IBMs Enhancements to Passport Advantage Agreements Part 1

A Review of IBMs Latest Passport Advantage Terms and Conditions

A Review of IBMs Latest Passport Advantage Terms and Conditions

IBMs Enhancements to Passport Advantage Agreements Part 1

In the early evening of Friday the 27th of October 2017 IBM robotically distributed a change in the Passport Advantage (PPA) terms and conditions which takes effect on 1 February 2018. The enhancements were announced by email to the designated PPA contacts. In the experience of Fisher Australia these changes are often missed by the company officers responsible for reviewing legal terms and conditions.  This can have serious consequences down the track.

The new terms are outlined in document Z125-5831-10 and the revision should come as no surprise as IBM has been revising PPA on a tri-annual basis since the early 2000’s.

The letter that accompanies the actual agreement states that:

“The new Agreement has been updated to provide some additional benefits and capabilities”.  and moves on to state “…and to provide improved clarity concerning aspects of the agreement….”.

The wording could be interpreted as ominous but there are, new terms that allow more flexible contract terminations and associated prorated refunds. Whats more is that these terms are immediately available to the customer prior to 1 February 2018. The new terms are applicable to monthly and fixed term licenses and appear to be designed to enhance these licence types.

In addition, IBM has moved to clean up the support of products after they reach end of service date. Traditionally for IBM you had to be vigilant with regard to payment for subscription and support when for at least part of the term IBM had withdrawn that support and you were paying for nothing.

So good job IBM – at least so far.

There are new sub capacity terms and conditions and some new terms are Australian specific.

Over the last 15 years IBM’s changes to PPA have been mainly about sub capacity with the primary driver being the rapid adoption of hypervisory operating systems such as VMWare and Hyper-V.  No doubt the adoption of containers within Windows Server 2016 and various Unix flavors will drive further change in subsequent PPA revisions.

These new 2018 revisions don’t remove or alter IBM’s position regarding the need for the IBM Licence Metric Tool (ILMT).  They allow IBM to suspend the billing for sub-capacity in certain circumstances.

At first glance the proposition doesn’t appear unreasonable but lets delve a little deeper into the actual wording.

“IBM may declare Client’s Enterprise, or any applicable portion of Clients Enterprise, ineligible for Sub-Capacity Licensing and will provide notice of such determination….”

If your enterprise has accepted these terms you allow IBM to become judge, jury and executioner.  In this scenario the sentence might be rather draconian.

The new agreement goes on to say:

“ Client agrees to acquire sufficient additional licenses and IBM Software Subscription …..necessary for full capacity usage within the identified Client environment at then current prices”

This can have a profound effect on the share price of a listed organization if the liability was declared.

As an example you purchased 70 Processor Value Unit Licences at a price of $50K a few years ago. It runs on a 256 core server complex under VMWare and Vmotion.  The current price is $100K for 70 PVUs.  This would generate a liability of $25.5 million.  Your recurring annual subscription and support charges would be over 2 million dollars. This liability is generated despite the fact that you have years of VMWare performance records.  This is despite the fact they show the virtual machine never had access to more that one Intel cpu of 80 PVU’s.

So exactly how does IBM form the view that your organization was ineligible for sub-capacity? The answer to this question can be found within Z125-5831-10 in the following wording:

“IBM may use an independent auditor to assist with such verification….”

Z125-5831-10 does not clearly define auditor independence.

In the experience of Fisher Australia software audit issues are magnified by the lack of true auditor independence. Software vendors usually interpret independence as any party that that:

“… they have a written confidentiality agreement in with…”

the clause is silent as to other aspects of independence or training for the position.

Acceptance of these new terms appear to allow IBM to revoke your sub capacity eligibility. This is based on a report that cannot be challenged and is also subject to the term:

“Client shall have 30 days to provide IBM information sufficient for IBM to determine the client is in full compliance with the applicable Sub-Capacity requirements.”

So justice is quick if you accept IBM’s terms which many customers choose not to accept. This is because they don’t appear in some form of agreement signed many years ago. Whats more they would never agree to this unfettered exposure.

The blog in the series examines a customers possible means of acceptance and other PPA changes that are Australian specific.

If you require a copy the new IBM terms or IBM ILMT services on our all Australian cloud in order to mitigate the exposure please email contact@fisheraust.com.

We provide a truly independent assessment of your possible IBM licence exposure.

IBM and the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corp.

The content of this site represents personal interpretations by Fisher Australia’s personnel.  It does not represent any promises, guarantees nor warranties on your existing or planned IBM Software estate. It does not attempt nor replaces legal advise for your specific situation.

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