IBM True-Down Rights
Many IBM customers are unknowingly paying annual support fees for software licenses they no longer use – a classic example of shelfware consuming IT budgets.
This happens when you renew IBM’s Subscription & Support (S&S) for all your licenses, even if a portion sits idle. Over time, these unused entitlements (“shelfware”) can cost your organization dearly in maintenance fees.
Savvy procurement and IT asset managers are increasingly looking to IBM license optimization strategies to eliminate this waste. One powerful tactic is negotiating true-down rights into your IBM agreements. Read our ultimate guide to IBM Renewal Negotiation: How to Fight Uplifts and Secure Better Renewal Terms.
A true-down clause gives you the contractual right to reduce license counts at renewal without penalty, aligning your entitlements to actual usage. In other words, if your needs have shrunk, you can drop those excess licenses and stop paying support on them going forward.
Without a true-down provision, IBM’s default stance is that you must keep renewing support on all originally purchased licenses, even the unused ones, if you want to remain compliant and supported.
It’s no surprise IBM prefers it that way, as it guarantees steady revenue. But you don’t have to accept paying for shelfware indefinitely.
This guide will explain how true-downs work, IBM’s typical position on them, and how you can prepare and negotiate to secure true-down rights. We’ll also cover a real-life case example and common FAQs.
By the end, you’ll have a playbook to reduce unused licenses at renewal and avoid overspending on IBM software.
What is a True-Down?
In IBM licensing terms, a “true-down” is the contractual right to reduce your license quantity at the time of renewal, thereby lowering your ongoing Software Subscription & Support fees.
Essentially, it lets you trim down (scale down) your entitlements to match what you actually use. This is the opposite of a “true-up,” where you would add licenses if usage grew.
With a true-down clause in place, you can shed the extra weight of unused licenses so you’re not paying maintenance on software that’s sitting on the shelf.
Without a true-down, IBM’s standard policy is to renew support on all your entitlements, regardless of whether you actively use them or not. If you purchased 1,000 licenses last year and only 700 are deployed today, IBM will still quote you support for all 1,000 at renewal.
The onus is on you to identify any shelfware and push to remove it – IBM won’t volunteer to lower your count. True-down rights protect you against overpayment when your usage declines due to downsizing, virtualization, cloud migration, or other changes.
They ensure your contract can flex downward as well as upward.
To clarify the concept, here’s what a true-down means in practice:
- Definition: A contractual clause allowing the customer to reduce license quantities at renewal without financial penalty. This adjusts future S&S fees downward proportionally.
- Why it matters: It aligns your paid support with actual needs. You avoid paying ~20% annual support on licenses you no longer utilize. Over a few years, that savings is substantial.
- Without it: IBM expects full support renewal on all originally purchased licenses. Any attempt to drop licenses post-purchase is often met with resistance or penalties (like hefty reinstatement fees if you later need support again). In short, without a true-down clause, you’re stuck paying for unused entitlements indefinitely.
Checklist: Are you covered for a true-down?
☐ Confirm if “true-down” rights are defined in your current IBM contract.
☐ Review renewal terms to see if you have the ability to reduce license counts.
☐ Identify any shelfware exposure (unused licenses) that you would target for reduction.
When to start preparing for the IBM renewal: Preparing for an IBM Renewal: Timeline and Best Practices.
IBM’s Stance on True-Downs
IBM does not openly advertise or encourage true-down options – in fact, they are notably silent about them in standard agreements. IBM’s typical position is that when renewal time comes, you will continue paying support on all licenses you own.
The default Passport Advantage agreement, for instance, assumes a seamless renewal of S&S for the entire entitlement set. There’s no automatic mechanism to drop licenses simply because your usage has decreased. Any reduction in quantities usually must be actively negotiated.
Why is IBM so cagey about true-downs? Quite simply, allowing customers to reduce licenses means a loss of predictable revenue for IBM.
Annual support fees (typically around 20% of the license purchase price per year) are a cash cow for software vendors – they want that stream to continue uninterrupted.
