Key Takeaways
- The license model defines the unit of measure: person, simultaneous access, device, or consumption.
- Microsoft bills Microsoft 365 and Dynamics 365 primarily with per-user licenses.
- IBM defines Authorized User and Concurrent User as distinct units of measure.
- Pricing tier and license model are separate components of a software contract.
Which license models exist?
Common license models differ primarily in their unit of measure.
- Named User: every authorized person requires their own license
- Concurrent User: simultaneous active accesses are counted
- Device license: the license is tied to a specific device
- Usage-based: billing is based on consumption, such as transactions or storage
- Site or flat-rate license: a fixed fee covering an entire company or location
How does the license model affect costs?
The license model determines which change in the company triggers additional costs. With Named User licenses, costs rise with every new hire; with Concurrent User licenses, they only rise when simultaneous usage increases; with usage-based models, they scale with consumption. Knowing the model allows companies to budget realistically for growth and turnover.
What should small and medium-sized businesses watch out for in a license model?
Small and medium-sized businesses should compare the license model against their actual usage patterns before signing a contract.
- How many people need the tool in total, and how many at the same time?
- Are there minimum quantities or fixed contract terms?
- Can licenses be reassigned when employees leave?
- How do prices change when upgrading to a higher tier?
Example: License Model in practice
Example: A logistics company with 120 employees evaluates scheduling software. 40 dispatchers need access, but they work in three shifts so at most 15 are logged in simultaneously. Instead of 40 Named User licenses, 15 Concurrent User licenses suffice—provided the vendor offers that model.
License Model vs. Pricing Tier (Plan)
| Aspect | License Model | Pricing Tier (Plan) |
|---|---|---|
| Describes | Counting and billing logic | Feature scope of a product edition |
| Example | Per user, per device, by consumption | Basic, Business, Enterprise |
| Effect on costs | Which metric is counted | Price per counted unit |
| Changeability | Usually only when changing contracts | Frequently possible via upgrade |
The license model defines what is counted, whereas the pricing tier defines which features are included and what each counted unit costs.
How does Sovaro help with License Model?
Sovaro records the license model, contract, renewal date, and notice period for each subscription. Ahead of a renewal, you can review license quantities against actual demand; interpreting the vendor's license terms remains your responsibility.