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Another year of IBM: trends, predictions and how your organization should respond

Part 1: 2021 IBM Trends

Livingstone Group recently joined the ITAM Review for the Online Summit: Software Vendor Insights 2022 to discuss year end results from some of the key vendors and what to expect from them in 2022. We focused on the trends seen from IBM in 2021 and how that will impact audits, product focus areas, licensing and more.

Knowing where IBM is coming from, and going to, will help you – and other internal stakeholders such as procurement and finance – to best understand any risks and successfully manage your relationship with IBM for another year.

You can view the full session here, but in Part 1 of the blog series, we’ll take a look at the IBM trends from 2021 and what they mean for your IBM estate going forward.

 

2021 Trends

IBM acquisitions, divestitures and partnerships

If you want to find out what IBM’s current strategy is, look at what it’s buying and selling. In terms of acquisitions, IBM has acquired the likes of Nordcloud, Rego, myInvenio, and Instana, making it clear that AI and hybrid cloud consulting have been and will continue to be key focus areas. In addition, the acquisitions of 7summits and Waeg (which expand IBM’s SalesForce capabilities), and ReaQta (security providers) highlight the focus on partnerships and security. The acquisition of Envizi in Environmental Performance Management stands out from this, but highlights that IBM still has some diverse interests, including areas like weather data.

The divestitures of Kyndryl and i2show that IBM is looking to focus on strategic areas of growth, and the divestiture of the Healthcare Data and analytics business shows the focus of IBM; the business here was growing, but not as fast as Microsoft and Google.

In the partnerships space, IBM continues to expand the Cloud for Financial Services, with other organizations globally joining Bank of America in using the industry-specific cloud. The Quantum Network is also expanding and now has over 170 partners and members. Similarly, vendor partnerships are also a focus area for growth, with announcements with the likes of SAP, Salesforce, Mulesoft, and Apptio.

 

IBM continues to innovate

In both the software and hardware space, IBM continues to drive innovation forward, and despite Samsung closing the gap, IBM remains in the top spot for having the largest number of US patents in the US, as it has for the last 26 or 27 years.

IBM’s big bets from a software perspective are hybrid cloud, AI, Quantum computing and security. In AI, things have been progressing slower than elsewhere, but they have made a number of acquisitions in that area such as Turbonomics, with a focus on IT operations. Quantum is being driven forward, at this stage still largely theoretical for software asset management in the enterprise. And of course, security is still a key focus.

The integrations with previous acquisitions are progressing, we are seeing closer integrations with Red Hat, with examples in Cloud Paks and Power Systems. The “Power Systems Private Cloud Rack Solution” for example, combines IBM hardware, software and Red Hat Software stack.

Tailored Fit Pricing on Mainframe is still being pushed, with regular changes implemented to make it more enticing for customers, such as moving to a growth-friendly pricing model.

Software and hardware such as storage is now being pushed as “Container Native”, which means that it has been designed from the ground up with containerisation in mind.

From a hardware perspective, 2021 was a big year, including the launch of Power 10 Servers along with a pilot for a new capacity-based pricing model called “Hybrid Capacity Credits”, which if successful will be pushed into the mainstream. In addition, the release of its new Mainframe processor (Telum z16) and z/OS (V2.5) will have a big impact on Enterprise IT.

There have also been new semiconductor developments with Samsung, 127 Qubit Quantum Processor, and the 2nm transistor technology. To put that achievement in perspective, the current technology used by Intel is 7nm, so quite a big development.

 

Audits

IBM audits are continuing in much the same program format, with Deloitte and KPMG carrying out audits globally, but they’ve also been expanded to cover smaller organizations who previously would not have been considered for audit activity. For larger organizations, and in one of IBM’s biggest compliance developments to date, there has been a huge push towards IBM Authorized SAM Provider Program (IASP) to meet its internal targets for roll out of the program.

When it comes to non-compliance issues, sub-capacity eligibility still takes the top spot. At Livingstone, roughly 80% of the IBM audits we’re involved in still contain some issue related to sub- capacity eligibility, such as ILMT not being deployed or reporting properly, or no-one owning and reviewing the ILMT reports. In addition, legacy operating systems such as Windows 2008 continue to add to non-compliance.

In terms of reporting, for most customers sub capacity reporting for Virtual Processor Core (VPC) is not a contractual requirement, but we expect that will change. The last release of an updated Passport Advantage agreement was in 2017, so we’re due one soon. The next iteration of the Passport Advantage Agreement is likely to include VPC and Eligible Cloud sub capacity terms, along with merging the Containerisation amendment so all customers can take apply them.

