Renewal vs New Purchase: Getting Discounts on IBM License Renewals
Renewals are one of IBM’s biggest revenue levers — and one of the toughest negotiation points. IBM tends to assume that existing clients will simply accept their renewal quote without much fuss.
Renewal pricing is often quoted at or near the list price, with significantly smaller discounts than those offered to new customers.
This puts loyal IBM customers in a bind: pay more to stick with what they have, or try to negotiate like a new buyer. Read our ultimate guide to IBM Renewal Negotiation: How to Fight Uplifts and Secure Better Renewal Terms.
This guide, written from the perspective of an IBM licensing and negotiation expert, breaks down IBM’s renewal pricing approach, benchmarks for fair discounts, and strategies to negotiate renewal terms that match or even beat new purchase discounts.
By understanding how IBM treats renewals versus new deals, procurement leaders and IT sourcing managers can approach renewal negotiations more strategically and save significantly on their software budgets.
Renewals don’t have to be a “loyalty tax.” Armed with the right benchmarks and strategies, you can push back and negotiate an IBM renewal that rewards your loyalty instead of exploiting it.
IBM’s Approach to Renewals
IBM typically treats renewals as “captive revenue.” In other words, once you’re an established customer, IBM assumes you won’t walk away.
This mindset means the incentive to offer generous discounts at renewal is low from IBM’s side.
It is common to see renewal discount offers in the 0–15% range, whereas new license deals for the same product might come with 25–40% off (or more) to win your business initially. IBM knows that switching to a different solution can be costly and time-consuming, so it leverages that reluctance.
Additionally, IBM often employs tactics like auto-renewal clauses or list price resets. An auto-renewal clause in your contract might automatically renew your software subscription or support at the end of the term unless you proactively cancel or renegotiate.
This can catch buyers off guard and lead to paying higher prices by default.
A list price reset means that even if you had a big discount on your original purchase, IBM might “reset” the renewal quote based on the current list price, effectively eroding your previous discount.
These practices reduce buyer leverage and can lead to unwarranted price increases if not challenged. For more on how to protect against IBM’s price uplifts at renewal, see our IBM Renewals & Price Uplift Protection guide.
Checklist:
☐ Renewal pricing vs. new license pricing compared
☐ Auto-renewal clauses reviewed
☐ IBM’s first renewal offer benchmarked against previous deals
Benchmarking Renewal Offers
How do you know if your IBM renewal quote is fair? It’s crucial to benchmark the offer against relevant data points:
- Compare to Your Past Deal: Begin by reviewing the discount you achieved in your initial purchase or last renewal. If you originally received, say, a 30% discount as a new customer, a renewal quote with only a 5% discount (or none at all) should raise red flags. Your past deal history sets a baseline for what’s reasonable.
- Cross-Check Market Discounts: Research typical discount ranges for similar IBM products currently available on the market. For instance, if new deals average around 35% off, your renewal should reflect a similar discount. Industry benchmarks or advisors can provide insight into what others are paying.
- Review IBM’s Current Promotions: Sometimes IBM runs promotions or special pricing for new customers on the very products you’re renewing. Check if IBM is advertising any limited-time deals or incentives. If new customers are being courted with 40% off, that’s valuable leverage for you to argue that your renewal deserves better than a token discount.
Insight: If your renewal discount is below 10–15%, you likely have room (and reason) to push back hard. IBM’s initial renewal quotes are often conservative. By bringing data to the table – like your original discount or competitive offers – you can challenge an unfair renewal price and set the expectation that you won’t settle for a poor deal.
Read about annual increases, CPI, and Price Uplift Clauses in IBM Agreements: How to Cap Your Renewal Costs.
Renewal vs. New Purchase Strategy
When facing a high renewal quote, it may be time to get creative and treat the situation more like a new purchase negotiation.
Consider these strategic angles to close the discount gap between a renewal and a new deal:
- Switching Angle: Sometimes, threatening to switch vendors or even to re-purchase the IBM product anew through a different channel can reset the conversation. Explore whether obtaining a quote as a “new” deal (perhaps through a different IBM reseller or business unit) could yield a better discount. IBM might offer a deeper cut to win what they perceive as new business – even if it’s essentially your renewal under a different guise.
- Leverage Competitive Alternatives: Evaluate comparable solutions from other vendors (including SaaS or cloud alternatives). If IBM believes you are considering jumping ship, they have more incentive to improve their renewal offer. Even if you intend to stick with IBM, having a credible alternative quote or a pilot with a competitor can be powerful leverage in negotiations.
- Cross-Portfolio Bundling: If you plan to purchase additional IBM products or services, bundle them with your renewal. Tying your renewal to a new purchase (such as adding more licenses or another IBM software product) can motivate IBM to grant an additional 5–10% discount across the board. In some cases, bundling multiple products into a larger deal or enterprise agreement may unlock even better rates (see our Enterprise Agreements guide for more details).
- Anticipate IBM’s Resistance: Be prepared for IBM’s reps to insist that “renewals must follow standard terms” or that your pricing is already set by policy. This is often a negotiation tactic. Don’t accept it at face value. Buyers should bring leverage and be ready to escalate if necessary to get exceptions. IBM can bend the rules when a renewal is truly at risk. By signaling that you have options and the will to pursue them, you encourage IBM to find creative ways to discount beyond the standard renewal script.
