Posted by Clarence Villanueva on August 10, 2011
I’m conducting research for our sourcing clients about the right approach to take in IBM software audits. In combing through Forrester’s IBM software sourcing inquiries, I’ve found that most sourcing professionals don't realize they have a licensing problem until it's too late — and they’re struggling to get quick information and guidance.
Some of the problems are vendor-driven: Market expectations keep the IBM Software Group on a high growth trajectory, and license audits contribute to their objectives. Others are client-driven: IBM's clients should expect audits that reconcile license discrepancies but then struggle to leverage resources to remain compliant. Regardless of the underlying reasons, these audits often end up in the same place — clients who are drowning in contract administration and compliance costs and frustrated with their IBM relationship.
As part of my research on the auditing process, I’ve been interviewing some former IBM sales reps, and I’m seeing a few trends. Some of my preliminary findings indicate:
- Sales teams often don’t have control over who’s audited . . . We spoke with one former IBM sales rep who noted that sales reps don’t have much control over auditing activity. He told us the audit department creates an audit letter and a spreadsheet of clients, pushes that to the sales team, and asks them to find the audit targets. This rep indicated that the auditing team asks sales to continue to call into this exec until they agreed to the audit, at which time it’s handed back to the audit team. So your rep may not be deeply connected to the process behind your audit.
- . . . Yet sales teams are often beneficiaries of the audit process. We’d like to think of our sales reps as our trusted advisors, but one former rep told us that sales reps stand to gain some significant commissions from an audit. While there are many factors that dictate the right number of licenses for an organization, several reps told us that this high-margin business is beneficial to IBM and sales — so there’s little incentive to change it.
- Some audit risks are vendor-created. The tech market changes every day — and IBM’s acquisitions may be a reason for audits. While vendors often view these audits as a simple correction of misaligned license agreements, the impact on the client is the same. For example, after IBM’s acquisition of Cognos, an open enterprise licensing structure was replaced by new policies, and this required audits. The audit is not driven by any specific client activity yet still creates a lot of compliance issues that clients must react to.
Sound frightening? Perhaps, if you expected your sales rep was always acting in your best interest. Informative? Absolutely. Staying connected with IBM’s audit process can help you prepare for the audit process yourself — and even improve your relationships with IBM.
It’s important to note that these preliminary findings may not be representative of all situations. But as I continue my research, I’ll post other findings. In fact, that’s a key reason for this post: If you've managed an organization through an IBM audit or have an IBM negotiation story, I'd love to hear about your experience. Further research with users is needed to make sure we aren’t getting too much ex-employee bias. If you’re not comfortable posting in the comments, email me directly at firstname.lastname@example.org.