Inspiring Tech Leaders
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Inspiring Tech Leaders
Managing the Shift from Concurrent to Named Software Licences – Costs, Challenges, and Solutions for Modern IT and Procurement Teams
Is your organisation transitioning from concurrent to named user licensing in SaaS applications? This shift is creating significant cost management challenges for IT leaders across industries.
The Inspiring Tech Leaders podcast reveals eight powerful strategies for optimising your approach to named user licensing, these include:
💡User Segmentation and Role-Based Licensing
💡License Utilisation Analysis
💡Strategic Vendor Negotiation
💡Alternative Access Methods
💡Hybrid Licensing Models
💡 License Management Tools
💡Contract Optimisation
💡Organisational Process Changes
Looking ahead, the podcast highlights emerging trends including consumption-based models, AI-driven license optimisation, and new questions around how automated agents should be licensed.
Organisations that build flexibility into their approach, through governance frameworks, cross-functional teams, and regular benchmarking, will be best positioned to adapt as licensing models continue to evolve.
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Welcome to the Inspiring Tech Leaders podcast, with me Dave Roberts. If you are involved in IT procurement, software asset management, or financial decision-making in your organisation, you have likely noticed a significant trend in the software industry with the shift from concurrent licensing models to named user license models, particularly in Software as a Service based applications.
This transition is not just a minor contractual change, it represents a fundamental shift in how organisations budget for, deploy, and manage their software resources. And for many companies, it is creating real challenges in terms of cost management and ensuring appropriate access for all users.
In this episode, I will talk about what is driving this industry shift, how it impacts the work we do, and most importantly, strategies for reducing costs and optimising your licensing approach in this new reality.
So, whether you are currently navigating this transition or preparing for it in the future, this podcast will provide you with actionable insights to help your organisation adapt effectively.
However, before we delve into strategies, let's make sure we have a clear understanding of the two licensing models we are discussing today, these being concurrent licensing and named user licensing.
Concurrent licensing, also known as a floating or a shared license, allows a specific number of users to access the software simultaneously, regardless of the total number of potential users in your organisation.
Think of it like a library with a limited number of copies of a popular book. The library might have 10 copies available for checkout, and any library member can borrow the book, but only 10 people can have it at any given time. Once all copies are checked out, the next person needs to wait until someone returns their copy.
In software terms, if your organisation has purchased 50 concurrent licenses for an application, it means that any 50 employees can use the software at the same time. When the 51st person tries to log in, they will typically receive a message indicating that all licenses are in use and they need to wait.
Organisations with employees who use software intermittently or in shifts can often serve more users with fewer licenses. If you have many potential users but only a fraction need access simultaneously, concurrent licensing can be more economical. It also means that users are not permanently tied to licenses, allowing for dynamic allocation based on real-time needs.
However, concurrent licensing also has some disadvantages, these being higher per-licence cost, complex licence management and potential productivity impacts. Vendors typically charge more per concurrent license than per named user license. Organisations need systems to monitor usage, manage peak demands, and handle situations when all licenses are in use and users may experience delays in accessing software during these peak times.
In contrast, named user licensing assigns licenses to specific individuals. Once a license is assigned to an employee, only that employee can use it to access the software.
Continuing our library analogy, this would be like each library member being assigned their own personal copy of the book, that no one else can borrow, whether they are currently reading it or not.
If your organisation purchases 100 named user licenses, you can assign these to 100 individual employees who will have guaranteed access to the software whenever they need it. However, the 101st employee would need an additional license to gain access, even if many of the existing license holders rarely use the software.
The advantages of named user licensing include guaranteed access, simplified administration, enhanced security and personalisation, and lower per-licence cost compared to concurrent licences. This means that licensed users never have to wait for access, eliminating productivity delays. Once licenses are assigned, there is less day-to-day management required and each user has their own identity within the system, allowing for better security controls and personalised experiences.
However, the disadvantages are that organisations often need to purchase more named licenses than they would concurrent licenses to ensure everyone who needs access has it. Licenses assigned to infrequent users remain idle much of the time, yet still incur the full costs. While, reassigning licenses as roles change requires administrative effort and may be restricted by licensing terms.
Over the past decade, we have seen a clear industry trend away from concurrent licensing toward named user licensing, particularly in the SaaS space. This shift aligns with the subscription-based nature of SaaS, where vendors seek predictable recurring revenue and closer relationships with individual users.
For many organisations, this transition has created significant challenges, especially those with diverse usage patterns among employees. A company that previously operated efficiently with 50 concurrent licenses might now find itself needing 150 or more named user licenses to provide the same level of access across the organisation.
