Managing IBM License Renewals with SAM
IBM software license renewals are among the most expensive – and risky – moments in your IT asset lifecycle.
Every year at renewal time, IBM often presents a significant cost increase and a lengthy quote. If you’re unprepared, it’s easy to accept those uplifts and continue paying for licenses you may not even be using. For an overview, read our guide to IBM Software Asset Management Strategies.
Without thorough preparation, many organizations simply accept IBM’s standard price hikes and renew all existing entitlements as-is. The result? Budgets balloon from automatic 5–7% support fee uplifts and ongoing maintenance on “shelfware” (software you own but don’t use). It’s a recipe for overspending and unpleasant surprises.
This guide will demonstrate how a robust Software Asset Management (SAM) practice counters IBM’s renewal tactics.
By leveraging SAM data on entitlements and usage, you can take control of the renewal process – capping cost increases, eliminating wasteful spending, and negotiating terms that favor you instead of IBM.
We’ll cover preparation steps, negotiation strategies, common pitfalls, a renewal checklist, and FAQs to ensure your next IBM renewal is both predictable and cost-efficient.
The IBM Renewal Challenge
IBM often treats renewals as an opportunity to boost revenue – applying a standard 5–7% annual uplift on support fees by default.
That means if you simply roll over your IBM maintenance each year, costs will snowball. (Even a “standard” 7% yearly increase compounds to roughly 23% higher fees after three years.)
IBM’s renewal quotes also tend to assume you’ll renew every license entitlement you have, not just what you actually use. In other words, the quote is based on full entitlement counts, so you continue to pay support for unused software sitting on the shelf.
Without hard data to challenge these assumptions, many companies accept the inflated baseline as accurate. The result is escalating costs and unwittingly renewing shelfware year after year.
Role of SAM in Renewal Management
To change that outcome, you need leverage – and that leverage comes from your SAM practice.
Software Asset Management (SAM) provides the accurate data and insights needed to take control of an IBM renewal:
- Accurate entitlement and usage data: SAM gives you a single source of truth for what IBM licenses you own (entitlements) and how much you’re actually using. This eliminates guesswork and ensures you aren’t relying on IBM’s figures or assumptions. With precise data, you know exactly where you stand.
- Identify underused licenses (shelfware): By tracking deployments and consumption, SAM makes it easy to spot shelfware – licenses that are installed or purchased but not being used. These become prime targets for elimination or reduction at renewal, immediately cutting unnecessary maintenance costs.
- Highlight negotiation leverage points: SAM insights reveal where you have leverage in negotiations. For example, you might uncover rights to reduce license counts at renewal (true-down provisions) or the option to swap unused product licenses for other software. Armed with facts about your actual usage and entitlements, you can negotiate from a position of strength rather than speculation.
Read our Introduction to IBM Software Asset Management (SAM)
Pre-Renewal Preparation with SAM
The key to a favorable IBM renewal is early, data-driven preparation. Ideally, start preparing 6–12 months before the renewal date to gather insights and take action. Use your SAM system and team to drive these critical pre-renewal steps:
- Reconcile entitlements vs. usage: Begin by comparing what you’ve purchased (entitlements) against what is actually deployed and in use. A SAM tool can generate a complete inventory of IBM licenses and their current usage. This reconciliation flags any mismatch – both surplus licenses (entitlements that far exceed actual use) and potential shortfalls (usage exceeding entitlement, which could lead to a compliance issue). By knowing exactly what you have versus what you truly need, you set the stage for a leaner, more accurate renewal.
- Identify shelfware and optimization opportunities: Based on the reconciliation, pinpoint which IBM products are underutilized or unused. These unused licenses – your shelfware – are costing you maintenance fees with no business value. Plan to remove or reduce them in the renewal. Also, look for optimization opportunities: are there overlapping tools or redundant capabilities you can retire? Has a shift (e.g,. cloud migration or downsizing) reduced your need for certain licenses? SAM data might reveal, for example, that you can consolidate environments or downgrade expensive editions to save money. Every optimization identified now translates to savings or leverage during negotiations.
- Run an internal audit with ILMT/SCRT: Before IBM ever audits you, do your own compliance check. Use IBM’s official tools – the IBM License Metric Tool (ILMT) for distributed software, and the Sub-Capacity Reporting Tool (SCRT) for mainframe – to gather verified usage reports. Running these tools (and ensuring they’re properly deployed) will confirm your current consumption down to each PVU or MSU. Crucially, this internal audit flags any compliance gaps (for example, using more processor cores than you have licensed) so you can address them proactively. If you discover any over-usage, you can true-up by purchasing additional licenses or adjusting deployments before the renewal discussion, rather than facing a surprise bill from IBM. Having ILMT/SCRT data in hand also demonstrates to IBM that you have authoritative numbers, thereby disarming any attempt to inflate your usage figures.
