Pricing Structure Complexity and Customer Challenges

IBM

IBM's pricing structure is notoriously complex, particularly around virtualization and processor-based licensing. IBM has implemented significant price increases, with a 24% hike in 2023 and an additional 6% global price harmonization in 2024. Key challenges include:

• Sub-capacity vs. Full-capacity licensing confusion: Many customers struggle with IBM's requirement that all physical cores in a server or cluster must be licensed when using virtualization

• Legacy operating system compliance risks: IBM is removing sub-capacity eligibility for older OS versions like RHEL 6 and Windows Server 2012, forcing customers into expensive full-capacity licensing

• Container licensing complexity: New containerization policies require specialized tools like IBM License Service, adding another layer of complexity

Microsoft

Microsoft's Enterprise Agreement (EA) pricing has become increasingly complex, with significant changes coming in November 2025 that will eliminate volume-based "waterfall" discounts. Customer challenges include:

• Elimination of volume discounts: Starting November 2025, all customers will pay Level A pricing regardless of size, potentially increasing costs by 6-12%

• Complex licensing metrics: Confusion around user-based licensing, especially with hybrid cloud deployments and Office 365 transitions

• Audit frequency: Microsoft audits have become more aggressive, particularly around virtualization and cloud migration scenarios

Oracle

Oracle is widely recognized as having the most aggressive audit practices and complex licensing terms. Oracle's licensing rules are particularly challenging in virtualized environments, where:

• VMware licensing requirements: Oracle requires licensing all physical cores in a VMware cluster, not just where Oracle software runs

• Java licensing changes: Oracle's shift to subscription-based Java licensing has created new audit risks, with potential 2X to 10X cost increases

• Predatory audit practices: Former Oracle employees have confirmed that sales teams coordinate with audit teams to pressure customers into cloud purchases

SAP

SAP's licensing complexity centers around user classification and indirect access. SAP audits focus heavily on user misclassification and digital access scenarios:

• User classification complexity: Customers struggle to properly classify users between Professional, Limited Professional, and Employee Self-Service licenses

• Indirect access risks: Third-party systems accessing SAP data can trigger massive compliance violations, often resulting in $1M to $50M audit exposures

• S/4HANA migration pressures: SAP's push toward cloud solutions creates additional licensing complexity during transitions

VMware (now Broadcom)

Following Broadcom's acquisition, VMware has undergone the most dramatic pricing changes. VMware switched from processor-based to core-based licensing, creating:

• 5X-40X cost increases: The shift to core-based licensing with 16-core minimums per CPU has shocked customers with massive price increases

• Subscription-only model: Elimination of perpetual licenses forces all customers into recurring subscription costs

• Partner channel disruption: Broadcom's changes to the reseller network have created additional complexity for customers

Customer Audit Defense Challenges

Common Audit Defense Issues

1. Lack of Preparation: Nearly 50% of organizations spent over $1 million on vendor software audits in just three years, often due to poor preparation

2. Data Collection Complexity: Publishers require extensive data collection using proprietary scripts and tools, creating significant IT resource burden

3. Interpretation Disputes: Vendors often apply their own policy interpretations rather than strict contractual terms, leading to inflated compliance gaps

4. Time Pressure: Organizations typically spend 60+ working days responding to audit requests, often under tight deadlines that increase error risk

Specific Publisher Tactics

• Oracle: Uses "Audit, Bargain, Close" tactics to pressure customers into cloud purchases during audits

• IBM: Applies list prices during audits regardless of negotiated discounts, significantly increasing exposure

• SAP: Focuses on user reclassification and indirect access scenarios that can result in massive retroactive charges

• Microsoft: Leverages virtualization complexity and cloud transition scenarios to identify compliance gaps

• VMware/Broadcom: Uses the licensing model changes to force customers into expensive subscription renewals

Recommendations for Customer Defense

1. Proactive License Management: Implement continuous monitoring rather than reactive audit response

2. Independent Expertise: Engage third-party licensing experts who understand vendor tactics and can provide objective guidance

3. Contract Negotiation: Include specific audit protections and clear definitions in licensing agreements

4. Documentation: Maintain comprehensive records of all licensing decisions and architectural changes

5. Regular Assessments: Conduct internal audits to identify and remediate issues before vendors discover them

The complexity of these pricing structures and the aggressive nature of software audits make it essential for organizations to invest in proper license management and expert guidance to avoid costly compliance issues.