LicenseFortress Pushes Back Against a $46M IBM Compliance Claim and Wins

Executive Summary

An existing customer, facing a $46 million IBM license compliance claim, the enterprise software provider’s IT procurement lead turns to LicenseFortress for help. What began as a seemingly insurmountable licensing issue was ultimately reduced to a settlement under $100,000. With minimal internal records, missing personnel, and a third-party audit report riddled with inaccuracies, the organization relied on LicenseFortress to reconstruct its licensing history, correct the record, and defend its position. The result: a 99.8% risk reduction and a 45,900% return on investment from the $100,000 engagement.

Challenges

Facing a $46M IBM License Compliance Claim with Flawed Audit Data

The initial draft report from a third-party auditor—acting on behalf of IBM—painted a dire picture: a $46 million shortfall in IBM licensing. The third-party auditor claimed the company had deployed numerous products without entitlements in its Effective License Position (ELP) report. They applied full-capacity licensing to servers that qualified for sub-capacity licensing and included inactive, duplicate, and system accounts in their user-based licensing calculations.

Worse still, much of the company’s institutional knowledge had walked out the door in prior years. The internal team couldn’t easily reach the people or locate the documentation needed to clarify what was in place, why it was there, and how it was licensed. The report’s errors—though obvious to someone fluent in IBM licensing—were not minor. They were systematic and wide-reaching, putting the entire organization at serious financial risk.

Key Challenges:

• $46 million alleged license shortfall
• Inaccurate entitlement matching and metric selection
• Limited internal knowledge due to staff turnover
• Pressure from IBM to resolve findings based on flawed data

The IT procurement lead knew they needed help. After reviewing the report, they engaged LicenseFortress to take a deeper look.

The Solution

How LicenseFortress Reversed a Faulty IBM Audit with Licensing Precision and Sub-Capacity Expertise

LicenseFortress quickly identified that the third-party auditor’s report did not reflect the true deployment picture or the company’s licensing position. The first task was to push back on the ELP before it sharing it with IBM. LicenseFortress worked closely with the client’s technical resources to identify and document errors in the audit assumptions.

One of the most critical issues was the third-party auditor’s disregard for sub-capacity licensing eligibility. LicenseFortress provided evidence that the servers in question met IBM’s requirements, countering assumptions based on outdated ILMT interpretations and operating system requirements.

The team also matched dozens of software deployments to entitlements the auditor had failed to consider, highlighting how the auditor had not fully reconciled license purchase history with installations. Bundled software was misclassified as standalone. Storage systems were overcounted without proper review of their licensing mechanisms. For user-based products like DB2 and Cognos, they had included accounts for former employees, shared accounts, and users with no access to the software.

Perhaps most impressively, the team completed much of this work from scratch—without support from legacy staff or access to detailed internal notes. LicenseFortress reverse-engineered entitlements, guided the internal team through the collection of technical data, and crafted strong rebuttals grounded in IBM licensing terms and practical precedent.

Solution Highlights:

• Reconstructed entitlement-to-deployment mapping
• Validated sub-capacity eligibility with ILMT data and OS timelines
• Reduced inflated user licensing figures
• Challenged the third-party auditor’s assumptions with licensing precedent
• Guided the client through technical and legal rebuttals

The Results

From $46 Million to Under $100K: LicenseFortress Achieves 45,900% ROI in IBM Audit Defense

After months of back and forth, the third-party auditor issued a final version of the ELP that reflected the company’s true position. Only one area remained outstanding—a previously acknowledged and expected shortfall in storage licensing. That cost is now under $100,000, based on IBM’s final pricing.

A case that began with a $46 million risk will close for a fraction of that amount.

Even more critically, the company avoided entering negotiations with IBM based on inaccurate data. They asserted control over the process, retained credibility, and protected their bottom line.

• ROI: 45,900%
• Cost of Engagement: $100,000
• Final Exposure: < $100,000

Why It Matters

This case goes beyond a successful audit defense—it reveals broader problems in the software licensing world, especially when vendor-aligned firms take control of the audit process. The company’s experience shows the risks organizations face when audit partners, like the one working on behalf of IBM, create compliance reports based on flawed assumptions, rushed timelines, and a clear bias toward revenue generation over accuracy.

IBM license audits are rarely impartial. The third-party auditor’s report included fundamental licensing misapplications—such as using full-capacity licensing when sub-capacity eligibility clearly applied—and inflated exposure with questionable user and storage calculations. These tactics are not unique to this case. They follow a pattern that many IBM customers have encountered:

• ILMT weaponization: Minor technical issues with IBM’s own sub-capacity reporting tool are frequently used to justify full-capacity licensing, even when organizations meet the intent and letter of IBM’s rules.
• Assumption-driven compliance gaps: Rather than working from validated usage data, audit firms often rely on generic scripts and inventory outputs that misidentify products or misclassify them as licensable.
• Pressure to accept flawed findings: Audit timelines are compressed. Reports are shared with IBM even before customers have had the chance to correct errors. This creates an environment designed to rush settlement rather than reach a fair conclusion.

The organization in this case had the foresight to push back—and the expertise of LicenseFortress to support them. But many companies don’t realize they can challenge these audits until it’s too late.

Key Takeaways:

• Don’t assume a vendor-led audit is neutral—there’s almost always a commercial agenda behind the findings.
• ILMT imperfections are common and do not automatically disqualify sub-capacity eligibility.
• It’s possible—and often necessary—to dispute audit assumptions before they’re used to negotiate settlements.
• Expert licensing, legal, and technical support can turn the tide in even the most intimidating audits.

LicenseFortress not only dismantled the inflated claims in this case—they empowered the organization to control the narrative, minimize disruption, and resolve the matter on its terms.

At a Glance