schedule talks when it hurts them the most. Be willing to walk away and wait – silence from your side near quarter-end makes them sweat.
- Lock in Long-Term Discounts: A big one-time discount on licenses is worthless if IBM increases your fees by double next year. Negotiate price protections in the contract. For example, ensure your Support & Subscription is based on your discounted price (not the list price) and cap any yearly increase. If you’re doing a multi-year ELA, insist on renewal price caps or extended discount guarantees so that IBM can’t jack up costs later.
- Escalate Wisely: Involve higher-ups if your sales rep isn’t giving ground. Get IBM’s sales management or even an executive sponsor on the line. High-level IBM executives often intervene to keep a strategic customer happy, using that to secure better terms or special concessions (e.g., a free year of a new product, enhanced support).
Internal Preparation: Before you even engage IBM, get your house in order:
- Inventory Everything: Know exactly what IBM software you own, how it’s used, and what it costs. This includes current licenses, usage stats, and any license shortfalls. Come armed with data to counter any wild claims from IBM.
- Define Your Objectives and Walk-Away Point: Align with your CFO and procurement on success (cost reduction, specific contract terms, etc.). Also, decide your red lines – e.g., the maximum you’re willing to pay or undesirable terms you won’t accept. Having a clear walk-away threshold prevents being talked into a bad deal under pressure.
- Learn IBM’s Pricing Tricks: Drill into IBM’s licensing models (PVU, user-based, Cloud Paks, etc.) so you won’t be baffled by their jargon. Identify any compliance risks in your environment now – don’t let IBM surprise you during negotiations by revealing you’re under-licensed somewhere. Run a mock internal audit to find and address issues in advance if needed.
- Build a United Front: Gather a cross-functional team – IT, legal, procurement, finance. IBM negotiators often try to divide and conquer (for example, going around the CIO to a less technical executive with a “great deal”). Ensure that everyone internally is on the same page and that no one communicates with IBM alone to maintain a consistent, firm stance.
Example – Beating the Bundle: A global manufacturer was offered an IBM ELA covering dozens of products – including databases, middleware, and security tools – with a tempting 50% discount if signed by the end of Q4. The CIO smelled a rat: half the bundled products were non-essential. She pushed back hard, removing the unnecessary software and focusing only on core licenses. IBM’s rep warned that removing items would void the big discount. The CIO didn’t blink, knowing it was the end of the quarter. Faced with losing a multi-million dollar sale, IBM relented – they kept the 50% discount on the reduced scope. The result? The company saved millions by refusing to buy IBM software it didn’t need, avoiding years of maintenance on shelfware.
Read the Strategic Toolkit for IBM Software Contract Negotiations.
Traps to Avoid: In license negotiations, CIOs must steer clear of common pitfalls:
- The “All or Nothing” Bluff: IBM might insist a deep discount only applies if you buy everything in the proposal. This is a pressure tactic. Don’t fall for it. Negotiate line by line. If IBM truly wants your business, it won’t disappear from a partial deal – they have quotas to meet.
- Undefined Usage Terms: Vague contract language regarding usage rights can come back to bite you later. Clarify everything—can you deploy in virtual environments freely? What if you need to move licenses to the cloud? Ensure the agreement is crystal clear to avoid surprise costs during an audit.
- Last-Minute “Exploding” Offers: IBM may drop a “one-time” offer on you with an absurdly short acceptance window (“sign by Friday or it’s off the table”). High-pressure deadlines are usually a bluff to rush you. Most offers will still be available (or return later). Stick to your due diligence and timeline.
- Ignoring Future Needs: Maybe IBM’s pitching a fancy AI software you don’t need today. Be wary if it’s included “free” or cheap in a bundle – you’ll end up paying maintenance, which could inflate your costs. Only commit to software that aligns with your strategic roadmap, not IBM’s sales agenda.
- Overlooking Hidden Costs: Scrutinize IBM’s proposal for costs beyond license fees. Is a required database or middleware license sold separately? Are there mandatory support charges? IBM sometimes slices and dices offerings – you might buy a product license only to discover you also need an IBM add-on to make it fully functional. Read the fine print so you’re negotiating the total cost of a solution, not a partial price.
Read more about IBM Negotiations.
IBM Audit Negotiations
IBM’s Playbook: Regarding license audits, IBM often wields them as a revenue weapon rather than a mere compliance exercise. If you receive an audit notice, assume IBM’s goal is to find something billable.