If every customer freely shed 20% of their licenses at renewal, IBM’s support revenues would take a hit. Thus, IBM reps are generally resistant to true-down requests. You won’t find a clause for it in off-the-shelf contracts, and if you ask mid-term, the answer is often “not allowed.”
That said, enterprises with leverage can and do secure true-down rights.
IBM is a pragmatic business; for a large or strategic customer, it may compromise on flexibility to maintain the overall account. If you’re renewing a major Enterprise License Agreement (ELA) or making a big new purchase, you have bargaining power.
With the right approach (and perhaps a bit of persistence), IBM will sometimes agree to a true-down at renewal or, at the very least, a partial license reduction. They might not make it easy, but it is not unheard of — especially if the alternative you present is not renewing a big chunk of business at all.
The key is that you must proactively negotiate these rights; IBM will rarely grant them unprompted. In negotiations, expect some pushback and be prepared to justify your request with data and a clear business rationale.
Insight: IBM may try to dissuade you by saying things like “Our policy is to renew all licenses” or by warning that dropping support now could incur large reinstatement fees later. Don’t let these scare tactics shut down the conversation.
From a procurement perspective, if those licenses are truly not needed, paying tens or hundreds of thousands in support “just in case” is usually far more expensive than any one-time reinstatement fee if you somehow needed to re-add a license later.
IBM’s stance is about protecting their revenue, not yours – so remain politely skeptical and stick to the facts of your usage decline.
Also, be aware of price increases: at renewals, IBM often applies an annual price increase (e.g., a 3-7% price uplift on support fees). If you’re over-licensed, those uplifts compound the waste. (For strategies on controlling renewal price hikes, see our IBM Renewals & Price Uplift Protection insights.)
In short, IBM’s default stance is “no reductions, pay the full freight,” but with the right leverage and knowledge, you can push back on both the quantity of licenses and the price increases.
How to Secure True-Down Rights
So how do you actually get IBM to agree to a true-down? The answer is negotiation and contractual language. Here are the key avenues to secure true-down rights:
- During Initial Contract Negotiation: The best time to bake in true-down flexibility is when you first sign a major agreement or ELA. Insist on explicit language that grants you the right to reduce license counts at renewal. If you’re a new customer or making a significant purchase, you have maximum leverage to negotiate this term. Ensure the contract wording clearly states that you may drop a specified number or percentage of licenses at each renewal period without incurring a penalty. It’s much easier to get IBM’s buy-in upfront than to add it later.
- At Renewal Time: If your contract doesn’t already allow true-downs, renewal is your moment to negotiate. Use data to make your case – conduct an internal audit (using tools like ILMT or other SAM tools) to show current usage vs entitlements. If you can present hard numbers demonstrating that, say, only 50 out of 100 licenses are actively used, it bolsters your argument to only renew support for those 50. Essentially, you’re leveraging compliance and usage data to justify the reduction. This is where IBM audit readiness practices come in handy – the same data that proves compliance can also prove over-compliance (shelfware). (For a deep dive on tracking usage and compliance with ILMT, see our IBM Audit guide.)
- Build a Business Case: Tie your true-down request to legitimate business changes. Perhaps your company underwent downsizing, data center consolidation, or a cloud migration that rendered some IBM software less needed. Maybe you virtualized workloads and increased efficiency, reducing processor (PVU) consumption. By explaining the why — “We decommissioned X servers, so we no longer need Y PVUs of WebSphere” — you make the reduction request sound rational and inevitable. It’s not about IBM failing to deliver value; it’s about your environment changing. IBM is more likely to accept a true-down if it’s framed as a logical adjustment to business reality rather than just cost-cutting.
