PPA – The IBM License Time Bomb

audit

Why Indefinite Use is Limited in Time and a compliance risk

Did you believe that IBM licenses are perpetual? Isn’t any license which has no specific time frame specified in its terms and conditions assuming indefinite use? If you thought so, you are not alone, but you might be in for a surprise.

When buying licenses from IBM with metrics such as users, PVU or server numbers, there is a “gotcha” in the Passport Advantage Agreement (PPA) which most people might overlook or don’t take seriously. Btw, you likely accepted the PPA when purchasing or downloading the software or any upgrades or maintenance.

Imagine you bought one or the other IBM software products a while ago, let’s say 3-4 years ago. You used them, were sort of happy with them but decided not to renew the Subscription and Support licenses for more than 2 years. You also didn’t acquire any new IBM licensed products for whatever reasons for more than 2 years. Do you still use the products? Do you still have the products installed on any of your IT infrastructure (even if you don’t use them)?

According to the Passport Advantage Agreement (PPA) termination conditions:

If you have not placed an order for IBM Software for 24 months nor have Software Subscription and Support (S&S) or Selected Support in effect, then the PPA “will be considered to have terminated”.

In that case you agreed (in PPA) “to promptly discontinue use of and destroy all of Client’s copies of a Program upon termination of a license grant”.

What does that mean?

Theoretically, it means: You do have to order new IBM software products or S&S within less than 24 months to keep using SW licenses you already paid for. Otherwise, IBM considers this agreement to be terminated meaning you are running the software “unlicensed”, being non-compliant to your IBM SW agreements.

Some of you might quickly google the IBM license conditions and find “The “License + Software Subscription and Support 12 Months” license grants the right to: indefinitely use the specific version/release of the software obtained…” at https://www-01.ibm.com/software/passportadvantage/about_software_licensing.html#PoE.

Apart from the fact that the web site is overruled by the agreement you signed (note, that PPA does not state anything about “indefinite use”), the “License grant” on the web site also states: “IBM licenses software for use either for a fixed term or indefinitely (depending on the type of license obtained), and as long as the Licensee complies with the terms of the license agreement.” And the license agreement (PPA) states these termination terms after the 24 months.

If you thought, you could just acquire new licenses or S&S to counteract that condition, IBM added the following sentence in the latest PPA: “Once terminated, no further EPs may be acquired by any participating Client Site under the Agreement.”  (EP=Eligible Products and Services)

This would put you into a non-compliance situation as soon the termination takes effect (24 months after last purchase, or S&S expiry). Unless you have an overriding agreement with IBM, you have no rights to continue using the products and services.

IBM never mentioned this to you? If you ask your IBM sales rep about the termination clauses in the PPA, you will quickly realise they are not aware of the details. Nevertheless, the audit team will be very aware, and so should you.

First action we recommend: Take a screenshot of the IBM web site where IBM talks about “indefinite use”: https://www-01.ibm.com/software/passportadvantage/about_software_licensing.html#PoE. It might hold up even if the PPA does not repeat it.

Second action: Keep track of your SW license renewal dates and regularly upgrade.

Third action: Perform an internal SW license review. Challenge your procurement and IT operations team with questions about records of usage, proof of purchase and aligning the two of them: reconciliation.

Most importantly: Don’t think you are safe from audits because: you are too small, have too few IBM licenses, have too few servers, or have a great relationship with your IBM team. None of these are relevant for the audit teams. It is up-to you to proof you are compliant.

All IBM needs to do is check on their product and S&S purchase records, identify all companies which have not purchased anything for 2 years (and don’t have any additional agreement for a longer term), and send the audit letters out or the audit team on their way. Are you sure you are not using more than you have purchased x many years ago?

If you are not sure, if this applies to your organisation or to your specific software stack, Fisher Australia will gladly assist you with an assessment and help protect your software estate and investment. We not only support you, give you assurance and guidance, we also advise on potential savings, and help prepare for and in vendor audits. Contact our experienced IBM license experts who want to help bringing light into the license complexities and take compliance worries away from you.

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IBM, 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 and 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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