They frequently target customers who aren’t growing their IBM spend or have declined a renewal – a non-renewed IBM ELA almost guarantees an audit within a year. IBM’s audit teams (or third-party auditors they hire) will scour your environment for any compliance gap.
Common tactics include overcounting usage (e.g., assuming all CPU cores require licensing if you lack IBM’s sub-capacity tool) and strict interpretations of ambiguous terms in the contract.
IBM knows most clients dread audits, so they may come in with an inflated compliance bill, expecting you to negotiate rather than fight each line. Their representatives might suggest that you have little choice but to purchase additional licenses based on their findings. In essence, IBM uses audits as “fishing expeditions” for revenue – all those audit triggers boil down to IBM seeking more $$$.
CIO Strategic Moves: A successful audit negotiation requires turning the tables and taking control of the narrative:
- Control the Audit Scope and Timeline: When the audit letter arrives, engage with IBM to negotiate the scope and schedule of the audit. Don’t let IBM conduct a free-for-all fishing expedition. Define which products are in scope and set a reasonable timeline so you can prepare. If you need more time to collect data or clarify findings, ask for it. Rushing benefits IBM, not you.
- Own the Data – Do Your Own Audit: Don’t blindly accept IBM’s findings. Assemble an internal task force, including software asset managers and technical leads, to conduct an internal audit. Use your tools (like ILMT for sub-capacity usage) and records to see where you truly stand. This lets you catch errors or overstatements in IBM’s claims. Be prepared to challenge IBM’s numbers line by line. Many IBM audit findings contain mistakes – missing entitlements, miscounted licenses, etc. Challenge everything questionable.
- Push Back and Negotiate the Remedy: If IBM claims you’re out of compliance, remember: the “penalty” is often negotiable. Rather than paying the list price for every shortfall, negotiate a settlement. For example, if you’re short 100 licenses, push for a deal where you purchase 50 at a discount and IBM waives the rest as an oversight. Or negotiate shifting your investment into a new IBM product instead of writing a pure compliance check. IBM would rather sell you additional products or subscriptions than drag out a fight. Use that to craft a settlement that gives you something of value, such as new licenses with a discount or a transition to a different solution, rather than just a fine. Also, try to eliminate or reduce retroactive maintenance fees – argue that any over-deployment was recent or that you derived limited value.
- Leverage Future Spend for Concessions: If you anticipate buying more from IBM in the future (perhaps a cloud project or an upgrade), use that as a bargaining chip. For instance, “We’ll commit to your Cloud Paks purchase next quarter, but in return, we expect leniency on this audit compliance bill.” IBM’s auditors might not mention it, but IBM’s sales side will listen if future revenue is at stake.
- Secure Audit Protections in Writing: As part of any settlement, get contractual protections to guard against repeat pain. This means a release of liability (IBM won’t return later for the same issue) and, ideally, a forbearance period – e.g., No new audits for a couple of years. If your issue was not running ILMT (IBM’s license tool), agree on a plan to deploy it rather than paying full penalties, and make sure IBM then considers the matter closed. All settlement terms should be documented clearly to prevent “gotchas” down the line.
Internal Preparation: The best time to prepare for an IBM audit is long before you’re audited. Key preparation steps include:
- Maintain Compliance Continuously: Regularly self-audit your IBM deployments. Ensure ILMT is properly installed and report if you use sub-capacity licensing. IBM requires quarterly ILMT reports – failure to do so can lead to significant compliance fees. Keep records of all your entitlements (licenses, proofs of purchase, Passport Advantage reports) organized. IBM will ask for these – have them ready.
- Train Your Team on IBM Licensing: IBM’s product licensing rules are notoriously complex. Invest in training your asset management team or bring in outside experts to understand IBM’s rules. This way, you can correct compliance issues (such as a server being spun up without licensing or a misconfigured virtualization environment) before IBM does.
- Plan Your Audit Response Team: Identify who will be involved the moment an IBM audit notice arrives—typically someone from IT asset management, a senior IT manager, legal counsel, and yourself or another executive to manage communications. Define roles: who gathers data, who interfaces with the auditors, and who negotiates the settlement. This incident-response approach prevents chaos during an audit.