So why do vendors prefer named user licensing? From a vendor's perspective, the shift to named user licensing offers several compelling advantages. First and foremost is predictable revenue. Named user licenses create a direct relationship between the number of users and revenue, making it easier for vendors to forecast income and plan for growth. This predictability is particularly valuable for SaaS companies, whose business models depend on stable, recurring revenue streams. In many cases, organisations need to purchase more named user licenses than they would concurrent licenses to provide the same level of access across their workforce, potentially increasing the vendor's total revenue.
Second is user-level analytics and engagement. Named user licensing gives vendors visibility into individual user behaviour, allowing them to better understand how their software is being used, identify patterns, and develop more targeted features and improvements. This data-driven approach helps vendors create more competitive products.
And third is simplified license enforcement. Named user licenses are generally easier to track and enforce than concurrent licenses, reducing the technical complexity of license management systems.
This shift is not happening in isolation; it is part of broader market trends in the SaaS industry. The rise of user-centric design and personalisation has made individual user accounts more valuable, as software increasingly adapts to individual preferences and work patterns.
Cloud-based delivery models have made it easier to track and manage individual user access, removing some of the technical barriers that previously made concurrent licensing more practical. Security and compliance requirements have become more stringent, driving the need for unique user authentication and authorisation, which aligns naturally with named user licensing. And the growth of integrated ecosystems means users often need consistent identities across multiple applications, further reinforcing the named user approach.
For organisations, this shift has significant implications. Many organisations experience substantial cost increases when transitioning from concurrent to named user licensing, particularly those with large numbers of occasional users or shift workers. The transition often requires rethinking how software costs are allocated across departments and projects.
IT teams need new processes for managing license assignments, handling employee role changes, and optimising license utilisation. While named users gain guaranteed access and personalised experiences, organisations must ensure that licensing constraints do not create barriers to productivity.
The shift from concurrent to named user licensing creates several significant challenges for organisations.
Perhaps the most immediate and visible challenge is the potential increase in total licensing costs. Organisations that have optimised their concurrent license counts based on actual simultaneous usage often find that they need significantly more named user licenses to provide equivalent access. Even with the lower per-license cost of named user licenses, this typically results in a substantial net increase in spending.
This cost increase creates budgeting challenges, particularly for organisations that did not anticipate the change in their annual planning. IT departments may need to request additional funding, reallocate budget from other initiatives, or make difficult decisions about who receives licenses.
Beyond the financial impact, organisations face several practical challenges in managing named user licenses. How do you justify the cost of a full license for someone who only needs access once a month? Yet without a license, that user cannot perform their job function when needed.
Shift workers present another challenge. In a concurrent model, workers across different shifts could share the same licenses. In a named user model, each worker needs their own license, even though they are never using the software at the same time as their counterparts on other shifts.
Role changes and employee turnover create administrative overhead. When employees change roles or leave the organisation, their licenses need to be reassigned. Some vendors place restrictions on how frequently licenses can be reassigned, creating additional complications.
License administration becomes more complex overall. IT teams need systems and processes to track who has licenses, monitor usage to identify underutilised licenses, and manage requests for new licenses.
The transition also often faces resistance from various stakeholders. Users who previously had flexible access may resist new constraints or processes for obtaining licenses. Department managers may push back against increased costs or the need to make difficult decisions about which team members receive licenses. IT teams face additional administrative burden without necessarily receiving additional resources to manage it.
So now let's focus on practical strategies to help your organisation reduce costs and optimise your approach to named user licensing.
One of the most effective approaches is to segment your user base and implement role-based licensing strategies. Start by categorising your users based on their usage patterns and needs. This could include power users who need constant access and advanced features. Regular users who need frequent but not constant access. Occasional users who need limited access or specific features and minimal users who might only need to submit requests or view information.
Once you have identified these segments, explore whether your software vendor offers different license types or tiers that align with these usage patterns. Many vendors now offer options like full licenses for power users, standard licenses for regular users, light or basic licenses for occasional users and portal or self-service access for minimal users.
For example, Microsoft 365 has E5, E3, and F1 licenses with different feature sets and price points. By matching license types to user needs, you can significantly reduce costs while still providing appropriate access for everyone.
Regular analysis of license utilisation is crucial for controlling costs in a named user environment. Implement processes and tools to track which users are actively using their licenses and how frequently. Identify licenses that have not been used in 30, 60, or 90 days and reclaim or reassign underutilised licenses.
Consider implementing automated notifications to managers when their team members have not used their licenses for an extended period, prompting a conversation about whether the license is still needed or not.
However, you should not underestimate the power of negotiation with vendors when transitioning to named user licensing. Effective negotiation strategies include requesting volume discounts for larger numbers of named licenses. Negotiating tiered pricing based on different user types or access levels and perhaps ask for transition discounts if you are moving from concurrent to named licensing with the same vendor. You should also try to negotiate for flexibility in reassigning licenses more frequently than standard terms might allow. Perhaps explore true-up models where you can adjust license counts periodically based on actual usage.
