During any given year, customers ask us to quote IBM hardware or software maintenance in “less than 1 year” increments. The request might be for invoicing monthly, quarterly, or twice a year – but something less than a full 1-year commitment. This can also be due to the customer moving off an older server during the coming year, and they do not have a specific date for decommissioning the old server.
The short answer to the question is IBM requires maintenance contracts be a minimum of 1 year (hardware and/or software).
Customers can purchase custom contract periods beyond 12 months (13 months, 19 months, 30 months, etc.), however IBM offers better pricing on contracts in yearly increments (12 month, 24 months, 36 months, etc.).
While 1-year increment is the minimum, potential cost savings is with longer term contracts (2-year, 3-year, etc.), which can lock in pricing at current rates – IBM does raise maintenance pricing on occasion (about every 2 years).
If a customer reaches a point where some (or all) of the hardware and/or related software has been “taken out of productive use”, IBM allows for cancellation of a contract with 60-day prior written notice. Any remaining contract amount will receive a prorated credit to be determined by IBM.
Our recommendation is customers purchase IBM maintenance contracts in yearly increments (1-year, 2-year, 3-year, etc.), knowing they can cancel anytime after the first 30 days, with IBM providing a refund of unused portion of the contract.
IBM does offer an option to purchase a yearly maintenance contract, and invoice it in quarterly increments. For example, a $40,000 contract purchased in January with quarterly invoicing would invoice $10,000 in January, April, July, October. If the contract is greater than $120,000, IBM has monthly invoicing increments are available. These options can be helpful for some scenarios, but does increase the amount of administrative work (i.e., paper shuffling) – when compared with yearly invoicing.
If a customer does know a specific “hard stop date” on the old server, a custom “end date” maintenance contract is available. However, customers need to understand there are no extensions or early cancellation options with this custom contract. IBM requires preapproval for “hard stop date” contracts when date is within 12 months of contract start date (for example, if contract start date is May 1, and “hard stop date” is November 1).
IBM regularly changes the available options, so reach out to Arbor Solutions to see how we can find a contract option which best fits your business needs. Contact us.