- Gather Intel: Knowing why IBM might be auditing you can be useful. Has your IBM spend dropped recently? Did you decline an upgrade or ELA renewal? Knowing the trigger (perhaps one of the common triggers, such as business growth, M&A, or a long gap since the last audit) helps tailor your strategy. For instance, if IBM is auditing because you didn’t renew an ELA, be extra careful – they assume you over-deployed during the ELA and will look for those overages. Knowing this, you would focus on bringing any ELA-era deployments up to date beforehand.
Example – Fighting an Inflated Audit: An international bank got hit with an IBM audit claiming a whopping $4 million license shortfalls for WebSphere and DB2. IBM’s report was dozens of pages of data. Instead of panicking, the CIO assembled a “war room” with the IT asset manager and database team. They found that IBM had counted several decommissioned servers and double-counted certain PVU metrics. Armed with this evidence, the CIO challenged IBM’s findings point by point
. Caught off guard, IBM’s auditors revised the compliance gap to $1.5 million. Then, the CIO negotiated further: rather than cutting a check, the bank agreed to purchase $1 million in new IBM Cloud Paks (aligned with their IT roadmap), and IBM dropped the rest of the compliance claim. The final settlement saved the bank money and redirected costs into a solution the bank needed, rather than a pure penalty.
Traps to Avoid: IBM audits are fraught with peril. Steer clear of these traps:
- Passive Compliance: Don’t adopt a submissive “IBM caught us, we have to pay” mindset. Too many CIOs just accept the audit findings at face value. Remember, IBM’s findings are often questionable and sometimes incorrect. Failing to scrutinize and push back is leaving money on the table.
- Scope Creep and Over-disclosure: Be careful about volunteering information beyond what’s asked. IBM will happily take any extra data you hand over and potentially use it against you. Stick to the scope. For example, if IBM audits your middleware, don’t let them examine unrelated software usage. Never allow them unrestricted access to your systems – all data should flow through your team to IBM, not the other way around.
- Rushing to Settle Fast: While you want to resolve the audit efficiently, don’t let IBM’s artificial deadlines force a bad settlement. IBM might say, “We need to close this audit by the end of the month.” That’s their timeline, not yours. Use the time you need to get it right. Getting a favorable outcome next quarter is better than a costly mistake now.
- Lack of Legal Review: The legal team should review audit settlements and new purchase orders following an audit. IBM may try to slip in language that increases your future compliance burden, such as a clause requiring additional attestations or granting them broader audit rights. Ensure your legal team checks that the settlement fully releases past issues and doesn’t create new traps.
- Repeating the Same Mistakes: After an audit, many organizations breathe a sigh of relief and move on, only to face similar issues later. If IBM found a compliance gap, fix the underlying process that caused it. Did you lack proper change management for software installs? Was ILMT not maintained? Close those gaps. If they see the same weaknesses, IBM will remember; a few years later, expect a déjà vu audit.
IBM Cloud (IaaS, PaaS & Hybrid) Negotiations
IBM’s Playbook: IBM’s cloud offerings, ranging from core IBM Cloud infrastructure to PaaS services and hybrid solutions like Cloud Paks on OpenShift, are pitched as enterprise-grade alternatives to AWS and Azure. IBM knows that many of its customers run legacy systems, such as mainframes and WebSphere, and will emphasize how IBM Cloud integrates seamlessly with your existing IBM investments.
A common tactic is bundling cloud services with traditional deals: for example, IBM might propose a deal where you commit to using IBM Cloud in exchange for a better price on an on-premises software renewal. This “bundle” can make it hard to tell what you’re paying for in the cloud. IBM also loves multi-year commitment contracts for cloud – they’ll offer significant discounts if you lock in a 1-3 year term of spending.
Be wary: they may cite “custom pricing” that seems to beat AWS on paper, but only if you commit to spending levels that might overshoot your actual needs. Another tactic is pushing their newer offerings (AI, Watson, blockchain, etc.) by dangling them as add-ons in a cloud deal, even if you didn’t plan to use them. IBM’s cloud sales reps know they’re often the underdog versus hyperscalers, so they might employ any classic trick – from FUD (fear, uncertainty, doubt) about security on other clouds to promises of white-glove service – to sway you.
CIO Strategic Moves: When negotiating IBM Cloud and hybrid deals, treat IBM like any other cloud provider – make them earn your business and keep flexibility in your hands:
- Benchmark Against the Big 3: Always compare IBM Cloud’s proposal with equivalent AWS, Azure, or Google offerings. If IBM claims a service will cost $X monthly, get a price for the same workload on AWS. Nine times out of ten, IBM’s initial price won’t be the most competitive. Use that data to push IBM lower or to include more value (e.g., more VMs or services for the price). IBM is aware that it is not the first cloud of choice for many – leverage that fact. Let them know you’re willing to go elsewhere if they can’t meet your needs in terms of price and performance.