- Negotiation Leverage: Leverage is crucial. IBM will be more amenable to concessions if it sees an upside for itself. One tactic is to offer a multi-year renewal or a broader purchase in exchange for true-down flexibility. For example, you might say, “We’ll commit to a 3-year renewal for these core products if you allow us to drop 15% of licenses next year that we aren’t using.” Bundling multiple renewals or adding a new IBM product purchase to the deal can give IBM sales reps a reason to grant your request – they can justify it internally if it helps secure new revenue or a longer commitment. Essentially, you’re sweetening the deal: IBM loses a bit of support revenue now but gains something else of value (your loyalty, a new sale, etc.). Use whatever negotiation chips you have: perhaps competitive alternatives, third-party support quotes, or an upcoming project that IBM wants in on. The more IBM fears losing your business entirely, the more flexible they will be on terms like true-down.
Finally, make sure any true-down arrangement is clearly documented in the contract or renewal paperwork. Example clause language to illustrate the difference:
- IBM’s standard wording: “Support shall continue on all entitlements.” (This implies you must renew everything, no drops.)
- Buyer’s proposed rewrite: “At each renewal, Customer may elect to reduce the number of licenses under support to align with the quantity of active entitlements in use.”
By inserting language like the above, you formalize your right to reduce the amount. Notice the phrasing “align with active entitlements in use” – it ties the support count to actual usage. (This is where understanding IBM’s pricing models and metrics comes into play: you want to ensure the contract links support fees to what you’re using, not what you bought historically.
For more on how IBM’s license models tie into entitlements, check out our IBM Pricing Models overview.) The bottom line: get it in writing. A verbal assurance from a sales rep that “we’ll work with you next year” means little if it’s not in your agreement.
Preparation Steps for a True-Down
When approaching an IBM renewal where you intend to true-down (reduce licenses), preparation is everything.
Here’s a checklist of steps to take well in advance of the renewal date:
- Audit Your License Usage: Conduct an internal audit of all IBM software deployments to ensure compliance with license usage. Use the IBM License Metric Tool (ILMT) or another Software Asset Management platform to gather data on what’s actually running and how much capacity is used. This will highlight any unused entitlements. For example, ILMT might indicate that you’re only consuming 70 PVUs out of 100 PVU licenses purchased for an IBM product, indicating that 30 PVUs are idle, essentially serving as shelfware.
- Identify Shelfware Candidates: Based on the usage data, pinpoint which licenses are not in active use. Create a list of products and their corresponding quantities that could potentially be discontinued. Focus on the big-ticket items or large gaps – e.g., 50 unused licenses of an expensive middleware product are a prime target. This list serves as your starting point for in-depth discussions.
- Build the Justification: Prepare a business rationale for each reduction. Why are those licenses no longer needed? It could be due to a project ending, a system being retired, a move to a cloud or SaaS alternative, or organizational downsizing, among other reasons. Document these reasons along with the cost savings from dropping support. If you can say, “By virtualizing our servers, we reduced capacity needs by 30%, so we want to drop 30% of licenses, saving $X in support,” it’s a compelling story.
- Review Contractual Notice Periods: Check your IBM agreements for any required notice period to reduce or cancel licenses at renewal. IBM often requires advance notice (e.g., 60-90 days before the renewal date) if you choose not to renew certain entitlements. Mark those dates on your calendar and formally notify IBM in writing within the window, stating which licenses you intend to drop from support. Missing a notice deadline could result in a one-year extension, so this is critical.
- Engage Early with IBM (or Your Reseller): Don’t wait until the last minute. Once you have obtained your data and internal approvals, initiate a conversation with IBM’s account team regarding the upcoming renewal. Let them know you have identified excess licenses that you plan not to renew. They should hear it upfront rather than as a surprise on the purchase order. Early engagement also gives you time to negotiate terms (like a true-down clause or one-time concessions) and escalate if needed. Be firm that you intend to optimize, and you expect the renewal quote to reflect the reduced scope.
- Adjust Renewal Scope and Budget: Internally, adjust your budgeting for the renewal based on the reduced license count. Ensure that when IBM provides the renewal quote, it’s broken out by product and reflects the quantities you plan to renew. If IBM’s quote still includes everything, push back and remind them which items are being dropped (and that you gave notice). Having an itemized quote helps you verify the changes. Make it clear you will only pay for the licenses you are renewing support on.
