2/15/2017
Are you curious on how to minimize IBM Cognos Support Costs? You may have heard rumors that you can negotiate with IBM to lock in your support costs so they don’t increase significantly. Under certain situations, IBM allow clients to enter into an addendum, which is often called a “Not to Exceed” or “NTE” provision. Here are the pros and cons you need to know on How to Minimize Your IBM Cognos Support Costs with - NTE.
What is a Not to Exceed (NTE) Provision?
Whenever you purchase software you want to calculate the future costs of owning the software. If you purchase on premise licenses, the future costs include the Software Subscription and Support (S&S) fees, often referred to as maintenance. IBM includes your first year of support when you purchase the software. In year two, the list price for IBM Cognos support maintenance is 20% of the license fee plus an annual uplift that is generally 3-5%. Check out this past blog for more info.
However, if you negotiated a discount on your licenses when you purchased it, then your year two IBM support cost typically is 20% of your purchase price plus a 10% uplift. In subsequent years, IBM increases your support between 10-15% (based on history), until the price reaches the list price of the software. Why My IBM Cognos Support Renewal Rate Increased.
When you purchase software, you may want to negotiate the cost of future support as part of the purchase. In some situations, IBM allows customers to enter a special terms addendum for IBM Cognos support. This is an agreement between the client and IBM that amends the standard International Passport Advantage Agreement.(IPAA) Lodestar Solutions recommends all clients stay current on IBM Cognos Support. (Should I continue IBM Cognos Support? For more information on IBM Support check out this site.
What are the benefits of an NTE with IBM for my Cognos licenses?
By negotiating an addendum or NTE agreement with IBM, you may be able to minimize your IBM Cognos Support costs so that they increase at a lower rate that is typical, which is usually 10-15%. Note, you need to negotiation this as part of your purchase of the new IBM Cognos licenses.
When can I get IBM to agree to a NTE provision?
Typically, IBM only agrees to an Addendum to locking in the uplift allowing you to minimize your IBM Cognos support costs when you purchase new license and the deal size needs to be significant. In my experience, the deal size must to be at least $100,000 or IBM typically does not agree to addendums to the IPAA.
Can I get a NTE on existing licenses?
Typically, IBM Support does not approve an NTE provision unless there is a purchase of new licenses, and even then, they are reluctant to agree to include existing licensing in the NTE. However, the beauty of negotiating is if you ask you might just get it. The bigger your purchase of new licenses, the more leverage you may have.
Can I negotiate the language in the NTE?
Yes, language is always negotiable, but here are a few things:
1. Committed - Does the language require you to purchase the future IBM support for the terms of the addendum or is it optional? If the addendum states it’s “Committed”, or “S&S charges are Non-cancelable” this means you must pay for IBM Cognos support for every year covered by the agreement. If for some reason, you decide you don’t need all the licenses or your needs changed and you would be better suited in a PVU license basis, you are technically prohibited, but IBM may still work with you.
2. Who Can You Buy IBM Support From – Sometimes an addendum might state that you must buy S&S from IBM. If you typically buy from a reseller, like Lodestar, we have the right to share some of our margin with you and therefore sell support to you cheaper than buying directly from IBM. Remember, everything is negotiable but I recommend you make sure the language keeps your options open.
What are the risks of signing a NTE Addendum?
1. Price not being cheaper – In a few rare situations we have seen where the regular annual uplift of support that IBM applies to subsequent years is actually lower than the cost in the addendum. If this is the case and you signed a “committed” addendum, then you are contractually committed to pay the price in the NTE. If instead, your contract stated you had the option to purchase the support at the prices in the agreement, but aren’t contractually obligated to, you may be able to tell them you don’t want to purchase under the NTE.
2. Jeopardizes potential future discounts from partners. – When you enter a NTE with IBM, IBM significantly reduces the margin that they give to partners that are authorized resellers. Many times, the partner pricing can be cheaper than IBM pricing with an NTE agreement.
3. Misinformation on the Addendum – The addendum states all the details of the agreement. Typically, these addendums are sought at the end of the quarter which is a very busy time for IBM. As a result, mistakes can be made. So, it’s is up to you or your partner to ensure the details: the part numbers, the quantity, the description, the dates and the costs are all correct. I have seen mistakes quite a few times.
4. No changing of licenses – For some clients their needs change. For example, a client was on an authorized licensing model but we discovered that a PVU licensing model would be more advantageous for them. If they had a NTE agreement in place, it could prohibit them from being able to negotiate changes to their licenses. But, again everything is negotiable.
5. No dumping of licenses – Let’s say your organization sold off a major division, and you don’t need as many licenses anymore, if you have a NTE that is a commitment, again you may not be able to dump licenses. If you don’t have a commitment NTE, you may be able to tell them you don’t want to purchase under the NTE, and try to negotiate dumping of licenses. But note if you are paying below list price for your support, IBM will either keep your total costs at the same rate you would have paid for all the licenses or will increase the remaining licenses to list price.
If you need additional information on your IBM Cognos Support, check out
Call to Action:
Now that you know how to minimize your IBM Cognos Support Costs with a NTE, it’s time to start really saving money on your IBM Cognos Support costs. The first step is to contact Lodestar’s team and ask for a competitive quote on your support renewal or purchase of new licenses. Our team of experts can provide a “What the Heck Do I own? – IBM Cognos Licensing” session and review your current entitlements to ensure you have the optimal IBM Cognos licensing mix and purchase support at the best price. To contact, simply email us at Sales@lodestarsolutions.com or call 630-240-5853.