Broadcom Mainframe True-Down Rights
Introduction – Why True-Downs Matter
Mainframe software licensing has traditionally been a one-way street: costs are tied to peak usage (measured in MSUs or MIPS), and vendors happily charge more if you grow but rarely charge less if you shrink.
Broadcom (formerly CA Technologies) is notorious for this – true-ups (paying more for increased usage) are enforced by default, while true-downs (paying less when usage declines) are often absent unless you fight for them.
This matters because many organizations are modernizing or outsourcing parts of their mainframe workloads. If your consumption drops but you’re locked into yesterday’s peak, you end up overpaying for capacity you no longer use.
For IT asset managers and procurement leads looking to reduce Broadcom mainframe MIPS license costs as usage declines, negotiating true-down rights is crucial. Read our ultimate guide to Broadcom Mainframe Software Licensing (CA Technologies): Negotiation Strategies for IBM Z Environments.
It can save millions and provide the flexibility to align costs with actual needs, rather than being stuck with a static, high-watermark contract.
Historical Lock-In Problem
Historically, mainframe software deals (including those from CA/Broadcom) were tied to peak usage commitments.
You might have licensed a tool for a 1,000 MIPS environment, and that number became your billing baseline, whether you used it fully or not.
There were no provisions to reduce fees if you downsized. As a result, companies that reduced workloads or moved applications off the mainframe saw no cost relief – their contracts continued to require them to pay for the old peak.
For example, consider an enterprise that modernized some legacy applications, resulting in a 30% decrease in mainframe MSU consumption.
If their Broadcom agreement was based on the old peak, the annual fees would remain the same despite one-third of the capacity now sitting idle.
This lock-in model creates a painful scenario: you invest in optimization or cloud migration to save costs, yet your vendor bills don’t shrink (and may even grow with annual increases).
It’s a legacy contracting approach that benefits the vendor’s revenue but punishes customers with “sticky” costs that don’t adapt downward.
Read about mainframe licensing agreements, Broadcom Mainframe Portfolio License Agreements (PLA) Explained – Pros, Cons & Negotiation Tips.
When to Push for True-Down Rights
Not every organization will immediately get true-down clauses offered – you often need to initiate the discussion.
Key moments and triggers to push for true-down rights include:
- Declining mainframe usage: If your MSU/MIPS consumption has been on a downward trend for several consecutive quarters (say, 12–24 months), it’s a clear signal. Perhaps your peak rolling 4-hour average is steadily dropping. This is the time to insist on contract flexibility to match the decline.
- Workload archiving or offloading: Maybe you’ve archived large data sets or retired certain batch jobs, permanently reducing workload. If you know parts of your processing have been eliminated (and won’t return), use that as leverage for a true-down.
- Outsourcing or managed services transitions: If your organization is outsourcing key mainframe operations to a third-party provider or consolidating data centers, your in-house usage may decrease. Similarly, adopting a managed service for certain tasks (like using a service bureau for payroll processing that used to run on your mainframe) can lower your MSUs. These strategic shifts should trigger an ask for cost reduction rights.
- Cloud migrations (for peripheral workloads): Core transactional systems may still run on IBM Z, but many companies are migrating peripheral applications (such as analytics, reporting, and front-end systems) to distributed or cloud platforms. As these workloads migrate off the mainframe, demand for MIPS goes down. When you can point to specific applications that have left the mainframe, it bolsters your case for a true-down clause to avoid paying for ghost workloads.
In short, whenever there’s a significant and sustained decline in usage or a planned reduction, prepare to negotiate true-down provisions.
Don’t wait for Broadcom to bring it up – it’s in your interest to raise the topic as soon as you have data to justify it.
Negotiation Tactics for True-Down Clauses
Securing true-down rights from Broadcom requires a strategy.
