W H I T E PA P E R

Managing IBM
License Complexity

Managing IBM License Complexity

Managing IBM License Complexity

Many organizations use IBM software products to manage
critical aspects of their business. In mid-sized to enterprise
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portion of their overall software estate where licensing
needs to be carefully managed to optimize spend.
As one of the worlds largest software companies, IBM
provides thousands of products in its portfolio and uses a
variety of license models, contract terms and conditions.
These license models can be very complex, causing frequent
confusion for organizations trying to grasp the concepts
while maintaining license compliance. Even within IBM,
there are experts who understand their software licensing
policies, while the general population does not. In fact,
the IBM sales team uses automated calculators to
determine software licensing as they put deals together
for their customers.
To understand IBM licensing, do you need to be a
mathematical genius like Albert Einstein? The answer
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incomprehensible, some education on the license models
and licensing scenarios will help minimize the confusion.
In addition, a more automated approach to managing
licenses enables organizations to gain control,
reduce ongoing software costs and minimize license
liability risks.

Challenges
What are some of the challenges associated with IBM
software licensing? To begin, IBM installation media are
delivered with no constraint on the number of installations.
In other words, IBM customers can download software
without restrictions as there are no embedded software
keys preventing installations. As a result, in distributed
environments, installations of software covered under the
same license may proliferate and bring an organization out
of compliance.
A second challenge is that IBM uses multiple contractual
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use rights. These documents include the IBM Customer
Agreement (ICA), International Product License Agreement
(IPLA), International Passport Advantage Agreement
(IPAA), License Information (LI) documents, and Software
Announcement Letters. Each of these documents carries
their own set of terms and conditions which sometimes
creates confusion on license rights. Some policies such
as backup and disaster recovery license rights are often
not detailed in any of the above agreements, but are
described on the IBM website, which can change at any
time. It is important to monitor the IBM website regularly to
maintain awareness of any changes that will impact license
compliance. When possible, organizations should capture
important policies like these in their contracts to safeguard

Managing IBM License Complexity

against the risk of expensive changes. Many enterprises

negotiate these potentially volatile policies as addendums
to the executed agreements so they only change through
bilateral agreement.
A third challenge is the variety of products and license
models. IBM products are grouped into the following
categories: Infrastructure Software, Operating Systems,
Development Tools, Databases, Middleware and
Network/Systems Management. The leading brands in
these categories are AIX, Websphere, DB2, Lotus, Tivoli,
Rational and Cognos. The various license models include:
Authorized User, User Value Units, Processor Value Units,
and Resource Value Units. The wide variety of license
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arms around the licensing.
Another challenge for long-term IBM customers is that
they tend to struggle with shelfware, or software they
have purchased that is not being used but is sitting on the
shelf. This is due to Enterprise License Agreements (ELAs)
they have signed with IBM, or multi-year, all you can eat
contracts that provide the end-user with access to numerous
products and the ability to substitute one for another.
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software entitlements they have purchased, thus creating
a shelfware problem.
Finally, IBM frequently audits its customers and it is
important for organizations to be prepared. Audits provide
a software vendor with the opportunity to uncover lowhanging fruit, or non-compliance situations that generate
easy revenue. Recent industry analyst research indicates
that IBM is among the top 10 companies most likely to
request an audit. IBM customers need to fully comprehend
licensing policies and know their actual state of deployment
and compliance prior to the commencement of an audit.
Doing so can eliminate or at least reduce the probability
of an audit before it happens.

IBM License Models

Lets examine the most common license models, which
IBM separates into 3 categories: User-based, Capacitybased and other licensing.
User-Based Licensing
User-based licensing is one of the most common IBM license
types for both its desktop and server software and aligns
to the number of unique individuals given access to an
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Authorized User
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given access to an application. Much like other major
vendors with server based access, especially by thin or
web client, it can be very challenging to determine all the
end-users that need a license.

