New ILMT Policy Could Increase Financial Exposure in IBM Audits

IBM may be making it more difficult for IBM customers to qualify for sub-capacity licensing in virtualized environments.  As many companies who have been audited by IBM have learned, it is sometimes difficult to demonstrate that the company has met all the criteria necessary to avoid licensing the full capacity of the virtualized environment.

With very few exceptions, IBM’s license agreement allows users to license only that capacity on which the IBM software is running only if those users meet the following criteria:

  1. Install and configure ILMT;
  2. ILMT deployed within 90 days of server deployment; and
  3. Generate, verify, and retain ILMT reports either monthly or quarterly, depending on the license requirements.

Failure to perform any of these tasks could result in an unexpected compliance gap and a large unbudgeted financial demand from IBM.  IBM requires ILMT or an acceptable alternative, because that is the only way IBM can confirm that the customer did not exceed the licensed software usage during the reporting period.  The penalties for failure to meet all the requirements can be draconian.

Consider an example where a company installs WebSphere on one virtual machine with 8 PVUs.  The physical host has 1080 PVUs.  If the company has not satisfied all of the requirements for sub-capacity licensing, IBM will require that the company purchase PVU licenses for the full capacity of the physical host, or in this example, 1080 PVUs.

Now, qualifying for sub-capacity licensing in an IBM audit may be even more difficult.  In some instances, IBM is also requiring that customers use a version of ILMT that IBM supports.  So, if the customer is using an outdated version of ILMT, that customer may not be able to license their installations on a sub-capacity basis.  The same applies if the customer is using ILMT on an operating system that ILMT does not support.  In those instances, even though ILMT is installed, configured, and reporting, IBM may claim that the customer must purchase licenses for the full capacity of the physical host.

Many customers face additional challenges when ILMT cannot be properly installed or configured in the customers’ environments, or when ILMT is reporting inaccurate information.  Such events do not exempt the customers from the ILMT-requirement and may require the customer to examine the costs of full-capacity licensing in that environment.  Sometimes, users believe that opening a ticket with IBM will allow the customer to license on a sub-capacity basis while IBM and the customer evaluate the ILMT issue, but that is not the case.

It is critical to ensure that if a company is trying to license its IBM installations on a sub-capacity basis that the company has satisfied all of the contractual requirements.  Failure to do so can be a time-consuming and expensive mistake that is not easily remedied.  Many IBM audits result in demands requiring payment of millions of dollars based on misunderstandings related to ILMT.