Here are tactics to strengthen your negotiating position:
- Come with data and evidence: Start by gathering hard evidence of your usage decline. Use IBM’s Sub-Capacity Reporting Tool (SCRT) reports or internal performance metrics to show your MSU peaks over time. For example, if you can show that your rolling 4-hour average has dropped from 1,000 MSUs to 800 MSUs consistently over the last year, bring that to the table. Concrete data proves that a high commitment baseline is no longer realistic. It’s harder for the vendor to argue against facts.
- Propose clear true-down conditions: Don’t just ask vaguely for “the ability to reduce if we use less.” Draft a specific clause or scenario. For instance: “If average quarterly MSU utilization falls X% below the contracted baseline for two consecutive quarters, then annual license fees will be adjusted downward by the same percentage.” Having a tiered reduction clause like this in plain language gives Broadcom something tangible to consider. It sets a trigger and a result. You could also propose an annual true-down review: e.g., each year, usage is reviewed, and if you’re in a lower band, fees are recalibrated accordingly for the next period.
- Leverage renewal and mid-term checkpoints: The best time to insert a true-down clause is at renewal, when Broadcom wants you to sign again. Make it a condition of renewal that the cost adjusts to current usage levels. However, also seek a mid-term adjustment option if you’re in a multi-year deal. For example, at the 18-month mark of a 3-year agreement, if usage has significantly dropped, you can renegotiate the baseline. Even if Broadcom resists a mid-term change, bringing it up can lead them to offer a compromise (like a one-time credit or a more flexible true-down at renewal).
- Tie reductions to capacity bands or license bundles: Broadcom often prices its offerings by bands/tiers (for example, licenses are priced for 500-1,000 MSUs, with a lower rate available if you only need 300-500 MSUs, etc.). Use this structure to your advantage. Negotiate the right to drop to a lower band without penalty. Essentially, you want an agreement that allows you to transition to the lower tier’s pricing if your actual usage falls within a lower tier. For a portfolio deal covering many products, this might mean that if your overall MSU footprint drops, you pay as if you had originally bought the smaller portfolio.
- Anticipate vendor pushback and set floors: It’s likely Broadcom will push back on unlimited flexibility (they fear revenue loss). Be prepared to negotiate a reasonable floor or cap on reductions. For example, maybe they won’t give a full true-down freedom, but you can get a clause that says you may reduce your licensed MIPS by up to 20% at renewal without penalty. Anything beyond 20% might require additional negotiation or a new agreement. While not ideal, even a partial true-down right is better than none – it ensures you can capture some savings if your usage shrinks. Avoid token gestures; the cap should be meaningful in relation to your expected decline.
Sample Clause Language:
When hashing out contract wording, clarity is key.
Here are a few plain-English examples of true-down clauses you can propose:
- True-Down Protection: “Annual license fees will be reduced if the customer’s average MSU usage for the preceding 12 months falls below the contracted baseline. Fees shall adjust proportionally to the decline in usage.”
- Lower Band Option: “Customer may migrate to a lower MIPS/MSU pricing band at renewal time if sustained usage for at least two consecutive quarters is below the current contracted band.”
- Mid-Term Adjustment: “If actual mainframe workload (measured in MSUs) decreases by more than 15% due to business changes (e.g., divestiture, workload migration), the customer and vendor will, in good faith, recalculate fees at a lower capacity tier to align with the new usage level.”
Bringing well-thought-out clause language to negotiations shows Broadcom you’ve done your homework. It can also save time – rather than debating concepts abstractly, you’re putting a proposal on the table.
Broadcom’s negotiators may try to water it down, but having a starting point tilts the conversation in your favor.
The overarching principle you should drive home is fairness: if they expect you to pay more when you consume more, it’s only fair that you pay less when you consume less.
Portfolio (PLA) Considerations
Broadcom’s Portfolio License Agreements (PLAs) bundle a suite of mainframe products under one contract with a fixed capacity commitment (often a total MSU cap covering all included products).