Concurrent User
A Concurrent User accesses an application at the same
time as other users, up to the number of concurrent licenses
purchased. Each Concurrent User may simultaneously access
the software multiple times (i.e. using different Installs)
under a single license. Typically, the software may be
installed on any number of machines for use by those users.
Floating User
Each Floating User may only access a single install of the
program at any given time under a single license. The
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Like with Concurrent User licenses, typically there is no
restriction on the number of times an application may be
installed to support licensed users. An organization might
choose the Floating User license type when the number of
active users at any given time is a fraction of the number
of total users. Many Rational products, for example, offer a
choice between Floating and Authorized User.
User Value Unit (UVU)
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program are converted to the required number of point-like
UVU entitlements per IBMs UVU tables and methods, which
vary substantially from product to product.
Capacity-Based Licensing
Capacity-based licensing aligns to the available hardware
resources (processor cores, memory, etc.) on the machines
where a software program is installed or on the machines
that the program manages. There are several types:
Processor Value Unit (PVU)
A processor, or central processing unit (CPU), is the logic
circuitry that processes the basic instructions that drive
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purpose of PVU-based licensing, to be each core on a
processor chip. With PVU licensing, the required value
unitswhich vary by processor technology (vendor,
brand, type and model number) per the IBM PVU table,
are calculated for each activated processor core that is
available to the software program.
Server Based License
An IBM server license is required for each server that is
available to the software program, regardless of the number
of processor cores or partitions in the server or the number
of copies of the program on the server.
Virtual Server
A virtual server is generally a virtual machine created
through either hard or soft partitioning, but can also be an
unpartitioned physical server. An IBM virtual server license
is required for each virtual server made available to the
software program, regardless of the number of processor
cores or installs on the server.

Managing IBM License Complexity

PVU Full Capacity and Sub-capacity Licensing

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capacity and Sub-capacity (aka Virtualization capacity).
For Full-capacity licensing, organizations must obtain PVU
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in the physical hardware environment where the software
program is installed, including other partitions on a server
even if they are not also being used to run the application.
Simply put, organizations must license the full capacity of
the physical server or group of servers. For Sub-capacity
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to cover only those activated processor cores available to
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where that software is installed. IBM customers are
licensed for the lower of Full-capacity or Sub-capacity of an
individual server or cluster and IBM offers these options to
help their customers drive down licensing costs.
One issue with Sub-capacity licensing is that it is easy to
spiral out of compliance due to the movement of virtual
machines within and between server groups. Virtual
environments tend to change frequently, making it critical
to track movement to maintain an understanding of
the organizations license position and make licensing
adjustments as necessary.
Generally speaking, many IBM products can be licensed as
User-based or Capacity-based. If the product has a server
component, it will commonly be licensed as Capacity-based

Applicat ion
Server

Managed
Server

Managed
Server

and if the product has only client components, then it will

usually be User-based. Oftentimes, however, products
contain both server and client components and IBM gives
organizations the option to license some products either
with Capacity-based or User-based metrics.
Other Licensing
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referencing Client Device and Resource Value Units (RVU).
Client Device
A Client Device is essentially a single user computer. It may
also feed data to another system, whether a traditional
server or not, like an appliance, kiosk, or sensor. An IBM
Client Device license is required for every Client Device
which runs, provides data to, uses services provided by, or
otherwise accesses the software. .
Resource Value Units (RVU)
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resource (e.g. the amount of memory in the system) used
or managed by the application. RVUs are counted in
a tiered fashion much like UVUs, and the tiered RVU
tables and counting methods vary just as much. With
RVU licensing, organizations can make changes in virtual
environments with less impact on licensing than with the
PVU model, since the RVU metric is not usually a function
of the hardware characteristics of the machine(s) where the
application is installed and running, unlike PVUs.

For PVU t he capacity

of t his server is used
as t he metric

Managed
Server

Applicat ion
Server

Managed
Server

Managed
Server

Managed
Server

For RVU, t he HW propert ies of t hese

managed servers impact t he license

Managing IBM License Complexity

PVU vs. RVU License Models

Managing IBM License Complexity

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number of users is calculated at a ratio of 15:1. Lets
say your organization consists of 50,000 internal users
and 105, 000 external users. Using the 15:1 ratio
calculation, external users become 7,000 chargeable
users (105,000/15). So, altogether, there are 57,000
chargeable users in this example.

IBM Licensing Scenarios

To further illustrate IBM licensing calculations, lets
examine examples of both User-based and PVU
Full-capacity license models.
Example #1UVUs:
Your organization is designing a company intranet and
requires Tivoli Security to manage the authentication and
authorization of users. How do you determine accurate
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authorized users. Then you need to separate them into
internal users as well as infrequent or external users.

The next step is to calculate the UVUs required using IBMs

UVU table. Each tier has a number of chargeable users
which is multiplied by the respective factor.

