By Donna Yobs
There are many approaches that companies can use for internal bill back (aka chargeback) of software licenses to optimize business results. I like to think of this in terms of your application usage model. Typically, your goals are to track software usage, allocate costs appropriately, and promote the desired software user behavior. I’m going to focus on the concurrent licensing model, as this is still one of the two most common licensing models software publishers are using today. (See the Key Software Trends report).
Bill back goals commonly expressed by enterprises:
- Spread software costs across the departments that are using the software
- Determine IT resources needed across the organization
- Effect user behavior (avoid peak hours usage, increase awareness of license denials)
- Enable compliance reporting for both internal and external audits
- Bill back clients appropriately by projects
Some Common Bill Back Approaches:
Approach |
Metric |
Justification |
Behavior |
|
None |
Self Managed: Each group evaluates, acquires and uses software on their own.
|
Departments define their costs independently. |
No consistency across enterprise departments. Lacks ability to realize savings from sharing of resources across the whole company. |
|
Department Based |
Split shared license pool costs between departments. Divide application cost by # departments using the application.
|
Each Department has equal access |
Allows for shared licenses, does reflect disproportionate license use across departments. |
|
User Based |
Split shared license pool costs between each user. Divide application cost by # users of the application.
|
Department size reflects valid bill back charges |
More representative of use but may result in limiting application use to subset of users on the team. |
|
Total Time Based |
Split shared license pool costs by total time used by each user. Divide application cost by # hours used.
|
Usage hours reflect valid bill back charges |
Users tend not to notice peak hours and may end up creating a false need for more licenses. |
|
Total Peak Hour Based |
Split shared license pool costs by total time used during peak usage hours by each user. Divide application cost by # peak hours used.
|
Promotes spreading of workload outside of just peak times. Captures cost of adding licenses when heavy peak usage drives the need for new licenses. |
Allows users to control cost by using applications during less busy times |
|
Hybrid |
One charge for basic usage + Higher cost per Peak hour usage. |
This reflects the cost of on-going maintenance for the base and purchasing needs for new licenses. |
Allows users to control costs by using applications during less busy times
|
The approach needs to take into account a balance between ‘fairness of accounting’, ease of accounting, and desired behavior. If you use one metric to spread costs evenly but end up with employees who are afraid to use the software for fear of charges, this can lead to an undesirable outcome of slower time to market.
Bill back can be an important component of your optimized license management strategy, helping you realize reduced costs and drive user behaviors that align with your corporate goals. Key questions to ask when choosing a bill back model are:
- Will this provide predictability and control to each department?
- Will this help bring the product to market faster or hinder development?
- Will this reflect the cost of the project?
Are you using bill back effectively in your organization? What models have you had success with?
