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How ServiceNow Licensing Works


Total ServiceNow cost is dependent on two variables:

(1) price and

(2) quantity.

Too often customers believe price alone is what prevents them from reducing their ServiceNow costs. The reality is that ServiceNow product quantity is equally important in the total cost equation and ServiceNow sales reps are skilled at manipulating volume to drive additional costs in negotiations.

To justify any ServiceNow deal, we need to ask ourselves “do we need the licenses we’re purchasing?”

This ServiceNow rightsizing report focuses on key demand forecasting techniques to mitigate purchase risk and highlights key topics related to purchasing licensing effectively to reduce ServiceNow cost:

1. ServiceNow User Types and Licensing Models

Understanding the differences between ServiceNow deal structures, user types, and licensing models is essential in figuring out which one is appropriate for your business. We examine each of the following common ServiceNow user types and licensing models:

There a 3 types of users that interact with ServiceNow:

ServiceNow Unrestricted User: For customers that wish to bypass the need for license administration, ServiceNow offers an all-employee licensing model that provides full-use product to all applicable end users. To purchase it, ServiceNow will qualify all active customer employees and contractors to be licensed for a full-use model. This allows for maximum flexibility in licensing your end users, without the need assign functionality restrictions. However, this model commonly results in over-purchasing and additional costs for ServiceNow customers. We detail when this ServiceNow price structure is appropriate, and when it should be avoided to optimize costs.

ServiceNow Fulfiller Users: Customers who would rather license individual users instead of the whole organization can purchase a set number of “Fulfiller Users.” Fulfillers get the same level of functionality as the Unrestricted licensing model, but quantities can be assigned to specific end-users. As a result, customers can pick and choose who they want to license in their organization, providing ways to cut costs without sacrificing license functionality. This section highlights the pros and cons of using the fulfiller model for assigning licensing.

ServiceNow Approver and Requester Users: Approver and Requester licenses are limited in functionality as compared to the Fulfiller license. These licenses are lower in cost and can be assigned to users who need minimal access to the ServiceNow solution. Customers incorporate these licenses into their demand forecasts as a strategy to lower the bottom-line cost total. We provide advice on ways that customers can mix and match licensing to optimize costs across Fulfillers, Approvers, and Requester ServiceNow license types.

2. ServiceNow License Under-Purchase Risk

Fear of over-purchasing causes many customers to not commit to long-term licensing needs, and only purchase ServiceNow licenses when needed. This leads to multiple small purchases at sub-optimal ServiceNow pricing. Without forecasting for ServiceNow license growth, you are eliminating a main negotiating lever. This section details the risk of under-purchasing with ServiceNow, specific ServiceNow products that are consistently under-purchased, and how the impact this can have on long-term ServiceNow costs.

3. ServiceNow License Over-Purchase Risk

ServiceNow sales reps are experts at inflating demand forecasts, leading to customers buying more than they need. This section details the ServiceNow products that are commonly over-purchased, and the impact over-purchasing has in a recurring SaaS pricing model. We detail how to identify and plan for situations where over-purchasing is a potential risk and mitigate long-term shelf-ware ServiceNow costs.

4. ServiceNow Purchase Demand Forecast Checklist

To help clients mitigate over- and under-purchasing, we developed a checklist for building more accurate demand models when engaging in a ServiceNow purchase. Building your own demand model prevents ServiceNow from doing it for you, which often leads to inflated proposals and ServiceNow costs. Understanding how much ServiceNow product you need and when you need it is central to your ability to obtain the best ServiceNow deal for your enterprise.

ServiceNow beats customers in negotiations not only through price, but through inflation of demand profiles. Over-buying and under-buying cause long term cost risk, so creating an accurate demand forecast is essential for achieving a successful ServiceNow deal.

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