- Demand Flexible Terms: Avoid rigid long-term commitments if possible. If IBM wants a 3-year commitment, see if they’ll agree to a “use it or lose it” pool that’s smaller or a one-year term with renewal options at the same discount. At minimum, try to include an escape clause after year 1 or 2 if certain performance or value criteria aren’t met. You don’t want to be stuck if IBM Cloud doesn’t meet expectations. Also, negotiate the rollover of unused credits – if you commit to spend $2M/year and only use $1.5M, ask that the $0.5M carries forward. Cloud usage can be unpredictable; don’t let IBM charge you for unused commitments.
- Insist on SLA and Accountability: Get a strong Service Level Agreement. IBM Cloud has had notable outages, and you need recourse if services go down. Ensure the contract includes meaningful penalties for downtime or performance shortfalls, such as credits or refunds. Additionally, clarify support responsibilities – do you get a named technical account manager? Is 24/7 support included? If IBM brags about “enterprise-grade support,” get it in writing as part of the deal.
- Leverage Hybrid Advantages – on Your Terms: If you’re eyeing a hybrid model (a mix of on-premises and IBM Cloud, possibly using Red Hat OpenShift or Cloud Paks), let IBM do some of the heavy lifting. For example, negotiate for free migration services – IBM should help you move workloads to their cloud. Also, consider negotiating the ability to repatriate to on-premises if needed. Perhaps you can use licenses interchangeably between on-premises and cloud. IBM’s hybrid messaging is strong; hold them to it by securing terms that allow you to shift workloads fluidly without penalties.
- Keep Options Open: Even if you plan to use IBM Cloud for a specific niche, such as mainframe adjacency or a particular IBM SaaS, avoid making it your sole cloud play. Nothing strengthens your negotiating hand more than a credible Plan B. If IBM knows you have a multi-cloud strategy and can pivot workloads elsewhere, it’ll be more inclined to bend on pricing and terms. Conversely, if you go “all in” with IBM Cloud, you’re at its mercy later. Start with a trial or pilot, not a massive commitment, and scale up only as needed – ideally under the negotiated pricing umbrella, but with checkpoints where you can recalibrate.
Internal Preparation: Approach cloud negotiations with IBM as a strategic project:
- Assess Workload Suitability: Not all workloads are suitable for IBM Cloud. Identify which applications make sense to move or start there (e.g., those tightly integrated with IBM software or requiring IBM-specific services). For other workloads, you might prefer a different cloud. Knowing this in advance prevents IBM from selling you capacity you won’t use.
- Calculate Total Cost of Ownership: Go beyond the initial rates. Factor in data egress fees (what will it cost to pull data out of IBM Cloud), networking costs, and any required IBM software licenses on the cloud. For instance, if you run IBM WebSphere on IBM Cloud VMs, do you still pay regular license fees, or is it included? Understand these details and model 1-year and 3-year costs in-house to see if IBM’s deal delivers savings.
- Prepare a Migration/Exit Plan: A cloud deal isn’t just about signing – it’s about what if it doesn’t work out. Have your architects sketch out how you would move off IBM Cloud if needed (or scale more onto it). This gives you insight into how tightly the environment is bound. If migration looks tough, you need even stronger contract safeguards. If it’s easy, that’s a great talking point to keep IBM in check (they know you can leave).
- Involve the Cloud Experts: Ensure your architects and engineers review IBM’s technical proposal. IBM sales might promise the world (e.g., “Sure, our cloud can handle your Oracle database workload just fine!”). Let your experts validate those claims. Their feedback will equip you with tough questions and demands, such as requiring a proof of concept or specific performance tests as a deal condition.
- Budget for the Unexpected: Cloud usage can spike, or new needs emerge. Decide ahead of time how much wiggle room you want in the contract. This ties back to flexibility – maybe push for the ability to burst beyond your committed spend at the same discounted rate, or conversely, protection that if a project using IBM Cloud is canceled, you can reduce your commitment. Knowing your risk tolerance and scenarios internally helps you negotiate clauses for those “what-ifs”.