Tiers

Users

Factor

Users in
Tier

Total UVUs Cumulat ive

in Tier
UVUs

250-5K

1.0

5K

5K

5K

5K-15K

0.5

10K

5K

10K

15K-50K

0.3

35K

10.5K

20.5K

50K-150K 0.2

7K

1.4K

21.9K

UVU Calculation
Tier 1 (250-5K):
5,000 chargeable users x 1.0 tier factor = 5,000 UVUs
Tier 2 (5K-15K):
10,000 chargeable users x 0.5 tier factor = 5,000 UVUs
Tier 3 (15K-50K):
35,000 chargeable users x 0.3 tier factor = 10,500 UVUs
Tier 4 (50K-150K):
Only 7,000 chargeable users left x 0.2 tier factor = 1,400 UVUs
Total UVUs for 57,000 Chargeable Users:
5,000 UVUs (tier 1) + 5,000 UVUs (tier 2) + 10,500 UVUs (tier 3) + 1,400 UVUs (tier 4) =
21,900 UVUs

Note however, that some products licensed by UVU do not

follow the example above. For example, InfoSphere Content
Collector requires the purchase of separate entitlements
for Authorized, External and Employee UVUs. This is a
common theme in IBM licensing; there are many important

variations to the main licensing models that must be taken

into account. This is where a next generation license
management tool, that has built-in knowledge of these
license entitlement details, can really help organizations
gain control of complex license models.

Managing IBM License Complexity

Example #2PVUs:
To execute the company intranet, your organization needs
to run Websphere Application Server (WAS). When an
employee navigates to the company intranet and clicks on
the link, this request is processed by WAS. In this scenario,
how do you determine accurate licensing for WAS?

WAS can be licensed as either Full or Sub-capacity.

With the Full-capacity model, you must acquire licenses
for all physical processor cores in the server where WAS
is installed.

Full Capacity Licensing

Server 1

MQ
WAS
8 Physical Cores
Applicat ion

# of Cores
to License

MQ

WAS

IBM Full-capacity Licensing Example

Suppose you are running WAS on an IBM Pseries
POWER770 and need to determine Full-capacity licensing.
First, you determine the number of PVUs per core per IBMs
PVU table (see excerpt below). Lets say the POWER770 has

16 cores and there are 120 PVUs per core. To calculate the
cost, multiply the number of cores by the number of PVUs
and the cost per PVU, as follows:

# of Cores

# of PVUs

Cost per PVU

16

120

$49

Calculation: 16 cores x 120 PVUs per core x $49 per PVU = $94,080

Managing IBM License Complexity

Processor Technologies
Processor Brand

>4

All

120

All

100

All

70

16-Core (16)

Oct i-Core (8)

PS700-703,
710-740

Hexa-Core (6)

POWER74 750, 755,

PS704

Quad Core (4)

770, 780, 795

Cores per socket

IFL Engine

PVUs
per
Core

Maximum
number of
sockets
per server

Dual-Core (2)

IBM

Proc.
Model
Number

Server
model
numbers

One-Core (1)

Processor Processor
Vendor
Name

Processor Type

PVU Table Excerpt

If you are using server virtualization technology and have
virtual machines or hardware partitions, then Sub-capacity
licensing can be more cost effective. In this scenario, you
would license WAS for the number of virtual cores that

are allocated to the virtual machine or hardware partition

running the WAS software, as shown in the graphic on the
next column.

Sub-Capacity Licensing
Server 1

PAR 1
MQ
WAS

PAR 2
MQ

4 Virtual Cores 4 Virtual Cores

8 Physical Cores
Applicat ion

# of Cores
to License

MQ

4+4 = 8

WAS

IBM Sub-capacity Licensing Example

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machines and other sub-capacity technologies dynamically
adjust to use more or different processor cores under
certain conditions. IBM tends to take the high water
mark and license for the upper level, asking what is the
highest number of PVUs required for this product at any
point in time.

As you can see, each licensing example resembles a math

word problem or brain teaser from our former school days.
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apply the license model, followed by the actual calculation
to arrive at the solution.

Managing IBM License Complexity

IBM License Metric Tool

To assist with managing Full and Sub-capacity licensing
terms, IBM provides the IBM License Metric Tool (ILMT)
which is recommended for IBM Passport Advantage
customers that are using Full-capacity licensing and
mandatory for Sub-capacity PVU licensing in environments
of more than 1,000 employees that are not using Tivoli
Asset Discovery for Distributed (TAD4d) . Customers are
required to generate quarterly ILMT reports and keep them
for a period of two years. These reports must be provided if
IBM conducts an audit.
If organizations are using ILMT, what else do they need?
Simply put, ILMT is a no-charge tool that helps maintain a
continuously updated inventory of the computers where IBM
Passport Advantage PVU-based software assets are installed
on a network. It is not a license management solution
because it does none of the following:
(a) Optimize license consumption based on entitlements, or
help reduce software spend,
(b) Inventory or manage the multitude of non-PVU-licensed
IBM software products or other software vendors
products, and

