Licensing fixed or variable costs?

Fixed or Variable variable
New answer on Jun 24, 2021
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Anonymous A asked on Jun 22, 2021

I see licenses clubbed as fixed costs but even with IT systems you can have multiple licenses right? And don't you pay per license in that case (which would make it a variable cost)

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Ian
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replied on Jun 23, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Licensing are almost always fixed costs. Remember, variable costs are costs that increase x $ per unit produced.

Having another employee license in a system does not mean I'm producing one more unit. Think of a license as a salaried employee. Salaried employees are fixed costs, hourly employees are variable. One more license does not result in one more unit produced.

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Anonymous B updated the answer on Jun 22, 2021

It can be both. It's not something you can generalise.

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Clara
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replied on Jun 24, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

It can be both, depends on the context. Do you want to post here the problem so we can help you? Cheers, 

Clara

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Henning
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replied on Jun 23, 2021
Bain | passed >15 MBB interviews as a candidate

It can be both. Traditionally licenses were fixed costs, (fixed cost per license and year). But especialyl with SAAS there are all sorts of licensing models that are being charged by the our or use case. 

For example: A lot of the tools that we are using in consulting are paid based on the number of client cases they are being deployed on. Think for example team collaboration tools like Trello. Or research reports that are being sold for specific client use. That's classic variable costs. 

If in doubt during a case you can always ask (though in most cases licenses would be a miniscule costs compared to others). So unless the client's business model fundamentally depends on this, you should deprioritise it.

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Adi
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replied on Jun 23, 2021
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience

If licenses are granted on a usage or demand basis then its variable otherwise its generally always fixed cost.

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Ian gave the best answer

Ian

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