Over the past year, we have seen some customers successfully delay audits as part of agreement renewals, with IBM agreeing instead to have the customer engage an auditor to carry out a single base-line review at a time convenient to the customer, typically in Q3. In addition, organizations have also had success in limiting the scope of audits, with just sub-capacity eligibility, certain geographies, businesses, core IT or specific product sets coming under the microscope. In these cases, there have been solid justifications for these scenarios.

Settlements and reporting have seen more variation as well, depending on auditors and region. In the UK, EU and US markets, we’re seeing IBM Auditors reporting on both contractual and sub-capacity requirements (referred to as OPITMA, observed point in time minimum available), whereas in Asia Pacific reporting is still just the contractual position. And while initial settlement offers on sub capacity eligibility issues vary up to 30% of full capacity, we’ve seen this reduced with the right discussion points, and proper preparation (more on that in part 2). Its important to note that IBM are probably one of the more positive vendors to deal with for these types of scenarios.

 

IASP

The IBM Authorised SAM Provider Program (IASP) has increase in the past year. The program enables customers to engage (and pay) an approved IBM partner (of which there are currently four) to carry out a full annual base line review – this includes a full ELP covering at least 95% of products by value, plus three quarterly sub-capacity reviews. The review reports are provided to the customer, who then has an obligation to pass them on to IBM.

IBM will not audit you while an IASP is in place and may pause audit notifications or commencements if you are in discussions to enter the program. Indeed, IBM makes significant concessions on sub-capacity eligibility as part of the IASP program, there is no penalty for not having historic reports, and servers can be added to ILMT throughout the process, which has been a primary driver for IBM customers moving to IASP. We have also seen examples of more lenience for issues relating to legacy technology, and a softer approach from IBM to some types of non-compliance and in-error deployments. From a contractual view, one benefit of having been in the IASP program is that when it comes to renewal, the risk or threat of an audit is no longer on the table. Everyone will know exactly what software is deployed, leading to an open and transparent discussion based on the future, not the past.

However, it’s important to keep in mind that the continual reporting process effectively means you are paying to get audited on a regular basis, and paying for the pleasure. IASP reports must be provided quarterly, meaning IBM has a constant overview of your estate, a process that increases the odds of exposing additional risks, such as any over-deployment or ineligible technology. IASP also isn’t open to everyone, its on an invite basis, not everyone is eligible. In many cases, if you are in control of your licensing and understand your position, it probably won’t be the right fit, and for small-midmarket organizations, the continual oversight process just doesn’t make sense.

But despite these challenges, IASP certainly forces organizations to get their IBM estates in shape, and ensure they thoroughly know and understand their IBM deployments.

 

Cloud Paks

Cloud Paks have continued to evolve. Automation has split into Network and Business; Data has been rebranded to “Modernization” (although there is not a huge difference in actual product); and Watson AIOps has been added whereas Multicloud Management has been dropped. 

With these ongoing changes in mind, if you’re thinking of migrating to Cloud Paks, there are a few things to keep in mind – do you have plans for modernization, containers or significant migrations? Can the new functionality of Cloud Paks assist with these plans? Since Cloud Paks means you can re-use licensing and reduce the number of new licenses you’ll require, would it be a more efficient licensing method for your usage?

Remember that Cloud Paks might not be the right fit for your IBM requirements now, but you also need to consider what your future plans look like, as you might find you want to migrate sooner than you think.

 

Keep an eye out for Part 2 of our ITAM Review IBM blog series where we’ll take a look at 2022 predictions and how your organization can respond to current and future IBM developments. To find out more about how Livingstone can help with your IBM needs click on the contact us tab on the right hand side of this page.

 

ABOUT THE AUTHOR

Niall Eddery – Senior Consultant, IBM Practice Lead

Niall has worked in the IT industry for over 26 years and more specifically in Software Licensing for 16. His experience has taken him on both sides of the audit fence, having audited for KMPG and managed IT assets for EY and Macquarie Bank at a global level.

Niall has been a senior consultant at Livingstone for over 7 years, during which time has managed well over 100 audit projects.  His expertise is around IT Asset Management, Software Asset Management & Licensing and he has been involved in contract compliance for software licensing, royalty, service level agreements and channel compliance in the UK, Australia, Europe and Asia Pacific.

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