- Establish renewal target pricing based on benchmarks: Don’t go into negotiations without a clear target. Use your SAM data and any available benchmarks to set a renewal cost goal. Analyze your current spending and project what it should be after eliminating shelfware and adding a reasonable uplift. For example, you might decide that total costs should stay flat or grow no more than 3% (instead of IBM’s typical 5–7% jump). If you have access to industry benchmarks or past deal data, leverage those to sanity-check IBM’s pricing – e.g., knowing the typical discount peers get on a product can inform what you ask for. With a target price or percentage in mind, you have a yardstick to measure IBM’s quote against. If their proposal overshoots your target, you’ll know exactly how far off it is and where to push back.
Read our IBM SAM best practices, IBM SAM Best Practices: How to Stay Compliant and Optimize IBM Licensing.
To illustrate the timing of these prep steps, here’s a rough timeline for using SAM in an IBM renewal:
| Timeline (months before renewal) | Key Preparation Actions |
|---|---|
| 9–12 months out | Inventory all IBM licenses and deployments. Reconcile entitlements vs. usage (build your SAM license position). Run ILMT/SCRT and verify accurate usage data for compliance. Identify any glaring usage issues early. |
| 6–9 months out | Identify shelfware candidates to drop. Engage stakeholders (IT, finance, procurement) with SAM findings to decide which licenses can be safely reduced or terminated. Begin gathering pricing benchmarks and formulating your target renewal budget. |
| 3–6 months out | Notify IBM of any intent to reduce or cancel licenses (respect the contract’s notice period requirements). Request IBM’s initial renewal quote. Analyze the quote using your SAM data – flag any licenses or costs that don’t align with actual needs. Refine your negotiation strategy and prepare counter-proposals using hard data. |
| 0–3 months out | Enter active negotiations with IBM. Leverage your SAM reports to justify any reductions and to push back on pricing (e.g. demand lower uplifts). Finalize the renewal agreement with agreed pricing and terms. Immediately update your SAM records with the new entitlements and any changes for ongoing tracking. |
Negotiation Strategies Using SAM Data
When it’s time to sit down with IBM, your SAM data becomes your strongest negotiating tool. You can counter IBM’s proposals with hard facts and shift the conversation from their “standard” terms to what truly fits your business.
Consider these SAM-powered negotiation strategies:
- Challenge IBM’s baseline with real usage: IBM’s initial quote will often assume you need 100% of your entitlements (or a certain high capacity). Use your SAM-collected usage facts to counter that baseline. For example, if IBM quotes support for 1,000 PVUs but your ILMT reports show only 600 PVUs in use, insist the renewal be sized to your actual need (with a buffer if necessary) – not the full 1,000. Provide IBM with your usage data to reset the baseline to reality. In short, don’t pay for software or capacity you aren’t using. Let the data speak for itself and drastically reduce the proposed renewal cost.
- Push for caps on annual uplifts: Just because IBM’s standard renewal includes a 5–7% price hike doesn’t mean you must accept it. Use industry norms and your own budget goals to push back on these increases. A proven tactic is negotiating a cap on annual increases – for instance, no more than 3% per year or tying increases to an inflation index (CPI) rather than a fixed rate of 7%. Present this as a reasonable term: your SAM analysis might show minimal growth (or even reduction) in usage, so there’s no justification for a hefty annual uplift. Locking in a low cap not only saves money over the contract term, it also gives you budget predictability.
- Leverage shelfware for swap or credit: By now, you’ve identified licenses you intend not to renew due to lack of use. IBM will be keen to retain that revenue, which gives you leverage in negotiations. Propose swapping those unused licenses for other IBM products or services that deliver more value, or ask IBM for credit equivalent to their cost that you can apply to new licenses you do need. For example, if you’re dropping an expensive analytics tool that turned out to be shelfware, negotiate to apply its maintenance fees toward expanding your WebSphere or Cloud Pak deployment. This way, IBM doesn’t “lose” the revenue and you avoid wasting budget on shelfware – a win-win. The key is to get something in return for the licenses you’re dropping, rather than simply cutting them (IBM may be more accommodating to swaps/credits than to pure cuts).
- Include BYOL, DR, and non-prod rights: Negotiation isn’t only about the price – it’s also your chance to secure more favorable usage terms. Use the renewal to negotiate valuable flexibility rights that IBM often doesn’t volunteer. For example, ensure the contract explicitly permits BYOL (Bring Your Own License) so you can bring your licenses into cloud environments (such as AWS and Azure) without incurring extra fees. Likewise, push for clear disaster recovery (DR) provisions – such as the right to deploy a passive backup instance or cold standby server without needing additional licenses – and non-production usage allowances for development/test environments at little or no cost. Gaining these concessions now can save you significant costs later (e.g., avoiding the need to purchase separate development and testing licenses or cloud subscriptions for software you already own). Bundle these asks into the renewal deal, leveraging your willingness to sign as the exchange for IBM granting these terms. They cost IBM very little, but provide significant value and cost avoidance for you.
