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Successful IBM ELA renewal negotiations require preparation

 

Deal option development

IBM ELA deal options are not black and white, Cho emphasized. But ClearEdge’s clients often say, “I’m going to renew my ELA for three to five years or whatever multiyear term I’m considering, or I’m not.” Sometimes there are other choices available, however. So, keep your options open as you prepare for negotiations and perform some risk assessments and forecasting.

Cho also noted that very few ClearEdge’s clients’ 30- to 36-month projects come to fruition. “And here’s the dirty little secret,” Cho added, “if you only commit to the first 18 to 24 months, there is absolutely nothing … stopping you in that second year from opening up your deal early. … IBM will be more than happy to do that, and you will likely get some concessions on your SS streams as a result.”

Price protections are also key. Your negotiation with IBM over the term of your ELA is about more than its three-year term, Cho said. It is also about the two years after your three-year term — where you can include renewal holds to guard against price variations.

“We say this all the time: Start with the parts. Know that there’s a difference between what you were entitled to (i.e., what you have receipts for when it comes to licenses) and your deployments, which is what you’re using today,” Cho elaborated. “Also, know that what you own today may not necessarily be what you will own tomorrow, next year or the year after that. Having a year-Cho also emphasized the importance of building your IBM product catalog and knowing the difference between your wish lists and projects that are confirmed, funded and have deadlines. He recommended scoping your catalog and net-new demands for the first 18 to 24 months.

Know your renewal rights, as well. Here, not-to-exceed pricing is key. He sees this in a variety of ways.

“Sometimes, much like the ELA being bottom line, we see the not-to-exceed pricing bottom line, which means that whether or not I renewed zero or 100% of my licenses, I pay the same amount,” Cho said. “Inversely, on the other side of the spectrum, we see clients with unit pricing per license, so they have a budget predictability beyond the deal for each particular tool.”

About ClearEdge Partners
Founded by senior sales executives from large IT suppliers and informed by current market analytics, ClearEdge enables CIOs and their teams to make more competitive IT investments. By combining rigorous inspection and IT financial expertise, we identify risk and opportunity, align internal teams and maintain leverage throughout the lifecycle of supplier relationships. As a result, our clients maximize the value of their investments by unlocking millions of dollars from legacy spending and redirecting funds toward IT modernization, digital and cloud transformation with confidence and speed.

 

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