Following these steps will set you up for a smoother true-down process.
You’ll enter negotiations with hard data, a sound business case, and all the contractual ducks in a row.
By preparing diligently, you shift the discussion from “No, you can’t reduce licenses” to “Here’s why we must reduce, and here’s the proof.” It puts you in a strong position to achieve the desired outcome.
Case Example: True-Down in Action
To see how true-down rights can translate into real savings, consider this anonymized case example:
A global enterprise had an IBM Enterprise License Agreement covering hundreds of software licenses, including a large deployment of an IBM middleware product measured in Processor Value Units (PVUs). Over the course of a few years, the company undertook a major virtualization and consolidation project in its data centers.
By moving workloads to more efficient servers and virtual machines, they cut their IBM PVU consumption by roughly 30%. In plain terms, if they originally needed 10,000 PVUs of capacity, they were now using only about 7,000 PVUs to run the same applications.
However, under the original contract, they still owned and were paying support on the full 10,000 PVUs entitlement. That excess 3,000 PVUs was pure shelfware – an expensive waste in annual maintenance fees.
Fortunately, this customer had wisely negotiated a true-down clause in their ELA from the outset. At the next renewal, they exercised their right to reduce the licensed PVUs to match the new usage level.
The result:
They were able to reduce their annual IBM support costs by 20% (a savings of several hundred thousand dollars), because they no longer paid for the 3,000 unused PVUs. IBM, of course, initially pushed back – the account team was concerned about losing revenue. However, the customer presented detailed ILMT reports showing lower utilization, and invoked the contract clause that explicitly allowed for the reduction at renewal. With little room to argue, IBM honored the true-down request.
Takeaway:
If the true-down clause hadn’t been in place, this company would have been stuck paying support on that shelfware. Despite having 30% less usage, they’d still be paying 100% of the original support bill every year.
Thanks to proactive negotiation and solid data, they aligned entitlements to actual needs and saved 20% in costs. This example underscores the value of securing flexibility before you need it – once you’re in a high-cost renewal without a clause, it’s much harder to convince IBM to let you off the hook.
FAQs
Q: If I don’t have a true-down clause in my IBM contract currently, what are my options?
A: Even if a true-down isn’t in your contract today, you still have a few avenues to reduce costs. First, you can try to negotiate a partial non-renewal at the upcoming renewal – essentially requesting IBM to let you drop certain licenses. While not guaranteed, IBM may agree if you present strong usage data or are a valued client. Another option is to convert or migrate to an IBM subscription or cloud model that inherently allows scaling down at term-end (for example, some IBM SaaS subscriptions let you adjust user counts at renewal). Finally, you could choose not to renew support on some licenses on your own. This means that those licenses become unsupported (which carries risks), but if they are truly not needed, you stop paying for them. Be sure to give IBM the required notice for any licenses you intend not to renew. And in the future, negotiate to include true-down rights in your next agreement or ELA to formalize this flexibility.
Q: Does IBM ever refund or credit unused licenses mid-term if we realize we overpaid for shelfware?
A: Generally, no – IBM will not refund support fees mid-term for licenses you aren’t using. Once you’ve paid for a year of support, that money is sunk, even if you identify shelfware the next day. IBM’s contracts are built on annual periods of commitment. They expect you to do true-ups for over-usage, but not true-downs for under-usage within the term. The best you can usually do mid-term is to notify IBM that you won’t renew certain licenses next cycle, or try to negotiate an early termination (which IBM would likely only consider if you’re, say, buying something else as a trade). One rare exception might be if you have a very flexible, consumption-based deal or an agile subscription; however, for standard agreements, refunds or credits on shelfware during the term are not typically offered. This is why it’s so important to address the issue at renewal time; that’s your opportunity to right-size the contract.
Q: Can I negotiate true-downs for IBM SaaS or subscription-based licenses, or is it only for perpetual licenses?
