Scott Technology Attorneys

IBM Software Audit

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If you have been audited by IBM, you need experienced counsel to protect your business. Scott & Scott, LLP has a dedicated practice group focusing on defending companies accused of software license violations by IBM. Our lawyers have counseled many businesses in your situation. Our lawyers and technology professionals have the technical and legal skills necessary to vigorously fight for your interests against an IBM audit.

A typical target of an IBM audit will receive a letter from IBM demanding the business’ cooperation in disclosing the number IBM installations on its network and the number of IBM licenses it owns, including serial numbers. An outside accounting firm is frequently engaged to perform a third-party compliance review. The letter may go on to describe the audit process and request a phone conference to “kick-off” the audit.

Targets who receive letters in an IBM audit should treat the matter very seriously. It is important to know your legal rights and protect your legal position before responding to a request for an IBM audit. Additionally, companies who prepare their own responses to IBM without the benefit of counsel and before conducting a thorough investigation may receive an unexpectedly high settlement offer from IBM. We advise our IBM audit clients to ensure that internally prepared license reconciliations are protected by the attorney-client and work-product privileges if possible.

In many cases, IBM demands a settlement payment calculated at the customer’s historical discounted price for the products found to be unlicensed plus back maintenance for up to two years.

When responding to IBM audit requests, you should work with experienced counsel to thoroughly investigate the software usage on your computers, protect yourself by requesting an agreement from IBM regarding the use of the materials that will be produced in the audit, and negotiate a resolution geared toward ensuring future compliance. Our lawyers and technology professionals can guide you through every step of the IBM audit process.


Q. Why am I being audited now?

A. IBM has an aggressive auditing department and strives to audit each of its customers at some point during the professional relationship. IBM seems to prioritize certain cases where it believes that there likely is a compliance gap between what its customers own and what they have installed.

Q. The auditors are requesting an in-person meeting. Should I proceed with the meeting?

A. IBM’s auditors typically request on-site inspections as part of the process. However, in some instances, the auditors will consent to a verification process that is conducted remotely.

Q. I submitted my audit results, and IBM now is demanding that my company pays millions of dollars in licensing fees to resolve the matter. What should I do?

A. First, it is vital to carefully review the audit findings in detail. IBM's customers often do not receive all the license credit they are entitlted to, and IBM typically will agree to modify its initial demands if there is a mistake in the calucations. Sometimes, IBM’s compliance teams often do not have a complete file of all license agreements that an audited company may have signed. In many cases, the negotiated terms of a license agreement can include alternative counting rules or other variables that change the way license requirements are determined for certain products. If the auditors are unaware of those terms, then the calculated audit discrepancies likely will be inflated and erroneous.

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IBM Audit Experience

  • Defended supply chain management solution provider in an IBM audit conducted by Deloitte involving Maximo software. 
  • Represented global snack food and beverage company in audit conducted by Deloitte related to IBM datacenter software including DB2 and WebSphere.
  • Represented large healthcare management company in audit conducted by KPMG regarding IBM WebSphere software. 
  • Defended security alarm monitoring company with over one million customers in an IBM audit initiated by Deloitte involving IBM web sphere and DB2 licensing. 

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