(c) Manage or report on contracts, users and payment

schedules. A complete, optimized software license
management solution does all of these things across a
wide range of software publishers, license models and
agreements, for hundreds of thousands of applications.
However, optimized license management solutions are
not standalone systems. Ideally, these solutions leverage
existing tools and infrastructure to collect the data required
to manage the software estate. They should be able to
import inventory data from sources such as ILMT and
connect to procurement systems for purchase order data, HR
systems and/or Active Directory for user and organizational
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information. ILMT and other inventory tools are necessary
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optimized license management program that can help
reduce software license and maintenance costs while
maintaining continuous license compliance.

Introducing FlexNet Manager for IBM

There is a solution that automates IBM license management
and helps organizations handle its complexity. FlexNet
Manager for IBM enables the reduction of license,
maintenance and audit costs for IBM desktop and server
software while maintaining license compliance.

ILMT

ILMT Connector

Auto-create Licenses
!Link all application
versions (from ARL)

ILMT Inventory

Software
!Limited hardware
!Sub-capacity calculations

Virtual Host
LPAR

.ndl
Full hardware
!Full software
!LPARs & Pools

Server

FlexNet Manager and ILMT Integration

LPAR

LPAR

Managing IBM License Complexity

Key Features
FlexNet Manager for IBM is built on the FlexNet Manager
Platform which is a state-of-the-art discovery, inventory and
license management solution covering more than 100,000
applications from 11,000 vendors. FlexNet Manager
for IBM automates purchased versus installed license
reconciliation of IBM applications, including Cognos,
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Application Server (WAS), and many more. Its Product Use
Rights Library for IBM includes entitlement information to
optimize IBM license management.
FlexNet Manager for IBM currently handles the following
IBM license types: PVU, Authorized User, Floating User,
User Value Unit (UVU), Resource Value Unit (RVU), and
Concurrent User. It can use ILMT as an inventory source
to provide information on hardware allocations to virtual
machines and hardware partitions, as well as detailed
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It supports both Full and Sub-capacity PVU licensing as
described above.
The FlexNet Manager for IBM License Simulation tool allows
for what if analysis to see the impact of changes to the IT
environment on an organizations IBM license position. For
example, it shows how sub-capacity license requirements
will change when applications or virtual machines are
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allows organizations to proactively assess changes to
reduce licensing cost and compliance risk.

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Reduced risks Minimize the risk of an IBM software audit,

unbudgeted true-up fees, penalties, litigation and brand
damage, by ensuring proper licensing of all software in use.
Rapid ROI Leverage existing IT systems as part of a
total FlexNet Manager Suite solution. FlexNet Manager
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software cost savings.
In summary, gain control of IBM license complexity
by understanding the license models, communicating
license terms and conditions to key stakeholders
throughout the organization, and be aware that virtual
environments need to be carefully monitored to manage
license compliance risk. Finally, utilize solutions such as
FlexNet Manager for IBM to automate and optimize IBM
software license management.

About Flexera Software

Flexera Software is the leading provider of strategic
solutions for Application Usage Management; solutions
delivering continuous compliance, optimized usage and
maximized value to application producers and their
customers. Flexera Software is trusted by more than
80,000 customers that depend on our comprehensive
solutions- from installation and licensing, entitlement
and compliance management to application readiness
and enterprise license optimization - to strategically
manage application usage and achieve breakthrough
results realized only through the systems-level approach
we provide. For more information, please go to:
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FlexNet Manager for IBM helps organizations gain control

of IBM software assets by automating license management,
reducing license liability risk, controlling license and
maintenance costs, and managing IBM license complexity.
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Improved negotiations with IBM Negotiate software
contracts with detailed knowledge of the organizations IBM
license position, application usage and payments. Better
plan purchases and upgrades to maximize discounts.
Reduced license costs Apply product use rights to
minimize license consumption and reduce true-up costs.
Automatically recycle unused licenses in the environment
to defer new license purchases. Buy only the licenses that
you need.
Reduced maintenance costs Optimize maintenance
payments based on actual software usage, where possible.
Ensure that the organization is not over-spending on
the multi-million dollar maintenance contracts that are
associated with high-value software licenses.

Flexera Software LLC

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(Global Headquarters):


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Middle East Headquarters):



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