Example – Squeezing Value from IBM Cloud: A regional bank considered using IBM Cloud for data archiving and some analytics, but also evaluated Azure. IBM initially quoted $1 million per year for a package of VMs and storage, claiming it was a special 20% discount. The bank’s CIO had his cloud team price the equivalent on Azure – $800k. Rather than ditch IBM outright, he used this to his advantage. He told IBM that their offer wasn’t good enough and that Azure provided a benchmark.
Over a series of tough meetings, IBM revised the deal: they matched the $ 800,000 effective cost, added 24/7 premium support at no extra charge, and agreed to a 12-month contract instead of 36 months, with an option to renew at the same rate.
Furthermore, IBM included a clause allowing the bank to exit after six months if the service levels were not met. Ultimately, the bank proceeded with IBM Cloud for that specific workload at a cost and risk level comparable to Azure. The key was treating IBM Cloud not as a default choice but as one of several options and making IBM fight to be the chosen one.
Traps to Avoid: Keep your eyes open for these pitfalls in IBM Cloud negotiations:
- Overcommitting Capacity: The big trap is committing to more cloud resources (or a longer term) than you need. IBM will push for a larger commitment by dangling bigger discounts. Don’t sign up for a $ 5 M, 3-year deal if your realistic need is $ 2 M, 1-year. It’s not a “savings” if you’re paying for phantom capacity. It’s better to slightly under-commit and add later than to over-commit and waste the budget.
- Ignoring Data Lock-In Costs: IBM might not highlight how data is cheap to get in but expensive to get out. If your contract doesn’t address data egress fees or migration assistance, you could be stuck with a huge bill or a practical lock-in when trying to move away. Negotiate caps or credits for data egress, especially if you plan to pull large datasets out for backups or multi-cloud analytics.
- Missing Alignment with License Entitlements: If you already own IBM software licenses, check if you can bring them to IBM Cloud (BYOL). Sometimes, IBM will require you to repurchase licenses through cloud service subscriptions. Don’t pay twice for the same capability. Clarify this during the negotiation – if you have an existing WebSphere license with S&S, can you use it on IBM Cloud VMs? If not, push for a better price, since you’re essentially paying double.
- Accepting Standard Terms by Default: IBM’s cloud master agreement might have terms that are not in your favor, like automatic renewals, unilateral price change rights after term, limited liability on their part, etc. Read the contract (or have legal or procurement do it). Push back on onerous terms. For example, strike any auto-renewal of commitments; you should have to actively opt in to renew, allowing you to renegotiate. Also, ensure pricing for any renewal period is defined or capped.
- Overlooking Security and Compliance Needs: IBM will tout security, but make sure the contract enforces it. Get your specific regulatory requirements (data residency, encryption standards, audit rights) written in. A trap is assuming IBM’s standard cloud is automatically compliant with your needs. If IBM fails to comply with an obligation that wasn’t explicit in the contract, the burden might fall on you. Nail these details down during the negotiation, when IBM is eager to please, rather than after an incident.
IBM Support & Subscription (S&S) Renewals
IBM’s Playbook: IBM’s annual Subscription & Support (S&S) renewals (maintenance fees for software updates and support) are the cash cow of their business. They count on customers treating S&S as a routine expense that increases every year. Common IBM tactics include stealth price hikes and exploiting policy loopholes to their advantage.
For instance, IBM has historically offered big discounts on license sales, but when it’s time to renew S&S, they attempt to revert prices to the list if you’re not protected. That can manifest as a shockingly high renewal quote if your contract lacks fixed pricing terms.
IBM reps (or often a dedicated renewals team) might claim that support prices are “standard” and non-negotiable – don’t believe that. They might also delay sending your renewal quote until the last minute, knowing you can’t risk a lapse in support, thus pressuring you to approve a high quote with little time to negotiate.
Another favorite tactic is bundling all your renewals together (hardware, software, different products) into one big line item, which obscures individual product costs and makes it harder to see where the increases are.
If you drop support on any licenses, IBM renewal reps may even suggest that you’ll face hefty reinstatement fees later or lose upgrade rights, trying to scare you into renewing everything, even shelfware. Essentially, IBM banks on inertia, fear of downtime, and complexity to keep the S&S money rolling in with minimal concessions.
CIO Strategic Moves: Renewals might not be “sexy,” but they have a huge budget impact. Here’s how to tackle IBM S&S renewals with a hard-nosed strategy:
- Audit Your Usage Before Renewal: Conduct an internal review of your usage at least a month before renewal. Identify applications or licenses that are retired or significantly underused. These are prime candidates to drop from support (or reduce volume) if possible. Why pay 20% of the license cost each year on something you barely use? Enter renewal talks with a clear list of what you need versus what you can live without.
