United States: IBM Introduces Sub-Capacity Licensing Benefits For z/VM Version 6

On July 17, 2017, IBM announced that it would allow customers running z/VM Version 6, Release 3 or higher to license the product on a sub-capacity basis. Under the sub-capacity licensing arrangement, IBM customers can purchase licenses for a fraction of the full machine capacity, which can often reduce costs and increase flexibility. However, companies should tread carefully before taking advantage of sub-capacity licensing rules because many customers learn during an IBM audit that they did not take all the steps necessary to qualify for sub-capacity licensing.

IBM's default license requirement is that customers must license the full physical capacity of the machines on which the IBM product is installed. For z/VM, full-capacity licensing requires:

  • If the program is used on any Central Processors ("CP") on a machine, it must be licensed on all the CPs on that machine.
  • If the program is used on any Integrated Facility for Linux engines ("IFL") on a machine, it must be licensed on all the IFLs on that machine.
  • If the program is used only on CPs you do not count the number of IFLs.
  • If the program is used only on IFLs you do not count the number of CPs.

To qualify for sub-capacity licensing, which in essence is an exception to the default IBM license rules, customers have to satisfy all of the requirements. The requirement that seems to give customers the most difficulty is the requirement that the customers install and configure the IBM License Metric Tool ("ILMT").

Initially, many customers are not aware that they are required to install ILMT. It is imperative to ensure that the company's IBM contact is always updated. IBM frequently sends license updates via e-mail to the customer representative IBM has on file. If the named representative no longer works for the company, or otherwise fails to recognize the significance of the notification from IBM, customers can find themselves with surprising new licensing obligations.

Even the customers who are aware of the ILMT requirement may have difficulty qualifying for sub-capacity licensing. Some customers experience difficulty installing the product on their infrastructure. Additionally, there are sometimes limited third-party resources available to assist with troubleshooting an ILMT implementation. IBM customers should remember that if they cannot get ILMT properly installed and running in their environment, they cannot qualify for sub-capacity licensing. Once ILMT is installed, to use ILMT to track licensing for z/VM, the customer must install and configure a z/VM Hypervisor Proxy in each logical partition ("LPAR").

The customers' obligations do not stop when ILMT and the z/VM Hypervisor Proxy are installed. Depending on a customer's license agreement, the customer must run an ILMT report either monthly or quarterly. Upon request, usually during an IBM software audit, the customer must produce the reports to IBM. For larger environments, it can take several days to run ILMT reports for the full environment.

Customers should also validate that the information on the ILMT report is correct. Customers have reported a variety of challenges with their ILMT reporting, including that the ILMT reports incorrectly calculate the number of sub-capacity licenses needed for certain environments. Because the ILMT report will be the official data IBM's auditors will use in a software license review, it is critical for the data to be correct, especially when it comes to calculating the sub-capacity license numbers.

To qualify for sub-capacity pricing and licensing, customers must also agree to the z/VM sub-capacity terms and conditions in the IBM Attachment for z/VM Sub-Capacity Pricing. Additional requirements include:

  • Client must be running z/VM V6.3 or later
  • Product must be installed on a supported IBM Z or LinuxONE server; and
  • Client must have a valid license to z/VM programs eligible for sub-capacity installed on that server that has implemented sub-capacity pricing.

Once ILMT is installed and correctly reporting the sub-capacity license requirements, customers must review each monthly (or quarterly) report. If the report indicates that the customer does not own a sufficient quantity of sub-capacity licenses, the customer must immediately place an order for the required additional licenses. Failure to correct any reporting errors can result in unexpected demands for licensing fees during an IBM software license review.

During an audit, the third party that IBM selects to conduct the audit will initially ask the customer if it has ILMT installed. If the customer reports that it does have ILMT installed, the auditors will ask for the ILMT reports for a period of time, often for the prior two years. For this reason, customers should always keep information about when they deployed systems in the environment to combat any allegations during a software license review that ILMT was not properly installed in the environment.

If a customer has IBM installed and running on machines that have ILMT but the customer does not have the required periodic reports, the auditors will assume that full-capacity licenses are required for the time period where IBM was installed without ILMT unless the customer can demonstrate that the installation occurred contemporaneously with the ILMT installation.

With very few exceptions, if the customer does not have ILMT installed, that customer will not contractually qualify for sub-capacity licensing for z/VM. Customers who cannot get ILMT installed in their environment or who cannot get ILMT to report correctly will not qualify for sub-capacity licensing and must continue to license the environment on a full-capacity basis.

Those customers who qualify for sub-capacity licensing are still not out of the woods. Licensing on a sub-capacity basis can be complicated. IBM provided a few examples of use cases at https://www-03.ibm.com/systems/z/resources/swprice/subcap/zvm.html. The examples show that licensing is often complex and that customers can easily misunderstand the rules to counting.

When customers fail to understand the requirements for sub-capacity licenses the consequences can be severe. During IBM software audits, a high percentage of customers who believed they were able to avail themselves of the benefits of sub-capacity licenses learn that they have not completed all the requirements. Those customers must then unexpectedly license the full capacity of the machines, which increases the costs of the projects significantly.

IBM customers should carefully review the environments in which they believe they are entitled to use sub-capacity licenses. Then, customers should ensure that ILMT is installed and reporting correctly to reduce the risk that a software license review will result in significant unplanned licensing costs when the company is forced to license the full capacity of the systems using z/VM.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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