How many ITSM tool licenses do we need

By ITIL from Experience ©

Determining the number of Licenses for a new ITSM tool is not a simple task. In addition to understanding the vendor's license model (e.g. SaaS, dedicated, concurrent), there are a number of organizational variables to consider. As a result, writing a business case, calculating the Total Cost of Ownership (TCO) or to close a deal with an ITSM tool supplier is not straight forward.

Moreover, an inaccurate estimate can have a real impact. Not enough licenses and people are not able to log in or work in the ITSM tool. Buying too many licenses, "just in case" is an expensive overcapacity to purchase and to uphold given the annual maintenance and support fees (e.g. 20% of list price). So, getting the right number of ITSM tool licenses required is important.

The License Model
The first step is to understand the supplier's license model. Each ITSM tool vendor has its own license and cost model. Usually, it can be one, or a combination, of the following:

Subscription or perpetual (e.g. Software-as-a-Service SaaS, one-time purchase)
Module or component-based (e.g. Service Catalogue/self-service portal, Process Workflow1 Designer, CMDB, Discovery Agent, mailbox reader, APIs)
Records based (e.g. number of clients/contact users, Configuration Items or Assets in the CMDB)
Transaction based (e.g. $ per Service Request logged)
Type of user license (e.g. named, assigned, per seat, dedicated vs. shared, pooled, floating2 , concurrent)
Role-based (e.g. self-service portal user, IT Specialist like tier 2, system administrator, process designer, CI Librarian, Change Approver) (See How many Configuration Librarian(s) do we need)
Installations (e.g. based on the requirement of the organization's SDLC3 this includes production and non-production instances/environments like a sandbox, Development, Training, Test).
Enterprise license agreement (ELA) (i.e. typically a fixed price for unlimited access to everything in the contract including the kitchen sink.

To add to the complexity, ITSM tool vendors use and combine the above to configure their product offerings. For example, a popular vendor charges per request logged but doesn't charge for the process designer. Moreover, vendors are usually willing to negotiate a custom model "just for you" to meet your particular business needs in order to win your business. This also explains why it is difficult to compare the license cost of one ITSM tool to another.

Organization Factors
The second step is to understand the number of licenses required based on a reasonable estimate.

Some people think that this shouldn't be too difficult. Just figure out how many users, records, modules or environments are needed based on the current tool and project objectives. The challenge is that comparing two license models can be complex.

For example, the existing tool may be based on assigned licenses where every user must have a license. In contrast, the new tool may offer assigned and shared licenses. Let us explore this challenge further for a moment.

The shared licenses work as follows. When the user logs into the tool, a license is taken to work in the tool. When they exit the application, like when they log off, close the application or after a certain amount of time of inactivity, the license they had is released and made available for their next session or for another user accessing the tool. However, if there are no licenses available, because they are all being used, the user is denied access and cannot use the tool.

Of course, the System Administrators and Service Desk staff should have a permanently assigned license to guarantee that they can log in to the tool. However, an assigned, a dedicated license is much more expansive than a shared one. While some service desks have shift work which sometimes overlaps using shared licenses is impractical and risky if all staff is required to meet call volumes. Moreover, it adds administrative complexity to figure out the type of license each service desk staff gets in order to contain costs. Likewise, assuming that Technical Specialists in the back office infrequently use the tool may not hold true for the Change Manager, the IT Security or the Monitoring team to name a few.

Thus, when the vendor’s license model includes shared licenses, an analysis of who uses what and how much time they spend using the tool each day may be required (e.g. conduct a survey, contact line managers (challenging people that claim that they use the tool more than there are hours in a day). In addition, every vendor will propose a ratio of users per shared license.

One vendor typically recommends a ratio of one (1) shared license for every four (4) users. However, based on our experience, the ITSM tool was successfully managed with a ratio of one (1) license for six (6) users due to the limited maturity of that organization. Be careful when a vendor recommends a ratio of one (1) license for every three (3) users! The organization needs to be very mature with an IT culture that makes the ITSM tool central to their operations in order to be worthwhile – otherwise, the vendor is simply increasing their revenues (see How to get people to log tickets).

The good news is that a tool vendor introduced a couple of years ago the functionality to assign shared licenses to a specific user group (e.g. Support Group). This makes it significantly easier to ensure that a group like the Service Desk always have a license available without having to assign a license to each of their staff.

Transformation Project
To increase the complexity of forecasting, many organizations use the new ITSM tool as a catalyst for IT's business transformation. It also typically expects that users of the tool will increase since re-engineered processes and improved practices are usually implemented as part of the transformation. In addition to the role and usage analysis mentioned above, factors to consider when preparing a reasonable estimate includes:

ITSM Program/project scope and timelines
Culture of the organization including:
- Management support and ability to execute (see What does it mean to have CIO and management support)
- Capability to absorb change (see Why are people not making ITIL a priority)
Current maturity level (see Should we do a maturity assessment) may flock to the new ITSM tool or they may resist using it or to centralize their data to the CMDB (see Do we need CIO support to succeed).

Procurement Cost and Administration
In some organizations, it may be particularly difficult to buy licenses after the initial tool’s purchase. For example, in many government organizations, it needs to be budgeted for the next fiscal year, then one or more quotes need to be asked from suppliers, a justification or briefing note needs to be prepared, the purchased must be approved (sometimes by several level of management), processed by accounting, ordered by the purchasing clerk, fulfilled by the supplier, confirmed by IT operations that the goods were received to finally review and approve the invoice for payment before receiving the license key from the supplier, then raising an RFC to before the new licenses available to users. Thus, one may be tempted to buy more licenses to future-proof the tool's operations to avoid this administrative burden.

However, as mentioned previously, overcapacity is expansive and many suppliers will not reimburse licenses over-purchased (even though they may allow stopping the maintenance and support for components not used). Thus, a mistake when estimating the number of licenses required is costly.

Finally, it is always good practice to liberate assigned licenses as part of the off-boarding process of staff along with a periodic audit to ensure that these assets are properly utilized.

Published on: 2020-02-17

"The ITSM tool can be many things to many people. It is better to do less very well than a lot poorly." Denis Matte

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