- Challenge Every Line Item: Don’t accept the renewal quote as-is. Break it down by product and compare each to last year. Question any increase beyond a nominal inflation rate. Ask IBM to justify the value of the increase – often, they cannot, beyond “our costs went up.” Push to keep pricing flat or increase very low on critical products. For less critical ones, consider saying, “We won’t renew this; it’s off the table.” That threat alone can sometimes bring IBM to negotiate a better price to keep it included.
- Negotiate a Multi-Year Contract with Safeguards: If you have budget stability, negotiating a multi-year renewal can give you leverage – IBM prefers long-term commitments. But only do this if you lock in favorable terms, such as fixed annual fees or a capped escalation (e.g., 3% per year maximum). For you, a multi-year commitment should mean predictability and maybe a package discount; for IBM, it means guaranteed revenue. Make sure it’s a win-win: you get a price break or a freeze, and they get your loyalty. And include a clause that if you divest part of the business or no longer need certain licenses, you can reduce quantities even in the mid-term – even if IBM resists, put the request out there.
- Use Third-Party Support as Leverage: IBM hates third-party maintenance providers, but they exist (companies like Origina claim to support many IBM products at ~50% of IBM’s cost). Whether or not you go that route, getting a quote from a third party can be eye-opening. If IBM is trying to raise your support bill by 20%, and a third party offers to support that software for half the price, you have a powerful argument. We’ve seen CIOs present this: “We have an alternative support option at 50% less. Match it or we walk.” IBM may counter-argue about quality or updates, but this can pressure them to grant concessions. At the very least, you might negotiate for certain products to be dropped from S&S and covered by a third party, while focusing IBM’s support on what they can do (e.g., proprietary updates).
- Tie Support to Product Sales Negotiations: If you’re also negotiating a new license deal or cloud purchase with IBM, bundle your support renewal negotiations into the bigger deal. If it means closing a big sale, IBM sales reps (focused on new sales) can sometimes help influence the support side. For example, you could say, “I’ll sign this new $5M deal, but only if you hold my next year’s S&S renewal at a 0% increase.” Use every piece of leverage. Conversely, if you have no new deals, make it clear that an unreasonable renewal will influence your future buying inclination – i.e., “If IBM gouges us on support now, why would we invest in more IBM products later?” Let them know that support costs influence long-term partnerships.
Internal Preparation: Winning the support renewal game starts well before the maintenance bill arrives:
- Depreciate and Decommission: Have a lifecycle plan for software. If certain IBM software is being phased out (for example, if you’re migrating off Lotus or an older IBM analytics tool), time the decommission with the support renewal cycle. Don’t renew support for a product you plan to retire in 6 months. Instead, schedule its retirement before the renewal date and inform IBM that you won’t need to renew it. This requires proactive planning between IT ops and finance.
- Budget realistically and include potential increases: Expect IBM to request them. Have your finance team forecast maintenance costs with a buffer for potential hikes (e.g., assume a 5-10% increase) so it’s not a fire drill when the quote comes. However, just because you budgeted for it doesn’t mean you accept it—it just means you’re prepared to push back, and any savings will be a win.
- Engage Procurement Early: Treat S&S renewal like a purchase because it is. Many organizations just let the renewal PO get cut as a routine action. Instead, procurement professionals should be involved in negotiating just as they would for a new contract. They can help negotiate better payment terms and discounts or identify if any licenses can be dropped. Procurement can also coordinate if multiple IBM divisions or products are up for renewal at once – bundling them in negotiations (as opposed to IBM’s bundling just in the quote) can allow you to say, for example, “we’ll renew these five products if we get a 15% discount on the lot.”
- Legal/Contract Review: Check the original license agreements for any support terms. Some IBM contracts might have clauses about renewals or reinstatement. Knowing these is key. For instance, understand IBM’s policy if you don’t renew – often, you can continue using the software indefinitely (since licenses are perpetual), and you just lose support/updates. But if you need support later, you might have to pay back the support plus a penalty to reinstate it. Having a lawyer confirm these details arms you in negotiations – you might decide to let support lapse on a non-critical product if the cost-benefit doesn’t pan out, and knowing the exact consequences helps weigh that decision.
