August 19, 2025
License Models: The Maze Where Every Turn Costs You
Ever read a licensing guide and felt like you stumbled into a choose-your-own-adventure book?
Page 12: Per-user model for enterprise products → go to page 38
Page 12: Per-user model for security products → go to page 42
Page 38: Concurrent model → skip to page 54
Page 54: Consumption-based model → return to page 12 and start over
When your product line grows faster than your licensing framework — or you acquire companies with similar products but slightly different license or billing models — you end up with a patchwork of rules:
Some tied to humans
Some tied to usage
Some tied to mystery metrics nobody remembers defining
And some that use the same metric name but with different definitions, quietly multiplying the ambiguity
Customers — and even your own sales teams — end up guessing which rules apply. And when no one’s quite sure, it’s only a matter of time before revenue leakage (and audit headaches) start showing up.
If your license model map reads like a labyrinth, you’re not just losing your way — you’re losing money.
Why the Maze Exists
The problem usually starts with growth outpacing governance. A vendor launches new SKUs or bundles, bolts on new products through acquisitions, or races to meet a sales request with a “one-off” license term. Each step makes sense in the moment. But over time, the accumulation creates overlapping, contradictory, and confusing license models.
What makes it worse:
Acquisitions. Each acquired product often comes with its own legacy license model. Harmonization is rarely immediate, leaving customers with inconsistent definitions.
Technology shifts. Moving from perpetual to subscription to SaaS changes what can realistically be measured and enforced.
Sales pressure. Teams under pressure to close deals may introduce exceptions or “special definitions” that are impossible to sustain later.
The result is a maze where both vendors and customers can get lost.
War Story: When “Named User” Means Two Different Things
This isn’t hypothetical.
A software vendor (Company A) acquired another company (Company B).
Company B’s flagship product was licensed by Named User — a term that seemed straightforward but had its own contractual definition.
Company A’s flagship product also used Named User, but the definition was very different.
As system integrations lagged, Company B’s customers purchasing additional Named User licenses suddenly had those orders processed under Company A’s model. Overnight, they had two incompatible buckets of licenses:
Company B’s version: perpetual, never-expiring rights.
Company A’s version: narrower scope, different obligations.
When the customer was later audited, the process was as confusing as it was frustrating:
By one definition, they were massively out of compliance.
By the other, they were over licensed.
Same metric name. Same vendor (post-acquisition). Completely different realities.
The fallout? Outrage, confusion, and a relationship that required careful repair.
Why Vendors Struggle
It’s tempting to blame vendors for creating these mazes. But in reality, most don’t set out to confuse customers. The struggles are real:
Mergers and acquisitions bring legacy models that take years to reconcile.
Engineering vs. commercial pressure. What product telemetry measures doesn’t always line up with what contracts say.
Internal silos. Product teams, finance, and legal may not coordinate, leaving inconsistent language in the field.
Even with good intent, the outcome can be models that are hard to explain, harder to enforce, and dangerous to leave unchecked.
Why Customers Struggle
Customers aren’t off the hook either.
Assumptions vs. contracts. Teams assume terms like user or transaction carry plain-English meaning. They rarely do.
Operational sprawl. Large organizations struggle with clean entitlement tracking. Disabled accounts, shared logins, and temporary rights blur the picture.
Audit anxiety. When vendors come calling, many customers discover years of unintended non-compliance — and the financial hit that follows.
What customers see as “gray area,” vendors often view as black-and-white entitlement enforcement.
The Cost of Ambiguity
The hidden toll of a license maze is steep:
For vendors: revenue leakage, failed audits, weak defensibility, and damaged credibility.
For customers: surprise invoices, strained vendor relationships, and budget chaos.
Both sides lose when clarity is missing.
How to Escape the Maze
The good news? The maze isn’t permanent. With discipline and clarity, both vendors and customers can redraw the map:
Anchor to measurable definitions. Every license model should define its metrics in terms that are enforceable, auditable, and transparent.
Review historical contracts. Definitions evolve. Looking backward reveals inconsistencies that must be corrected.
Validate system enforcement. If software tracking doesn’t match contractual definitions, it creates unsustainable risk.
Train internal teams. Sales, support, procurement, and IT all need the same understanding of what license terms actually mean.
Closing Thought
Software licensing isn’t about traps. It’s about fair value exchange — aligning what customers use with what vendors get paid for delivering.
But when license models grow unchecked, they turn into a maze where every turn costs you.
At RevenueEdge Advisors, we help both vendors and customers redesign their maps so every path leads somewhere logical — and fully billable.
👉 Contact us today to talk about how we can help untangle your license models.