IBM Stops Buybacks to Pay for Red Hat

IMO it's not that the engineering group is trying to not be trustworthy. It's that they have a job to do and IBM knows that this is their goal. So if we let engineering do their job, uninhibited, then there's a high chance that if the product is useful to do that they'll keep expanding it's reach internally (land and expand). This is just a slightly different spin on how the vendor allows the end user client to use their product. It's very likely the agreement between IBM and the enterprise client clearly spells this out. However, since the client is bound to pay for overages in arrears they are now at the mercy of not having as much leverage in price negotiations. A smart customer will predefine usage level bands as it pertains to discounts. For example if we're using 10k seats of RHEL we get 10% off list, 20k seats @ 20%, etc.

The disconnect is that procurement is likely disconnected from engineering for the better part between audits and they're not well prepared to have the after-the-fact negotiation to true up licensing. IBM, and others, bank on this by selling the value the customer is receiving from said products in use. The disconnect here is that had IBM enforced hard license limits the organization may say that the product is too expensive and look for an alternative because the customer is forced to buy more licensing mid-budget cycle. It's harder to rip out or change 20k installations of RHEL than it is 10k. Vendors know this and leverage this consequence of using this approach to keep the customer on the ball and chain.

So we have an enterprise that doesn't plan or communicate with itself very well and a vendor who puts out the all you can eat buffet to the hungry engineers. It's not technically wrong, and if an enterprise gets burned by it technically it's their own fault. Is it by design? For sure and my guess is that this type of model pays dividends all while being on the up and up.

But the fed doesn't control long term rates (probably wish it did). The short end is heavily driven by technical factors including the overnight rate (even then that is only a target and it doesn't anyways follow what the fed wished it was). The long end isn't the same. It is driven by return on capital (higher returns both seek out loans and can afford to pay more for them).

If there was long term mispricing we would see it in the tips market, and we don't. The research shows the opposite - been little arbitrage exists in the market and it is extremely well allocated.

After seeing how clunky some of the tooling is (sqlplus is downright byzantine for no good reason), I have to wonder...

1. The audits can take considerable time and resources to complete (effectively, an extra cost)

2. The audits can be wrong, which sounds like a nightmare to deal with ([1])

As such, avoiding Redhat even if you are "paying for the software you're using" may still seem like a good idea.

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[1] Answer in the FAQ about incorrect audits

> First, it is vital to carefully review the audit findings in detail. IBM's customers often do not receive all the license credit they are entitlted to, and IBM typically will agree to modify its initial demands if there is a mistake in the calucations. Sometimes, IBM’s compliance teams often do not have a complete file of all license agreements that an audited company may have signed. In many cases, the negotiated terms of a license agreement can include alternative counting rules or other variables that change the way license requirements are determined for certain products. If the auditors are unaware of those terms, then the calculated audit discrepancies likely will be inflated and erroneous.