These mega-deals can be double-edged swords when it comes to true-down:
- Fixed baseline challenges: A PLA might lock you into, say, 5,000 MSUs of capacity across all CA/Broadcom tools for a flat fee. That’s great if you consistently use that much, but if your actual usage drops to 4,000 MSUs, you’re overpaying for 1,000 MSUs of “shelfware.” The contract baseline is too high for your reality.
- Negotiate a lower-band clause: In any PLA negotiation, insist on a clause that allows you to step down the committed MSU band if usage falls significantly. For instance, if you signed up for 5,000 MSUs but a year later you only need ~4,000, you should have the right to adjust the PLA to a 4,000 MSU tier (with pricing aligned to that lower tier). Maybe this happens at the anniversary or with some notice period – get it in writing. Broadcom might frame its PLAs as fixed, but large customers have successfully built in such flex rights by proving their environment is in flux.
- Maintain a growth buffer: One concern when reducing a PLA commitment is the potential loss of flexibility to grow back if needed. Ensure that your true-down clause in a PLA doesn’t eliminate any headroom. For example, after stepping down to 4,000 MSUs, you may still be able to burst up to 4,200 MSUs occasionally without incurring an immediate penalty (or with a simple, pro-rated true-up). Essentially, don’t trade all your flexibility away when negotiating a lower commitment. A well-structured PLA can have bands both ways: you can move down when usage drops, and you can accommodate a bit of growth if there’s a temporary uptick, all within the agreement.
- Long-term view: Because PLAs are often multi-year (three, five, or even more years), think about your roadmap. If your organization plans to decommission a mainframe or offload big chunks of work in year 2 or 3, build that expectation into the PLA. You might negotiate an option to recalculate the baseline at mid-term or, at the very least, not be penalized for sunsetting a system. Without this, you could be stuck overpaying for the remainder of a long contract. Remember, Broadcom wants the PLA commitment for revenue predictability – use that as leverage to say, “if you want a long commitment, give us adaptability in case our world changes.”
Internal Preparation & Capacity Management
The success of negotiating true-down rights often hinges on how well you’ve prepared internally.
Before and during discussions with Broadcom, make sure you’ve done the following:
- Monitor and document usage trends: Internally track your mainframe usage religiously. This includes the Rolling 4-Hour Average (R4HA) MSU utilization, which is the basis for IBM’s billing and a proxy for third-party software usage. Keep a quarterly log of peak MSUs and note any downward movements. Graph it out over the last 1-2 years. A visual drop in usage is powerful evidence. For example, showing a slide where every quarter’s peak was a bit lower than the last illustrates a clear trend.
- Leverage SCRT and tooling: Use IBM’s SCRT reports or any capacity management tool outputs to break down usage by LPAR or by software product if possible. If you can show that certain Broadcom/CA products are now running on fewer MSUs because you retired a subsystem, that’s golden evidence. It connects the dots between technical changes and license needs. Ensure these reports are accurate and up-to-date when you present them.
- Forecast future reductions: Take it a step further and forecast the next 1-3 years of mainframe capacity requirements. Work with application owners and enterprise architects: are there plans to offload additional applications, move data to the cloud, or optimize programs that will cut CPU usage? If you anticipate, say, another 20% drop in MSUs two years from now due to known projects, include that in your negotiation rationale. You might say, “We’re at 800 MSUs now and expect to be around 600 in two years as we complete XYZ modernization. We need an agreement that can accommodate that decline.” Vendors won’t reduce costs just on the promise of future drops, but it sets the stage for why you’re insisting on true-down flexibility.
- Align internally on goals: Ensure your procurement, IT, finance, and leadership are all on the same page about the importance of true-down rights. This means internally justifying it as a top negotiation objective (possibly trading off something else for it, if needed). If everyone understands that without true-down, you’re looking at paying for empty capacity, there will be a unified front when pushing this issue. It helps to quantify the impact: e.g., “At current rates, not adjusting down from 1000 to 800 MSUs would waste roughly $XXX,000 over the next year.” That kind of number gets executive attention and backing.