- Consider Alternatives for Each Line: For every product on support, ask, “What if we didn’t have it?” An older IBM product could be replaced with a cheaper modern solution, eliminating the need for IBM support. Or maybe an open-source alternative exists. Identifying these options internally gives you the confidence to drop support or at least the credibility to threaten doing so. IBM’s worst fear is that you will entirely discontinue use of a product because then they lose both the support revenue and any future license revenue. Use that where appropriate – e.g., “We are considering switching from IBM MQ to an open source messaging platform if maintenance costs stay this high.” Planting that seed can influence IBM’s approach even if it’s a long-term play.
Example – Slashing the Support Bill: A large retailer found that its IBM support bill was creeping up by double digits annually, reaching $4 million. The CIO had had enough. Ahead of renewal, her team did a deep dive and discovered that 15% of those licenses were unused or tied to projects that had ended. They also got an offer from a third-party support firm for legacy IBM WebSphere at half the cost. Armed with this, the CIO approached IBM. She informed them that they would drop support for the unused licenses (roughly $ 500,000 worth) and consider a third-party option for WebSphere ($ 800,000 worth) unless IBM could significantly improve the terms.
IBM initially responded with the usual “policy” talk. Still, when the CIO didn’t budge, IBM came back with a new proposal: a 15% discount on the entire renewal and a commitment to freeze prices for two years if the retailer kept all licenses with IBM support.
They also agreed to provide extended support for an older product at no extra charge as a sweetener. The CIO accepted the deal, resulting in a rare decrease in annual support costs and stability for budgeting. The blunt approach – show IBM you’re ready to walk – paid off in spades, saving the company seven figures.
Traps to Avoid: Don’t let these common pitfalls undermine your S&S renewal negotiations:
- Renewing by Rote: Simply rubber-stamping the renewal is exactly what IBM wants you to do. This “auto-renew” mentality means you’ll absorb whatever increase they impose. It’s a trap of complacency. Every renewal is an opportunity to reassess and renegotiate – treat it as such.
- Falling for the “Support is Sacred” Myth: IBM may insinuate that dropping support puts your systems at risk (no updates, no help if something breaks). While support is important, not every system needs gold-plated support forever. Weigh the risk. If a product is stable and not mission-critical, you might take the calculated risk of temporarily dropping S&S or use third-party support for break-fix help. Don’t let FUD keep you paying for support ad infinitum without scrutiny.
- Ignoring Bundled Maintenance in Deals: The first year of S&S is often included or required when you buy new IBM software. A trap is not negotiating the out-year maintenance rate at the time of purchase. You might celebrate a 50% license discount, but if you don’t also negotiate that maintenance will be charged at the discounted price, IBM can and will charge maintenance at the full list price later. Always negotiate the maintenance base and cap at the time of purchase; it will save headaches at renewal.
- Missing Renewal Deadlines: Some IBM contracts have terms that auto-renew if you don’t officially cancel support X days before expiration. If you intend to drop or reduce licenses, do it formally and on time. Set reminders for notice periods. If you miss the window, IBM might hold you to another year (or use it as leverage to charge penalties). This is an avoidable trap with good contract management.
- No Record of Historical Discounts: Over the years, personnel change ,and memories fade. If you don’t record what discounts or special terms you had in the past, IBM might conveniently “forget” them at renewal. Always document prior concessions. If, during the last renewal, IBM gave you a 10% courtesy discount due to economic conditions, bring that up and ask for it again (or more). Don’t negotiate in a vacuum – historical context is power. IBM counts on customers not tracking this; prove them wrong by maintaining a paper trail of every negotiation outcome.
In Closing: Negotiating with IBM is not for the timid. It requires diligence, guts, and a willingness to say no. IBM will use every tool in its arsenal – complex contracts, audits, bundle deals, price hikes – to maximize its revenue.
Your job as a CIO is to turn those tools to your advantage or blunt them entirely. That means being as informed about IBM’s tactics as IBM’s insiders and never showing your desperation.
Whether it’s hammering out a license deal, surviving an audit, optimizing a cloud contract, or squeezing the fat out of a support renewal, the principles are the same: prepare relentlessly, challenge IBM’s assumptions, leverage your options, and put your business needs above their sales goals. In doing so, you can cut costs, mitigate compliance risks, and force clarity into IBM’s often opaque contracts – all while maintaining the IBM relationship on your terms. Remember, IBM needs customers as much as you need IBM solutions. Use that reality to dictate a deal that truly puts you, the customer, first.
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