The following is an adaptation from a transcript of one of XTIVIA’s helpful webinars. The video is available at the bottom of the page, where you’ll also find a form to contact us should you have any questions or are interested to learn more! This is the first of three articles adapted from this informative conversation, so stay tuned for further updates!
Amir Shalev is an IBM go-to person with rare knowledge and unique experience. Amir makes the IBM world simple for its customers. In addition, Amir has a wide angle of IBM software business. In the past, Amir managed one of the leading IBM software distributors in Europe. After that, he founded STONS, a leading IBM business partner, which XTIVIA acquired in 2016. He is the CEO of the STONS division at XTIVIA.
Joining Amir today is Koen Din Jung. Koen Din Jung has worked in the IBM software license compliance field since 2006. He coordinated and performed over 60 IBM license-compliant reviews as a former Deloitte auditor. His responsibilities included being the main point of contact for IBM compliance managers, scheduling and staffing onsite reviews, coordinating and performing license-compliant procedures, training and guiding junior colleagues, and performing quality assurance reviews on final audit reports. He is the director of ITAA.
Recently, a lot of IBM clients have been audited. What is going on?
Amir: First of all, yes, something is going on. Usually, 20-25% of IBM customers are under audit. But recently, I spoke with my customers and prospects, and during those conversations, I learned that every other customer is under an IBM audit. So something is going on. It seems to me that IBM increased its efforts toward IBM audits, and the question is: why?
Take a look at the financials of IBM in the recent two years, quarter by quarter, and see that their traditional sales are decreasing. Furthermore, if you speak with IBM team members, reps, or post-IBM people, they will tell you also that the traditional IBM business is decreasing. So if you take all that information, you can conclude that the IBM software business is decreasing, so IBM needs to make up that deficit. And the easiest method to make it up is to perform IBM audits.
Second, audit teams have a high quota. They have targets. I spoke with many, many, many IBM reps during my career, and I never met a seller that had a quota that was higher than the quota of an IBM audit rep. And yes, I call them IBM audit reps because, from my point of view, there is no difference between a regular seller and an IBM audit person, which is a seller, like all the other sellers.
Now, you may ask yourself, “Why does IBM bother to conduct audits? Just to find a few dollars here and there?” I have a surprise for you. IBM auditing is a big business. Koen has now performed around 60 audits during his career.
Koen, what is the average payment request you saw during your involvement with an IBM audit?
Koen: I’ve dealt with a lot of audits from both sides. I originally conducted them when I was working at Deloitte on behalf of IBM, but since then, I’ve also helped a lot of customers in our defense situations. I’ve seen claims above $200 million. That’s, of course, a very strong negotiating position for IBM to start from. They use the technical findings. And, of course, these are the larger organizations, but let’s say 30, 40 million on average. That’s very common, that type of risk and 100 plus million, that’s more the larger organizations. But it’s good to keep in mind the scale of risk, which is very common.
Amir: This is a surprising view!
Koen: Yeah, it’s never a pleasant surprise.
Myth or Pitfall? “I’ve been a loyal IBM customer for years. In case there’s a problem, I will get a waiver.”
Amir: Yes, and I believe in fairytales, right? Of course, this is a myth. Okay? Your relationship with IBM is irrelevant. My grandmother once taught me that if you want to understand the map of interest, follow the money trail. As we said before, IBM audit people have targets, and their purpose is to milk the highest possible payment you can give them. And this is easy because this is not a “nice-to-have” purchase. This is a mandatory purchase because this is an audit. So how can you minimize this risk? Just perform the self-service assessment, which is a dry run without the bad surprise of an audit.
Myth or Pitfall? “We have a great software asset management team. We don’t use more IBM software than we purchased.”
Amir: This is a pitfall. I can tell you from experience that this assumption can cost you a lot, a lot, a lot of money. IBM is a complicated business, and the number of people that really, really understand IBM is very, very small. For example, IBM has several metrics that count licenses. Do you know how many metrics IBM has? If you look at the IBM price book, you will find 153 different metrics. Now you tell me, do you think that there is a software asset management person that can understand the differences between 153 metrics? Know the rules? Understand the bundles? So, as much as you think you are protected, believe me, you are not.
Stay tuned for Part 2 of IBM Audits: Myth, Pitfalls, Tips & Tricks. For any additional questions, please reach out to XTIVIA by filling out this contact form.
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