A: True-down concepts apply in both scenarios, but they take different forms. With perpetual licenses (where you pay one-time for the license and then yearly support and services), you can negotiate the right not to renew support on some of those perpetual entitlements. With SaaS or subscriptions, you typically have term-based licenses (e.g., a one-year subscription for 500 users). In many IBM subscription contracts, you actually can adjust quantities at the end of each term by default – you simply renew for a lower number of users or capacity if needed. In that sense, subscription licensing inherently has a true-down at renewal, as long as you’re not locked into a multi-year commitment with fixed quantities. However, suppose you signed a multi-year SaaS agreement with a fixed number of users for the whole period. In that case, you’d want to negotiate true-down rights at anniversaries or checkpoints. Always check the terms: some cloud services might have minimum purchase commitments.
In summary, for SaaS/subscription models, ensure your contract allows you to decrease the count when renewing. It might be easier than with perpetual licenses, but don’t assume – explicitly verify and negotiate if needed.
Q: How does ILMT reporting support a true-down request?
A: ILMT (IBM License Metric Tool) is IBM’s approved tool for tracking the usage of certain IBM software, especially those licensed by processor value unit (PVU) or virtual processor core. It’s critical for sub-capacity licensing compliance, but it’s also your best friend when aiming to true-down. The ILMT generates reports detailing exactly how much of each IBM product is deployed and in use in your environment. When you want to reduce licenses, ILMT data provides hard evidence to back your request. For example, if ILMT consistently shows you used only 50 PVUs out of 100 PVUs purchased for WebSphere over the last year, you can bring that report to IBM and say, “Look, we never exceeded 50 PVUs, so we want to renew support for just 50 and drop the rest.” Because ILMT is an IBM-blessed tool, the data carries weight in negotiations. It also helps ensure you remain in compliance if you do drop licenses — you’ll continue to monitor to avoid usage creeping above the new, lower entitlement. In short, ILMT reporting quantifies your shelfware and validates the truth, making your case factual rather than speculative.
Q: Will IBM resist true-down requests at renewal?
A: In many cases, yes, you should expect at least initial resistance. IBM’s sales teams are trained to preserve revenue, and a true-down directly cuts into their maintenance stream. Don’t be surprised if your account rep responds to a true-down request with warnings (“If you drop those licenses, you’ll lose support on them and reinstatement is costly!”) or by trying to upsell alternative solutions (“Instead of dropping, how about we migrate you to a different IBM product?”). This resistance is standard – but it’s not the final word. By coming prepared (as we’ve outlined above) and demonstrating that you’re serious (e.g., you’re willing to walk away from support on that shelfware if they say no), you can often get IBM to engage in a solution. They might escalate to a higher approval or offer a compromise, such as swapping those unused licenses for credits toward other software. Large enterprises have successfully obtained true-down rights, but it usually takes negotiation. Stay firm yet collaborative: make it clear that you value the IBM relationship and the products you do use, but you simply cannot keep justifying budget for unused licenses. If IBM senses that denying the request could jeopardize the broader account or open the door for a competitor, it will be more inclined to find a workable arrangement. Remember, even within IBM’s standard policies, Passport Advantage does allow you to choose not to renew certain entitlements – it’s just up to you to invoke that choice and handle the consequences. With a well-negotiated clause, the “consequences” (such as reinstatement fees or loss of rights) are waived, which is ideal. Aim for that, but even without the clause, assert your intent to optimize your licenses. You might be pleasantly surprised by IBM’s willingness to collaborate once they see you’re making an informed, strategic decision.
By taking a strategic, data-driven approach to your IBM renewals, you can avoid paying for shelfware and ensure your license counts (and costs) stay aligned with reality.
True-down rights are a powerful tool in the procurement arsenal for achieving ongoing IBM license optimization.
Don’t be afraid to ask for them – and back up your ask with the facts. Ultimately, the goal is straightforward: stop paying for what you don’t use and reinvest those savings where they matter.
Read about our IBM Negotiation Service.
