The Challenge
A Madrid-based professional services firm with approximately 1,400 employees—delivering management consulting, IT services, and business process outsourcing across Spain and Latin America—had standardised on IBM WebSphere Application Server and IBM Db2 across its delivery platforms. The infrastructure had been managed responsibly for years, with proper licensing documentation and compliance oversight.
In late 2025, the firm won a large regional outsourcing contract that required rapid expansion of compute capacity. The new WebSphere deployment was provisioned within weeks at a shared-services data centre in Madrid and a delivery centre in Bogotá, Colombia. The speed of deployment and the geographic split across two countries meant ILMT (IBM License Metric Tool) coverage was not established immediately on the new infrastructure. The firm's IT operations team had planned to implement monitoring retroactively, but IBM initiated a Software Asset Management review before they could do so.
IBM's audit identified undocumented WebSphere instances in Madrid and Bogotá that fell outside the firm's existing licensing agreements. The vendor calculated a claim of €2.9M, centred on:
- €1.6M from the Bogotá deployment, treated as a standalone acquisition
- €1.3M from additional Madrid instances, levied as incremental usage
IBM also applied its cross-geography Passport Advantage interpretation, arguing that the firm's existing Passport Advantage agreement—which covered Madrid operations—could not be extended to Latin America without a new contract and additional fees. The firm's leadership faced either a large financial settlement or a prolonged negotiation with IBM, with no clear path to resolution.
The Approach
Redress was engaged to defend the firm against the claim. Our strategy centred on three concurrent workstreams: rapid ILMT deployment, contract interpretation, and infrastructure reclassification.
Retroactive ILMT Deployment
Redress worked with the firm's IT operations team to deploy ILMT across both Madrid and Bogotá within four weeks. This was challenging because ILMT had to be installed on production systems carrying live client workloads with zero downtime tolerance. We coordinated with the firm's system administrators to stage deployment during low-demand windows and validated each installation thoroughly before moving to the next environment.
ILMT generated complete usage history for the new WebSphere instances, providing empirical data on actual resource consumption, uptime patterns, and licence utilisation across the 12-month period preceding the audit. This retroactive data proved critical: it showed that the firm's actual usage patterns differed substantially from IBM's assumptions and that the infrastructure had been deployed incrementally, not as a single large purchase event.
Passport Advantage Reclassification
IBM's position that the Colombia deployment could not be covered by the existing Passport Advantage agreement hinged on a restrictive geographic interpretation. Redress challenged this by examining the firm's operational structure: the Madrid headquarters provided central IT services and infrastructure management to the Bogotá delivery centre. The Colombia WebSphere infrastructure was not a separate business entity—it was part of the same global IT organisation, with Madrid acting as the control centre.
Under this interpretation, the Bogotá deployment qualified as part of the existing Passport Advantage agreement, not as a new geography requiring a separate contract. The existing agreement's terms, which had been negotiated two years prior, explicitly allowed for expansion to support group operations. Redress presented this argument to IBM's licensing team and engaged a legal advisor to reinforce the contractual interpretation.
Remaining Madrid Claim
For the additional Madrid instances, Redress reviewed IBM's usage calculations and challenged their methodology. IBM had extrapolated licence requirements based on peak concurrent usage. However, ILMT data showed that actual average utilisation was considerably lower, and that many of the flagged instances were test or staging systems that should not have triggered licence obligations under the terms of the existing agreement.
Redress argued that the remaining claim (€1.3M) should be resolved through the firm's existing Passport Advantage credit. The firm had maintained consistent maintenance and support payments for its IBM portfolio and had not fully utilised the coverage limits of its existing agreement. This remaining exposure was absorbed by the existing Passport Advantage entitlement with no additional cost to the firm.
The Outcome
IBM accepted Redress's defence strategy in full. The €2.9M claim was closed to zero settlement cost through a combination of reclassification and existing entitlement utilisation:
- Colombia deployment (€1.6M): Reclassified under the existing Madrid-based Passport Advantage agreement. No additional licence fees required.
- Madrid additional instances (€1.3M): Resolved through existing Passport Advantage credit reserves. No out-of-pocket settlement.
Beyond the audit defence itself, the firm's relationship with IBM improved. The vendor recognised the firm's commitment to compliance (demonstrated by the retroactive ILMT deployment) and offered more favourable terms in the subsequent two-year Passport Advantage renewal. The new agreement reduced the annual support cost by 14% compared to the expiring contract, resulting in approximately €180,000 in year-over-year savings on future renewals.
Key Takeaways
ILMT is a defence tool, not just a compliance tool. By deploying ILMT retroactively and comprehensively, we obtained empirical data that contradicted IBM's claims and audit assumptions. The usage data became the foundation of our negotiation strategy.
Passport Advantage agreements have geographic flexibility. Many firms treat Passport Advantage as tied to a specific location or business unit, but the terms often permit expansion to group operations. Challenging IBM's geography interpretation directly addressed the largest component of the claim (€1.6M).
Existing entitlements are underutilised recovery levers. Most enterprises do not fully utilise the coverage limits of their existing agreements. The remaining Madrid claim was absorbed by unused Passport Advantage credit, turning a potential settlement into a zero-cost resolution.
Speed and scale require governance. The firm's ability to win and execute the outsourcing contract depended on rapid infrastructure deployment. But without ILMT coverage from day one, the firm exposed itself to audit risk. The lesson: establish monitoring before scale, not after.
Vendor relationships can improve after successful defence. IBM's decision to offer 14% better terms on the renewal reflected its recognition of the firm's commitment to compliance governance. A successful audit defence can reset the relationship in the client's favour.