In summary, do your homework. Being armed with detailed capacity data and a solid story turns what could be a vague request (“we want to pay less if we use less”) into a compelling business case.
Broadcom is more likely to concede if you demonstrate that you are familiar with your environment and will otherwise be paying for air – no vendor wants to appear unreasonable when faced with facts.
Risks of Skipping True-Down Rights
What happens if you don’t negotiate any true-down flexibility? Here are the pitfalls:
- Overpaying for unused capacity: This is the obvious one – if you’re locked into a contract at a certain MSU level and your actual use drops, you’re paying for thin air. That could mean hundreds of thousands (or millions) of dollars essentially wasted, with zero value to your company. Mainframe software isn’t cheap; CFOs do not like writing big checks for capacity that isn’t there.
- Accumulating shelfware: In the context of enterprise licenses or PLAs, lack of true-downs means you could end up with a lot of shelfware – licenses or capacity entitlements paid for but not actually utilized. Shelfware in mainframe deals can be insidious because it’s not as obvious as unused seats of a SaaS product; it’s buried in a big bundle. Over a multi-year term, shelfware can grow if, for instance, your usage declines slightly each year but your contract remains unchanged. By the end, you might only be using 60% of what you’re paying for.
- No flexibility = reduced leverage later: If you give up on true-downs now, you might think, “We’ll fix it at renewal in a few years.” However, the problem is that you’ll be paying the higher amount the whole time, and at renewal, Broadcom’s baseline expectation for revenue is that higher number. They will be reluctant to drop you significantly because it hits their books. You’ll be trying to negotiate down from a bloated spend, essentially asking for a big discount just to match reality. That’s a tougher conversation than having a clause that preemptively adjusted your spend. In contrast, with true-down provisions, your spend would already be normalized to actual use, and renewal negotiations can focus on forward-looking needs rather than correcting past overpayments.
- Budget strain and opportunity cost: Think of all the dollars tied up in over-licensing. That money could be funding innovative projects, such as cloud initiatives, new software development, and analytics. Without true-downs, IT budgets often have to absorb these inefficient costs. It’s a missed opportunity: not only are you overspending, but that overspend means fewer resources for modernization. Ironically, lacking true downsizing can slow down modernization because leadership sees that even if they reduce mainframe usage, costs don’t fall, which might discourage further funding for mainframe reductions. It’s a vicious cycle.
In short, not having true-down rights keeps you chained to the past. It’s a risk and cost that savvy IT asset managers should avoid by tackling the issue head-on in negotiations.
Checklist: Must-Have True-Down Protections in Your Contract
When finalizing a Broadcom mainframe agreement, use this checklist to ensure you’re covered on true-down flexibility:
- Annual Usage Review Clause: Ensure that there’s a provision requiring you and the vendor to review actual mainframe usage at least once a year. This clause should explicitly state that if usage is lower than the licensed amount, the fees will be adjusted downward (either immediately or in the next billing period). The key is to formalize a recurring opportunity to recalibrate costs.
- Explicit True-Down Right: It’s not enough to have a vague review. The contract should have a named true-down right or adjustment mechanism. For example, “Customer may reduce the licensed MSU quantity upon evidence of reduced usage, with a corresponding fee reduction, up to X% per year.” The clause should eliminate penalties for reducing licenses – you don’t want Broadcom saying you committed to pay for 1000 MSUs and any reduction is a breach. Instead, it should be a built-in feature of the deal.
- Lower-Band Migration in PLA: If you are signing a Portfolio License Agreement or any multi-product bundle, the contract should allow migration to a lower band if your total requirements drop. This might read like, “Customer may move to a lower portfolio tier if resource utilization falls below the current tier’s threshold.” Without this, a PLA can become a trap. With it, you have a safety valve. Ensure the contract defines the tiers and outlines the financial recalculation process (e.g., prorated fees), so it’s not left to later argument.