Negotiation Tips for Renewal Discounts
Securing a better renewal price from IBM requires a mix of tact, timing, and tenacity.
Here are some expert negotiation tips tailored for IBM renewals (building on concepts from our IBM Discount Negotiation page):
- Ask for Loyalty Discounts: Highlight your history and commitment as a customer. If you’ve been with IBM for years, make it clear you expect to be treated like a valued partner, not a captive buyer. Explicitly ask if there are loyalty or retention discounts available. Sometimes, just raising this point prompts IBM to improve the offer to keep a long-term client happy.
- Bundle Strategically: As mentioned, adding even a modest new purchase to your renewal can give your IBM rep something to justify a discount. It could be additional users, an upgrade, or a complementary IBM product. By increasing the deal size or scope slightly, you give IBM a reason to advocate internally for a better overall price.
- Use Timing to Your Advantage: Align your negotiation with IBM’s quarterly or annual end dates. As sales deadlines approach, reps become more eager to close deals and often more flexible on pricing. Negotiating during those crunch periods can yield better discounts.
- Escalate When Needed: If your sales representative insists, “That’s the best we can do,” consider escalating the issue. Involve a sales manager or request a pricing committee review of your proposal. Big discounts often need higher-level approval, and reps won’t seek it without customer pressure. Showing you’re willing to take the deal up the chain signals that you expect better, and it can lead to concessions a rep alone couldn’t authorize.
Checklist:
☐ Loyalty discount requested
☐ Bundling options (add-on products or licenses) explored
☐ Renewal negotiation timed with quarter-end for leverage
☐ Escalation path (management or executive review) identified
Budget Impact – Renewal at List vs. Negotiated Discount
Sticker shock at renewal time is a common occurrence. Let’s illustrate how different discount scenarios impact your budget. Suppose IBM sends you a renewal quote for $1,000,000 per year (at list price with no discount).
Here’s what you’d pay over three years under three scenarios:
Table – Renewal Scenarios
| Renewal Scenario | Annual Cost | 3-Year Cost | Savings vs. List (per year) |
|---|---|---|---|
| At List Price (0% discount) | $1,000,000 | $3,000,000 | – |
| 15% Discount on Renewal | $850,000 | $2,550,000 | $150,000 |
| 30% Discount (New Deal Level) | $700,000 | $2,100,000 | $300,000 |
In this example, negotiating even a modest 15% renewal discount would save you $150,000 in the first year alone, and $450,000 over three years.
That’s a significant budget impact — money that could be allocated to other projects. If you manage to negotiate a 30% discount (essentially getting your renewal pricing closer to a “new purchase” deal), the savings jump even higher.
The takeaway is clear: even small percentage improvements on a large IBM renewal can yield six- or seven-figure savings over the term. This is why pushing for a fair discount at renewal is well worth the effort for most enterprises.
When to start preparing for the IBM renewal: Preparing for an IBM Renewal: Timeline and Best Practices.
FAQs
Q: Can I negotiate renewal pricing on IBM SaaS subscriptions?
A: Yes, you can and should negotiate SaaS renewals. IBM’s SaaS offerings often come with auto-renewal at preset rates, but that price isn’t set in stone. Before your IBM SaaS subscription renews, engage your account rep about the pricing. Treat it like any other software renewal: gather data on how your usage has grown or the value you’re getting, and ask if there are any promotions or re-rating options. Customers have successfully negotiated better rates or added value (like extra features or services) at SaaS renewal time — but only if they ask.
Q: Will IBM ever price-match a competitor at renewal?
A: IBM won’t typically price-match a competitor’s offer, but if you show them a significantly cheaper alternative, they will often sharpen their pencil to keep your business. They want to avoid losing you. IBM might not be able to beat the competitor’s price if the gap is large, but a credible threat of switching can prompt extra discounts or incentives to close the gap.
Q: Can I reset my renewal discount by purchasing through a different reseller or channel?
A: Possibly. IBM’s pricing can differ by channel. Sometimes a reseller or IBM business partner will offer special discount pricing to win your business, even on the same product you’re renewing. Getting a quote for a “new” purchase via a reseller can create competitive pressure. Just ensure switching channels won’t disrupt your support, and remember, IBM will likely recognize you as the same customer. Even so, the threat of moving to a reseller can push IBM’s direct sales team to sharpen its offer.
Q: Is it better to negotiate a multi-year renewal for price protection?
A: A multi-year renewal can lock in better pricing and protect against yearly increases. By committing to multiple years, you might cap annual price hikes or secure a fixed discount for the term. This provides budget predictability and shields you from IBM’s typical 3–7% annual increases. The downside is that you lose some flexibility since you’re locked in for a longer period. If IBM offers significantly better pricing or protections for a multi-year commitment, it can be worth it – just ensure the contract clearly defines the price caps or limits.
Q: What discount should I target at renewal to ensure fairness?
A: Try to get a discount close to what a new customer would receive. For example, if new deals are offered at ~30% off, aiming for about 15–25% off at renewal is reasonable. At the very least, push beyond 10–15% so you’re not paying a loyalty tax for sticking with IBM. Generally, you should aim not to pay more per unit than you initially did. If you can negotiate an even better rate (due to increased volume or effective bargaining), that would be even better. The key is to ask — IBM expects many customers won’t, so by aiming high, you increase your chances of a fair deal.
Read about our IBM Negotiation Service.
