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Article IBM – HCL Technologies Transfer of Business is complete

Announced in December 2018, and closed on 30th June 2019, IBM has now divested 6 of its product families to the Indian IT company HCL Technologies (HCL). HCL acquired the 6 product families for a total of $1.8 billion.

By Insight UK / 2 Sep 2019 / Topics: Software

With this acquisition, HCL created a new business division - HCL Software - for selling, supporting and further developing these software products. As selling software is a brand new activity for HCL, there are some uncertainties around what could happen.

Some examples:

What will happen with IBM’s License Metric Tool (ILMT)? Will it still be a requirement for IBM clients to prove Sub Capacity licensing and will it still be available for free, since IBM isn’t the owner after the transfer of the BigFix products?
Will HCL define new license metrics going forward?
Will HCL introduce an audit program? And how will it look?
What about supporting programs? For example, a BigFix license (owned by HCL) comes with DB2 (still owned by IBM) as a supporting program.

The product-groups in scope of the acquisition are:

AppScan for secure application development
BigFix for secure device management
Unica (on-premise) for marketing automation
Commerce (on-premise) for omni-channel e-procurement
Portal (on-premise) for digital experience
Notes & Domino for email and low-code rapid application development
Connections for workstream collaboration

For a complete list of all products transferred to HCL, visit ibm.com/downloads/cas/AL1OBXBJ

As an existing IBM customer for one or more of the product-families above, you will have received a letter from IBM, with one of 3 following options:

The contract is assigned by notice:

Contract conveyed to HCL per transfer of business (30th June, 2019) HCL will honour and fulfill all obligations in your IPAA and IPLA contract HCL will provide support Next renewal is with HCL Only applicable for divested products

The contract is being retained by IBM:

Contract is retained by IBM through expiration of the contract Typically for ELAs/ESSOs and other contracts that contain reason to retain HCL will provide subscription and support (subcontracting between IBM and HCL) At contract expiration, a PoE will be issued and subscription and support will be fully transferred business as usual to HCL from that date

The contract requires written consent to assign:

Primary contact in Passport Advantage will receive a request for consent to assign the contract to HCL which requires a response within 30 days. It is unknown what will happen when client refuses to assign contract to HCL yet

New Master License Agreement, including Audit Clause

All acquired products are under a new HCL Master License Agreement (MLA). This MLA also contains an audit clause, which gives HCL the right to do an audit on your installed base. A few highlights from this new audit clause include:

HCL has the right to audit a client once per year
HCL can do the audit themselves, or they may involve a third party
HCL will provide 15 calendar days notice prior to an audit
HCL’s audit rights will survive for a period of 2 years after expiration of a contract or an order

On the license-compliancy topic, there are still a lot of uncertainties. In IBM, every product has its own License Information Document, which is accessible for everyone in an organisation. With the transfer to HCL, all the detailed licensing information has been moved into a License Portal, and can only be accessed once your company HCL contact has added you to this portal.

What should I do next?

Be prepared and make sure you understand your current deployment situation for the products that are part of the transfer. Having a good understanding of your compliancy position before you begin negotiations with HCL about your next renewal or next license purchase puts you in a better position. With this knowledge you are also well prepared when HCL decides to become active in doing license audits. As a start:

Ensure all entitlements are transferred to your new HCL agreements
Make sure the renewal coverage periods are transferred correctly from your previous IBM contract
Don’t pull the plug from IBM’s License Metric Tool (ILMT)
If you are in an audit with IBM, make sure the transferred products will be taken out of scope

At Insight, we are ready to help you with any kind of licensing or contractual question related to HCL Software, IBM Software and the possible combination of the two.

Please reach out to Jurgen Grolleman for further assistance.