Some salad bars are all-you-can eat, some charge by the plate or the weight, and some combine traditional restaurant menus and table service with the option of going to the salad bar for all those little extras. It’s all about what you — the customer — wants and needs.

Similarly, there’s a variety of ways to license your services in the cloud.

The four main licensing models are:

• Subscription model – You pay monthly or yearly for access to a cloud service. You’re not tied to long-term and expensive contracts, and you can cancel at the end of a project or if you’re dissatisfied with the service.
• Pay-as-you-go model – You pay for the use of a specific instance, such as CPU capacity, memory, or storage. You’re charged only for how much you use.
• Pay-by-instance model – You pay for each server or server instance the vendor spins up for you. These Reserved Instances are contracted for specific periods of time (1 to 3 years), and they run 24/7.
• Bring-your-own license (BYOL) – You can use cloud software for which you already have a “perpetual” license, a license that never ends. Keep the terms and conditions you know, so there are no hidden or accidental costs.

Knowing how much of the cloud you use can help you decide on the best cloud licenses. Usage is based on many metrics such as:

• the number of per user licenses
• disk space and storage space
• the number of servers or instances
• number of processes
• size of database and number of database queries

Each of these usage metrics can be tracked with a SAM tool that gives you an accurate picture of current and projected needs.

Start your cloud migration by identifying the problems that cloud services can solve. Do you need more ad-hoc computing power? If the answer is yes, then knowing how much and how often you need that power can help you decide between pay-as-you-go and pay-by-instance licenses. Or do you need software programs that can be installed on-premises but are also available on the go? Then a hybrid cloud option might be the best fit. Figuring out a business case for the cloud will help you analyze your current infrastructure, platform, and software concerns, and guide your organization in making the right license purchasing decisions.

Whether you’ve already migrated or you’re thinking about it, your existing terms and conditions with a vendor might give you pricing advantages. Make sure you know exactly how to use your existing contracts to your advantage.

For example, Microsoft customers who have purchased three years of Software Assurance can move to the cloud at a lower price.

When you migrate to the cloud, make sure that you’re paying for only what you will need and use. The size and number of your servers, instances, and virtual machines will vary depending on your needs. For instance, consider whether you can redistribute your cores to fit in different sized and potentially cheaper instances. Don’t pay for 100% of a server if you’re only going to use 30% of it. Figure out in advance of your migration exactly how much server space you’ll need, and make sure to pay just for that.

If your cloud servers and instances don’t need to be on during certain times of the day, then get a cloud license that will allow you to turn them off or spin them down. Shifting consumption to off-peak hours can save money in the long run. Capacity management can also result in refunds. For instance, Google Cloud Platform customers are entitled to a refund if their cloud resources are not available in accordance with their Service Level Agreements. Regularly reviewing your downtime logs can help to recoup costs for any violation of the SLA.

When employees leave the company, or if they no longer need regular access to a cloud program, their existing licenses should be deactivated. This is software license re-harvesting. It prevents people from gaining access, returns usable licenses to the library, and makes them available for allocation to other employees. Instead of buying new licenses, you can better manage the ones you already have.

Many organizations encounter this licensing challenge with Salesforce license management. Employees change roles or jobs, but they continue to have an assigned Salesforce license. If someone else needs a license and there are none available, then new licenses need to be purchased. By using cloud cost optimization techniques like re-harvesting licenses, you will save money by eliminating unnecessary license spend.

Maintain flexibility without losing financial oversight. A key factor in successful cloud cost management is having a central license overview to help track which business unit is using and purchasing licenses. Use that information to decide how to better budget for license purchasing, and to make sure licenses aren’t being wasted.

For example, Business Unit A has 15 unused Salesforce licenses, and Business Unit B needs 23. Unit B can take the 15 unused licenses from Unit A and only needs to purchase 8 more. Without a central license overview, the organization would have wasted resources on licenses it didn’t need.