Common Pitfalls in Renewal Management
Even with the right strategy, a few common mistakes can undermine your renewal outcome.
Watch out for these pitfalls when managing IBM license renewals:
- Letting an auto-renewal go unchallenged: Some IBM agreements will auto-renew by default, meaning if you do nothing, you’re locked into another term under the same terms (often with that built-in price uplift). Never let an IBM renewal occur “on autopilot.” Always review the renewal notice and quote, then actively opt out or renegotiate rather than rubber-stamping an auto-renewal. If you simply allow an auto-renewal to proceed without scrutiny, you’re almost certainly missing an opportunity to reduce costs or drop unused licenses.
- Missing the notice window to reduce/cancel licenses: IBM contracts typically require advance notice (commonly 30, 60, or 90 days before the renewal date) if you plan to terminate or reduce any licenses at renewal. Missing this window can cost you dearly – if you don’t notify IBM in time, you may be obligated to renew everything for another year. Your SAM and contract management processes should track these critical dates. Ensure that you formally communicate any non-renewals or reductions to IBM within the required timeframe to preserve your right to downsize. Missing a notice deadline can trap you into paying for software you intended to drop.
- Basing negotiations on outdated data: If your entitlement or usage data is outdated, your negotiation stance can be completely off-base. Imagine going into discussions thinking you have 500 users on a product when, in reality, a recent project sunset means only 300 are using it – or vice versa. Using stale data might lead you to renew far more (or less) than you actually need, or leave you exposed to compliance issues. Always refresh your SAM records and double-check your license position right before engaging with IBM. Current, accurate data is your safety net; without it, you might negotiate the wrong deal or overlook a compliance gap that IBM will later catch.
- Ignoring SAM insights on bundle deals: IBM often offers tempting bundle or Enterprise License Agreement deals with significant discounts if you renew or add products together. It’s easy to say yes without proper SAM analysis – but that’s a risky move. If you ignore your usage data, you could end up adding products that provide little real value to your organization – essentially more shelfware under the guise of a shiny discount. Always evaluate each component of a bundle against your actual needs and usage statistics to ensure optimal fit. It’s often wiser to take a slightly smaller discount on a right-sized selection of products than to pay maintenance on a “great deal” bundle that is half unused. Let the SAM data guide which bundle components are truly justified.
Checklist – SAM for Renewal Success
Before finalizing any IBM renewal, use this checklist to ensure you’ve covered all the bases. A disciplined SAM review process will help you avoid surprises and maximize savings:
- Entitlements reconciled against actual usage (license inventory vs. deployment is up to date)
- Shelfware identified and swap rights negotiated (unused licenses pinpointed and addressed in the deal)
- Renewal quote benchmarked with SAM data (costs compared against actual needs and fair market benchmarks)
- Uplift caps confirmed (≤3%) (annual increase limited by contract)
- ILMT/SCRT reports validated (internal audit confirms compliance status)
- Renewal timeline reviewed (notice periods met, no critical deadlines missed)
FAQs
Q: When should I start preparing for an IBM renewal?
A: Start your renewal prep at least 6–9 months before the contract end date. That lead time lets you fully leverage SAM insights – reconciling licenses, identifying optimization opportunities, and shaping your negotiation strategy – without the pressure of a last-minute scramble.
Q: Can SAM reduce IBM renewal costs?
A: Yes, absolutely. A strong SAM practice almost always uncovers ways to reduce renewal costs. It provides clear visibility into what you’re actually using (versus what you’re paying for), exposing shelfware and over-licensing. Armed with these facts, you can eliminate waste and negotiate a lower bill based on real needs.
Q: Are uplifts negotiable?
A: Definitely. You’re not obligated to accept IBM’s standard 5–7% annual uplift. Many customers successfully negotiate these increases down – for example, capping yearly support fee hikes at 3% or tying them to the Consumer Price Index (CPI), which measures inflation. In short, uplifts can be negotiated, and it’s wise to push for a fair cap.
Q: Can SAM help avoid auto-renewal risks?
A: Yes. SAM tools track contract details and alert you to upcoming renewal dates and notice deadlines. This ensures you won’t accidentally miss the window to renegotiate or cancel licenses before an auto-renewal kicks in. Essentially, SAM acts as an early warning system so you can review entitlements and take action well before any auto-renewal locks you in.
Q: Should SAM be linked with negotiation teams?
A: Absolutely. Your procurement or negotiation team should work hand-in-hand with the SAM team. SAM provides the data backbone for negotiations – factual reports on usage, entitlements, and costs that inform every ask. With SAM insights fueling the conversation, your negotiators have credible evidence to support discounts, reductions, and better terms during the IBM renewal discussions.
Read about our IBM Licensing Assessment Service.
