Beware IBM Acquisitions and Product Transitions

IBM software licensing can be a very complex knot to untie. While IBM does develop new products in house, many of its most popular offerings (Cognos, Tivoli and ILOG, to name a few) are the result of its active history of acquiring smaller publishers and then continuing to offer their products under the IBM brand. As a result, those publishers’ licensing metrics sometimes are incorporated (at least for a time) among the myriad other IBM metrics under which IBM licenses its products. (A description of different IBM license types is available here.)

Compounding the complication is the problem that arises when owners of licenses for products published prior to an IBM acquisition seek to expand their use of those products or to prove their license positions in the event of an audit. In some circumstances, IBM in the past has offered those licensees the option of acquiring additional, “legacy” licenses under the metrics that applied prior to the acquisition. However, barring that, the licensees often discover that the product they have licensed has been “bluewashed” and that in order to expand usage or even to continue their maintenance and support subscriptions, they have to convert their old licenses to whatever quantity results from application of an arbitrary conversion rate that IBM uses to recognize those entitlements.

Predictably, this often results in a licensing shortfall for companies that previously were fully licensed for the products deployed on their servers. It also means that there is a higher likelihood of confusion in the event of an audit, where IBM’s auditors incorrectly may apply current license metrics to determine a company’s license position for a product that was deployed under pre-acquisition license metrics (which often can be difficult to document).

For this reason, it makes lots of sense for companies deploying mission-critical software products to stay abreast of the corporate status of the companies that publish those products. If it is announced that IBM (or, in fairness, any other, audit-happy software publisher) is moving to acquire one of those companies, the licensee then needs to do the following:

• Prioritize an analysis of its current license position and prospective needs of the products it has deployed,
• Confirm that all entitlements previously purchased are fully documented and that copies of any license   agreements describing applicable license metrics are retained, and
• Explore the possibility of identifying alternatives to the currently deployed product and weighing the costs of transitioning to that product against the (sometimes substantial and unexpected) audit-exposure risk associated with running those products following the consummation of an announced acquisition.