The wrong licensing model can cost as much as buying the wrong software. A per-seat license where only 30% of seats are active at any given time wastes money on idle capacity. A concurrent-user license too small for actual peak demand causes access bottlenecks and forces engineers to wait for a floating seat to free up. Getting this right requires understanding both the model options and how your organization actually consumes the software.
The Main Licensing Models
Per-Seat (Named User) Licensing
Each named individual gets their own license. The seat is assigned to a specific person regardless of how often they use it. If your company has 200 engineers and each needs access, you buy 200 licenses.
Best for: Software used regularly by the same people, especially where the vendor ties features or preferences to a user account. Also well-suited to environments with audit and compliance requirements, where you need a clear record of who is licensed.
Watch out for: Overstating the number of seats needed. It is common to size based on headcount rather than actual usage. In most companies, 15-25% of named licenses go unused in any given month.
Concurrent (Floating) Licensing
A shared pool of licenses that any user can check out. If you have 50 concurrent licenses, up to 50 users can run the software simultaneously. The 51st user gets an error - or enters a queue, depending on how the license manager is configured.
Best for: Engineering, design, and scientific tools used by large teams but not simultaneously. Typical scenarios: a team of 200 engineers where only 60 are actively running a CAD or simulation tool at once.
Watch out for: License server reliability. Concurrent licensing typically requires a license manager server (FlexNet, HASP, or similar) that all clients connect to. If the server goes down, no one can run the software. Also watch for vendors moving away from this model - some have discontinued it entirely in recent years.
Per-Device Licensing
The license is tied to a specific machine, not a user. Multiple people can use the same device with the same license. Common in shared workstation environments: lab computers, factory floor terminals, kiosks.
Best for: Shared hardware environments where user identities are not tracked or vary frequently.
Watch out for: If the device gets replaced or reimaged, the license may need to be transferred. Some vendors handle this poorly. Check the transfer policy before buying.
Site or Campus Licensing
One agreement covering unlimited use at a defined location or across the entire organization. Usually structured as an annual fee negotiated with the vendor.
Best for: High-penetration deployments where most of the organization needs access. Also useful when you need to simplify administration and remove license management overhead.
Watch out for: The cost per user can look low but the total contract value is often large. Vendors use site licenses to lock in large renewals. Read the termination and price escalation clauses carefully.
Enterprise License Agreement (ELA)
A multi-year blanket agreement covering an entire enterprise, typically with a fixed annual fee. Structured around committed spend rather than specific product units.
Best for: Large organizations with complex, multi-product vendor relationships. An ELA can simplify procurement, often lowers unit cost, and reduces audit exposure.
Watch out for: ELAs lock you into a vendor for the term. They can also create budget commitments that persist even when usage drops. Organizations sometimes sign ELAs based on projected growth that does not materialize, then find themselves paying for capacity they do not use.
Sizing the License Count
The most common mistake in licensing decisions is sizing based on headcount instead of usage data. Before committing to a seat count, answer three questions:
Peak concurrent usage: For any given hour of the business day, what is the maximum number of users running the software simultaneously? Most license tracking tools or server logs can provide this. If you do not have this data, run a 30-day sample before signing.
Active users vs. licensed users: A named-user license assigned to someone who left the company six months ago still costs money. Audit active accounts quarterly. In organizations with moderate turnover, 10-20% of named licenses are commonly assigned to accounts that are inactive or belong to former employees.
Seasonal variation: Some software shows significant seasonal demand spikes (year-end finance tools, summer project management peaks). A permanent concurrent license sized for typical demand may be too small for peak months.
Multi-Vendor Complexity
Most organizations use software from dozens of vendors, each with different licensing models. The practical challenge is not choosing one model - it is managing a portfolio of models simultaneously.
This is where procurement experience matters more than policy. A rule like “we only do concurrent licensing” will not work because vendors do not all offer concurrent models. What you need is a systematic way to evaluate each product on its own terms, document the decision, and track usage after deployment.
Three things help here:
- A software asset register - a record of what you own, from whom, under what model, and when it renews.
- Utilization monitoring - tools that show you actual usage, not just license assignments.
- A review cycle - quarterly or at least annual review of licenses against actual usage, timed before renewals.
Before the Next Renewal
When a license renewal comes up, treat it as a checkpoint rather than a routine transaction. Pull usage data from the past contract period. Check whether headcount in the relevant teams has grown or shrunk. Ask whether the product is still the right fit or whether alternatives have become competitive.
Vendors price renewals based on your inertia. Organizations that treat renewals as negotiable - and bring actual usage data to the conversation - consistently get better terms than those that sign whatever the auto-renewal invoice says.
If you are working through license model selection across a complex multi-vendor environment, we have been handling exactly this kind of analysis since 1997. We work through what you need, not what is easiest to sell.