- Pre-Defined Baseline and Re-baseline Process: Clearly document what your starting baseline is (e.g., “Contracted capacity: 1,000 MSUs across XYZ products”) so there’s no confusion. Then, importantly, define the process to change that baseline. For instance, “The contracted MSU capacity may be re-baselined by mutual agreement if the rolling 12-month average usage is at least 10% lower than the current baseline.” Having that in black and white means you have a procedure to point to when the time comes. Without it, even if both sides agree on usage, you might lack the contractual mechanism to actually adjust the fees.
- No One-Way Growth-Only Clauses: Review the contract for any references to capacity increases, true-ups, or penalties for overuse. If those exist (they often do), mirror them with true-down language. A fair contract should not be one-sided. If Broadcom wants protection to charge more if you suddenly need more MSUs (understandable), then you should equally have protection to pay less if you need fewer. Do not accept wording that says you can add licenses or capacity at cost, but is silent on reductions. That silence is effectively saying reductions aren’t allowed. Insist on symmetry.
This checklist is a safeguard. Before you sign, double-check each of these points.
If any are missing, go back to the negotiation table. It’s much harder to add these protections later, so it’s best to include them at the start.
FAQs on Broadcom True-Down Rights
- What is a “true-down” in mainframe licensing?
A true-down is the contractual right to reduce your license volume or fees when your usage decreases. In other words, it allows your costs to go down in proportion to a decline in mainframe consumption. This contrasts with a “true-up,” where costs increase if usage rises. True-downs make sure you’re not overpaying for capacity you no longer need. - Can Broadcom/CA contracts include true-downs?
Yes, but you almost always have to negotiate them explicitly. Broadcom’s out-of-the-box contracts often do not mention true-down adjustments (they prefer locked-in commitments). However, especially for large customers or renewals, Broadcom has shown willingness to include true-down clauses when pressed. It might come with conditions (such as only at renewal or up to a certain percentage drop), but it’s possible. The key is to raise it as a must-have item. If you don’t ask, it definitely won’t be offered. - How do I prove declining MSU usage to justify a true-down?
The best approach is to present a data-driven case. Use your SCRT reports, which detail monthly MSU usage, and highlight a downward trend. You can also display mainframe capacity planning reports or invoice history from IBM, which may show lower Monthly License Charge costs (if IBM software bills decreased, it implies usage also decreased). Internally, gather any charts or graphs from performance tools that illustrate the drop. When you show up to negotiations with a dossier of evidence – e.g., “here’s our MSU utilization graph for the last 2 years, notice the 15% decline” – it lends credibility. It makes it hard for the vendor to deny the logic of a true-down. - What if Broadcom only offers true-ups and resists true-downs?
It’s common for a vendor to push back on this; after all, true-downs reduce their revenue. If Broadcom insists on a one-way arrangement (you pay more if usage goes up, but you can’t pay less if it goes down), you have a few options:- Negotiate a cap or compromise: Maybe they won’t allow a full free-fall reduction, but would they allow, say, a 15% decrease at renewal without penalty? Try to find a middle ground. Sometimes phrasing it as a percentage or one-time adjustment makes it more palatable.
- Shorten the contract term: If Broadcom truly won’t budge on true-down during a multi-year term, consider only committing for a shorter period. A one-year term with the ability to re-negotiate next year might be safer than a three-year lock with no exit. That way, you can right-size sooner.
- Get creative with trade-offs: Perhaps you can agree to extend the contract duration or include additional products in exchange for flexibility on capacity. For instance, you commit to a longer relationship (which they like for stability) if they agree to a clause allowing reduction. Make it a win-win: you’re not trying to pay less just because – you’re aligning cost to use, which ultimately can help you remain a Broadcom customer without feeling gouged.
- Last resort – consider alternatives: As a last resort, research whether there are any alternative solutions to the Broadcom product in question. Even if migration off is hard, having an option B strengthens your hand. Broadcom might relent on a true-down clause if they sense that intransigence could drive you to invest in replacing their software.
