Whiteboard Wednesday Episode 7: How to save money on user licensing models
Whiteboard Wednesday is me, a whiteboard and learning about all things IT Asset Management (ITAM), every Wednesday!
This week we look at user licensing. What is it? How do I save money?
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How to save money on user licensing models
User-based licensing is where you’re paying for the individuals that are accessing software. In contrast to device-based licensing, so if you’ve got five machines, you might have five licensing that will be device-based licensing, user-based licensing is based on the individuals accessing the software. So, me Martin might be one user, I might access the software through three devices but I’m being charged by the user. This is a very common license model these days used by Microsoft, SAP, Zoom, and many, many others.
The Software Publisher
What the software publisher wants when you are on user-based licensing is for all your users, so this bottom axis is all our users, they want you to pay a certain price for every single user and their only Gambit is going to be the full-fat version, all singing all dancing, bells and whistles version for a great price. They want complete absorption of their software across your entire estate. You can haggle with this, you can lower this price, for example, if you commit to a longer-term, so if you’re going to commit for three years, you might get a better deal.
The actual requirements of your estate
The real savings come in when you profile your users and look at the actual requirements of your estate. This is the offer from the software publisher, but your actual requirements might be something more like this. You might have within your estate or within your environment a requirement for the full-fat version and a genuine requirement for that full-fat version. Then there’s a subset of users that don’t need nearly as much as that, then there’s a really low requirement here and then the rest of users don’t need anything at all. By profiling the users and actually looking at your real requirements, you can carve out this enormous waste from your spent.
How to save money
Real-life case studies of this are Viacom saving 30% on their Zoom spent doing this process. Jaguar Land Rover for SAP save 30%, profiling users taking out the full-fat version and reducing it with a lower-cost version, and JetBlue, again with SAP saving 50% of their user base by profiling users. What this flat line has got going for it is convenience. If you just buy everybody the same full fat version, that’s great and it’s nice and easy. But you pay far too much money and you become numb to your real requirements. You don’t actually know what the users require, because there’s no need to know. By carving out these profiles, understanding your real user requirements, you can save a lot of money. This is applicable to all users, so if you did this exercise for Microsoft, you can then apply the same logic to SAP and to Zoom, and to all the other user-based licensing models.
About Martin Thompson
Martin is also the founder of ITAM Forum, a not-for-profit trade body for the ITAM industry created to raise the profile of the profession and bring an organisational certification to market. On a voluntary basis Martin is a contributor to ISO WG21 which develops the ITAM International Standard ISO/IEC 19770.
He is also the author of the book "Practical ITAM - The essential guide for IT Asset Managers", a book that describes how to get started and make a difference in the field of IT Asset Management. In addition, Martin developed the PITAM training course and certification.
Prior to founding the ITAM Review in 2008 Martin worked for Centennial Software (Ivanti), Silicon Graphics, CA Technologies and Computer 2000 (Tech Data).
When not working, Martin likes to Ski, Hike, Motorbike and spend time with his young family.
Connect with Martin on LinkedIn.