What Your ITSM Vendor Isn’t Telling You About Their Licensing Model—and Why It Matters

Posted by on February 21, 2019


Although named licensing might feel easy, safe, and predictable, it can cost between 50-75 percent more than concurrent licensing, which also offers a more flexible approach.

Rewind to 1989, when I was a 4th grader learning long division for the first time. Like most grade school kids, I wondered why I needed to learn division when this wonderful machine called a calculator could solve these problems for me. Being the bold and adventurous (read: snarky) child I was, I raised my hand and asked Ms. Thorpe that very question.

Tweet this: Does your ITSM vendor have the right licensing model for your business? 

“Because Jarod—if you don’t understand what you are trying to figure out and how the numbers relate to the problem you’re trying to solve, the calculator is useless,” she explained.  “If nothing else, learn this math so you can take care of your money. One day you’re going to be an enterprise software decision maker, and some vendor is going to try to sell you more licenses than you need, and you’ll be unable to recognize the trap and how it will diminish the investment you promised the business.”

Ok—that last part isn’t true, but in the spirit of making Ms. Thorpe proud, picture this scenario: You are searching for a new IT service management (ITSM) solution and comparing the pros and cons of each vendor. You might be tempted to skim over the software licensing policies because surely they can’t vary that much from vendor to vendor, right? Not so fast. Unless you understand the difference in licensing policies now, you could be unpleasantly surprised down the road with complications and hidden costs.

We want to help you understand different license models, policies, and enforcement methods to avoid increased, unexpected costs and ensure the ITSM solution you choose meets the needs—not just from a capabilities perspective, but also from a fiscal standpoint—of your organization from day one. For the purpose of this post, we’re going to look at Named vs. Concurrent licensing. What are the key differences between each licensing model?

Named Licensing vs. Concurrent Licensing

First, let’s talk about the definitions of named and concurrent licensing:

  • Named licensing enables a specific named individual to access the functionality of the software. These licenses are typically nontransferable from user to user, other than on a one-time permanent basis.
  • Concurrent licensing enables any authorized person to access the functionality of the software, provided the maximum number of simultaneous users do not exceed the total number of licenses purchased. The ratio of users per concurrent license typically ranges anywhere from 1:2 – 1:5 (named to concurrent).

Let’s put these definitions in context. Imagine you are buying an ITSM solution for a 600 person IT organization. In a named licensing scenario, you would purchase 600 licenses to support 600 users, each of whom may need access to the software at any point in time, though typically not all at the same time. In a concurrent licensing scenario, you would purchase the right for a given number of users to log into the system at any one time. Rather than purchase 600 licenses, concurrent licensing could be based on a standard industry ratio of 3:1, which would be a purchase of 200 licenses. Having 200 concurrent licenses means as many as 200 users could access the system at one time.

Tweet this: Named licensing may feel easy, but it can cost more than concurrent licensing  

Software vendors (particularly SaaS vendors) have been quick to move away from traditional concurrent software pricing metrics. Although named licensing comes at a higher cost, these vendors claim it is easier to administer and account for uncertainty around usage. It’s true that every organization has different usage patterns. But, there are ways to eliminate that uncertainty about usage. One best practice is to use software asset management tools to understand utilization and ascertain areas where you are out of compliance (under-licensed) and at risk if you get audited. Such tools can even control access to concurrently licensed software, preventing the “Nth” user from launching the app, creating wait lists, and notifying users when a license comes available.

How Do I Choose Between Named or Concurrent Licensing for My Organization?

Before you decide between named and concurrent licensing models, you want to be sure you consider all the factors. Concurrent licenses are usually consumed on a first-come, first-serve basis. So, once the number of users accessing the system reaches the maximum number of concurrent licenses purchased, each additional user is denied access and notified when a license comes available.

Given this, named licenses make sense for IT personnel who work frequently in the system and require guaranteed access. Most often, these are your tier 1 analysts, with utilization rates between 70 percent or higher.

Concurrent licensing is good for personnel who work in the system less frequently or hold a less critical role within the IT organization. Most often these are your tier 2 and tier 3 analysts, with utilization rates at 30 percent or below. These personnel could include change approvers, executives, front-line managers, and more.

Which begs the question that concurrent licensing answers – does it make sense to pay 100 percent for a license that’s only used 30 percent of the time?

Most organizations do not need to require every user of the software a named license. By choosing a concurrent licensing model, your organization can be more:

  • Agile: Concurrent licensing grows with your organization as you hire more people.
  • Flexible: If your organization employs multiple part-time resources, or if you experience a period of high turnover, concurrent licenses provide needed flexibility without increasing cost.
  • Strategic: When users leave the company, their licenses don’t need to be released/reallocated.
  • Productive: Allows users in different time zones/work shifts to access to the same software during a working day.

So, how do you choose the right vendor with a concurrent licensing model? Look for a vendor whose solution does the following:

  • Easily allows administrators to add new concurrent users
  • Warns the system administrator when maximum numbers are nearly reached
  • Provides license reservation for key personnel who always need access to the software

The best vendors will do both of these things at no additional charge.

Tweet this: How much money could you be saving with concurrent licensing? 

When choosing a new ITSM solution, it’s important to make your 4th grade math teacher proud. Don’t let vendors get away with convincing you that you need more licenses than you actually do and gauge the corporate pocketbook accordingly. Understanding licensing models now could save you a ton of money and hassle in the future.

Are you interested in learning how much money you could save with concurrent licensing? Check out more information on the licensing model with Cherwell Service Management. 

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