- Is there any downside to having a true-down clause?
In principle, a true-down clause is all upside for you. But be mindful of how it’s implemented:- If you drastically reduce your committed capacity, ensure it’s truly what you expect to use. If you were to cut down and later need those MIPS back, you might face a true-up cost. Essentially, don’t cut to the bone unrealistically – maintain a reasonable buffer.
- Also, check if the true-down clause has any impact on discounts. Sometimes, pricing tiers come with volume discounts – if you drop to a much lower tier, the unit price of software could be higher (though you’re buying less of it). Make sure the clause doesn’t inadvertently raise your per-MSU rate. Negotiate that the discount level stays the same even if volume changes, or at least know the implications.
- Lastly, be aware of timing. If a true-down can only happen at renewal, plan your consumption and budget accordingly until that point. In a worst-case scenario, if you have to wait 18 months for a reduction to take effect, ensure you account for this in your budgets (or negotiate an interim credit).
In summary, there’s little downside to asking for true-down rights – just use them wisely. They’re a tool to optimize cost, and as long as you manage your capacity with foresight, they shouldn’t harm you.
5 Actionable True-Down Negotiation Tips
- Track MSU usage trends quarterly: Regularly monitor your mainframe usage (MSUs/MIPS) and keep a record of the rolling peaks. This data will be your strongest ally – it’s hard evidence you can show when negotiating. Set up quarterly internal reviews of usage so you’re never caught off guard by what your consumption is doing. You can’t argue for a cost reduction you can’t quantify.
- Negotiate lower-band rights in every deal: Whether it’s a new contract or a renewal, make it a standard practice to ask, “What if we need less?” Ensure there’s language that lets you drop to a lower licensing band or reduce quantities. Even if you don’t end up using it, having it there protects you. Don’t be shy – vendors include clauses to charge you more if you grow, so you’re completely justified to include clauses to charge you less if you shrink.
- Leverage workload declines as bargaining chips: Before negotiating with Broadcom, do an inventory of what has changed in your environment. For example, if you decommissioned an application or moved a workload off the mainframe, note how many MSUs that saved. Bring those specifics up: “We shut down System X, which used ~50 MSUs. We shouldn’t be paying for that capacity anymore.” It frames the true-down not as an arbitrary ask, but as a logical consequence of actions you’ve taken to optimize.
- Insist on annual (or mid-term) usage reviews: Establish a cadence of reviewing usage as part of the contract and ongoing business relationship. When Broadcom knows that the topic of usage versus cost will be revisited every year, they’re more likely to deal reasonably to avoid conflict at those junctures. It also educates their account team that you are actively managing consumption. In practice, this could be a simple meeting where you present your MSU numbers and discuss adjustments – the key is that it’s an expected step, not an ad-hoc fight you have to pick.
- Reject one-way street terms: Finally, hold your ground that licensing must be fair and two-directional. If you encounter resistance, frame it as a matter of principle and partnership. For instance, “We’re committing to Broadcom’s software to run our business. We expect a partnership approach – if our needs decrease, our costs should decrease. We’re not asking for freebies, just fairness.” Often, taking this stance firmly (but respectfully) will push the vendor to find some middle ground. Remember, once you sign a one-way deal, you lose leverage, so it’s better to delay signing and negotiate further than to accept terms you’ll regret for years.
Conclusion: True-down and capacity reduction rights are essential protections in modern mainframe deals, especially with a vendor like Broadcom.
As enterprises pursue digital transformation and hybrid IT strategies, mainframe workloads can fluctuate or decline – and your contracts must keep pace.
By being proactive, data-driven, and firm in negotiations, you can avoid being locked into peak usage costs and instead pay for what you actually use.
The result is a more efficient spend and the freedom to modernize without the fear of paying for dormant capacity.
In short, don’t let legacy contract terms nullify the gains of your IT optimization – negotiate those true-down rights and take control of your mainframe licensing costs.
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