'Customers will feel blindsided': IBM hoists UK software prices by 24 per cent

Timing of move questioned by software licensing experts

IBM is hoisting its UK software prices by nearly a quarter, in a move critics claims will drive customers into the arms of competitors.

In an announcement earlier this week, Big Blue confirmed it will be adjusting prices in select currencies in January 2023 for all Passport Advantage Perpetual, Subscription License, Monthly License, Fixed Term Licenses, Appliances, and SaaS Products.

Customers in the UK, as well as across the eurozone and several other countries, face rises of 24 per cent.

These increases supersede those announced in September (which CRN understands to have been eight per cent for the UK), IBM stressed.

'Budget-killing increase'

The move immediately drew stinging criticism from the software asset management community for causing chaos for IBM software customers planning their budgets for 2023 and beyond.

Rich Gibbons, ITAM services director at independent asset management analyst ITAM Review (pictured below), feared that the move could backfire for IBM by pushing customers to look at third-party support options or alternative products.

"I think customer organisations will feel blind-sided by this," he said.

"It's only a matter of weeks before 2023 arrives. Most organisations will have their budgets set for next year and if that includes buying IBM that's a big change. We expect to see people looking at whether they can move from IBM to something else, or delay the project, because it's not the kind of price increase you can grin and bear."

Writing in a personal capacity in a LinkedIn post, Nial Eddery, IBM practice lead at software asset management consultancy Livingstone Group, branded the hikes "customer budget killing increase rates".

"I cannot remember a credible vendor pushing a straight uncamouflaged price increase over 10 per cent in my time in licensing and SAM," he said.

"If there's one type of company this will benefit, it's the growing number of third-party support organisations."

Talking in more depth to CRN, Eddery said that the move would cause "serious budgetary issues for our customers".

"I think we're going to see an increase in customers trying to squeeze downwards on their existing deployment of IBM in order to try to manage those costs," he said.

"The timing causes massive problems as well because we're four weeks from year end, if you take Christmas into effect. If we'd had this announcement back in September, we would have spent the last couple of months trying to do early renewals or commercial deals with IBM that mitigated the price increases, at least for a period of time. But we don't feel that our customers who had renewals next year will be in a fully knowledgeable situation to do that."

Partners caught in the middle

Big Blue advised its reseller partners to link to Passport Advantage Online to obtain Business Partner-specific information on the pricing changes.

John Davenport, sales director at Bell Integration, said IBM Business Partners such as Bell are "caught in the middle with little or no ability to influence change".

"Our customers are being instructed to do more with less, yet the unheralded global financial and political un-stability is forcing price hikes across all levels of expenditure, from the electricity used to power IT through to the software that sits on top of it," Davenport (pictured above) told CRN.

"This presents more challenges for us; as customers' behaviours and expenditure patterns are changing in order to meet customer priorities. It's becoming tougher in the resell market."

Gibbons said that he "wouldn't relish being a partner or IBM sales rep trying to position this to customers".

"Being a partner is a bit like being front of house in a restaurant," he said.

"You are the one that's in front of the customer and the one the customer is paying, so you take the brunt of it."

The rises exceed those announced by Microsoft around its 365 offering earlier this year.

Besides the UK and EU, customers in Denmark, Japan, Norway, South Africa and Sweden are also facing 24 per cent increases, while Canada will be subject to a 19 per cent hike.

The adjustments may deviate slightly from the above percentages on a small number of products, it added.

IBM said it will not be providing any further comment.