Remember that vendors want to maintain your business, especially if you are a long-term customer. Use this leverage in your negotiations.
For infrequent users, explore alternative access methods that do not require full licenses. This could include allowing implementing self-service portals with limited functionality that do not consume full licenses or enable licensed users to perform actions on behalf of others, as part of a delegated workflow process. You can also consider reporting solutions by providing access to key information through dashboards that do not require system access.
Some vendors are beginning to offer hybrid licensing models that combine elements of both named and concurrent licensing. These models can provide the best of both worlds for organisations with diverse usage patterns. For example, a core set of named licenses for power users who need guaranteed access and a pool of concurrent licenses for occasional users to share. If your vendor does not explicitly offer this option, it's worth discussing during contract negotiations. Some vendors may be willing to create custom licensing arrangements, especially for larger customers.
Investing in license management tools can help you optimise your named user licensing approach. SaaS management platforms provide visibility into license usage across multiple applications. License optimisation tools can identify opportunities for consolidation or downgrades, while automated provisioning and deprovisioning ensures licenses are quickly reassigned when roles change. Usage analytics can help to identify patterns and opportunities for optimisation. And remember, these tools often pay for themselves through the license cost savings they enable.
Beyond the licenses themselves, consider how your contract terms can be optimised. Include clauses that allow for adjusting license counts during the contract period and ensure clear definitions of user types and associated rights. Try to negotiate favourable terms for license reassignment when employees change roles or leave the organisation, and include price protection for renewals to avoid unexpected increases.
Sometimes, the most effective way to manage named user license costs is to adjust your organisational processes. Implement formal license request and approval workflows to ensure licenses are allocated based on genuine need. Establish regular license review cycles with department managers and create clear policies for license allocation. Train users on license implications to encourage responsible usage and encourage opportunities to identify where efficiencies can be gained. Consider chargeback models where departments pay for their allocated licenses. These process changes help create accountability and ensure licenses are treated as valuable resources rather than unlimited commodities.
As we look to the future of software licensing, several emerging trends may influence how organisations approach their licensing strategies. Understanding these trends can help you prepare for continued evolution in this space.
While the industry has been moving toward named user licensing, we are beginning to see new models emerge that may offer more flexibility. These include consumption-based licensing, which charges organisations based on actual usage metrics, rather than user counts. This could include API calls, transactions processed, or compute resources consumed. This model aligns costs more directly with value received and may become more prevalent for certain types of applications.
Value-based licensing ties costs to business outcomes achieved through the software, such as cost savings, revenue generated, or productivity improvements. While challenging to implement, this approach creates stronger alignment between vendor and customer success.
Hybrid and flexible models that combine elements of different licensing approaches are likely to become more common as vendors recognise the diverse needs of their customers. These might include core named licenses with flexible add-ons or usage-based components.
Artificial intelligence and automation are poised to impact software licensing in several ways including AI-powered license optimisation tools that will become more sophisticated, automatically identifying opportunities to reassign or consolidate licenses based on usage patterns and user behaviour.
Automated workflows will reduce the need for direct system access for certain tasks, potentially decreasing the number of full licenses required. And AI assistants and bots may access systems on behalf of users, raising new questions about how these automated agents should be licensed.
Organisations that stay attuned to these developments will be better positioned to leverage them for cost optimisation.
Given the continuing evolution of licensing models, organisations should focus on building flexibility into their approach. This can include developing a licensing governance framework that establishes clear principles and processes for managing licenses across the organisation. Consider creating a cross-functional licensing team including IT, procurement, finance, and business unit representatives to ensure diverse perspectives inform your strategy. Regularly benchmark your licensing costs against industry standards to identify opportunities for optimisation and build flexibility into vendor contracts to accommodate changing needs and emerging licensing models. While also investing in tools and skills for effective license management, as this becomes an increasingly important skill.
To prepare your organisation for ongoing changes in software licensing, consider the following key steps. Start by conducting a comprehensive inventory of your current software licenses, including types, costs, and utilisation rates. Develop user personas based on usage patterns to inform your segmentation strategy. Establish regular review processes to ensure licenses remain optimally allocated as your organisation evolves. Train your procurement team on effective negotiation strategies for software licensing. Explore emerging license management tools that can provide better visibility and control. And build relationships with key vendors to stay informed about licensing changes and influence their approach.
By taking these steps, you will position your organisation to adapt effectively as licensing models continue to evolve.
Well, that’s all for today. I encourage you to analysing your current licensing situation, segmenting your user base, and exploring whether your vendors offer different license types or tiers that could better align with your users' needs. Remember, even small optimisations can lead to significant cost savings over time. Thank you for joining me for this discussion. I hope you've found it valuable and that you now feel better equipped to navigate the evolving landscape of software licensing in your organisation.
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Thanks again for listening, and until next time, stay curious, stay connected, and keep pushing the boundaries of what's possible in tech.
