By Julie Machal-Fulks, Partner, Scott & Scott, LLP
Organizations face numerous challenges when trying to ensure compliance with their IBM license agreements. IBM agreements are not easy to understand and manage. They often contain complex, expansive, and onerous provisions.
IBM products like WebSphere, DB2, and Cognos are expensive. Many companies using these products cannot easily or quickly verify compliance, and the risks associated with IBM licensing can be severe. For example, if a company is trying to license under IBM's Sub-Capacity license rules and fails to adhere to all of the requirements, IBM often demands enough licenses to cover the full capacity of the hardware on which the software is installed.
In some instances, the costs associated with non-compliance can be tens of millions of dollars. Proper licensing is critical to avoid unexpected liabilities.
It is best to negotiate favorable licensing terms at the beginning of the IBM relationship or upon renewal of the agreement. The following points should be considered:
- Evaluate how the software will be used
- Understand the license requirements, especially if virtual environments or clusters are present
- Identify and resolve ambiguities before agreement is signed
- Ensure that the license expressly grants usage rights required for architecture being used
- Confirm what rights exist upon termination or expiration of the license
- Get legal involved at the outset of the relationship, or anytime there is a license revision.
IBM currently offers software (publicly) under approximately nine different, license-measurement frameworks. The different frameworks involve varying levels of complexity. Some apply on a relatively simple user or device-access basis, while others apply on a server-installation basis. Complicating matters even further is the fact that IBM acquires many companies that have used different licensing models, and it can be difficult in many instances to wade through the resulting mountain of documentation licenses to determine how those old license types translate – if at all – to the current models.
It is therefore very important for businesses being audited by IBM to try to limit and clarify the scope of the audit at the earliest possible stage. Comprehensive audit-scoping helps businesses not only to determine – in advance – the level of their licensing exposure resulting from the audit, but also to direct the efforts of internal resources and consultants to the tasks where they are most needed.
On January 20th, I will be discussing some of the legal risks of IBM licensing in a free webinar.
For more details and registration information, click here.
