Seat-Based Pricing
Definition
Seat-Based Pricing
Seat-based pricing charges a fixed amount for each user entitled to access a platform or service, whether or not they log in. Entitlement is the billing trigger, not activity, which is why unused seats are the commonest source of waste.
It is the dominant model in business software — and it carries straight into outsourcing, where platform costs are passed through or bundled into a service fee.
Two conventions exist and they behave very differently. A named seat belongs to one person; a concurrent seat is shared by whoever is logged in at the time.
Buyers of outsourced services meet this in three places — the provider’s own tooling, licences the buyer supplies, and any platform the provider resells.
Key takeaways
- Payment attaches to entitlement, so a dormant user still costs full price.
- Named seats are simpler to administer and more expensive at low utilisation.
- Concurrent seats cost more per seat and fewer are needed for shift-based work.
- Joiner and leaver discipline is the single biggest controllable saving.
How it works
Seat pricing is deliberately simple. Stripe’s documentation describes per-seat pricing as a model where “each pricing unit represents one user”, which is all the arithmetic there is.
Administration is where the cost actually sits. Microsoft’s guidance is that a buyer specifies the number of licences needed, assigns one to each person, and can “buy more licenses to accommodate new people, or reassign licenses to other users when someone leaves”.
Reassignment is the word that matters — organisations that never reclaim leaver seats pay for a workforce they no longer employ, and high-attrition environments are the worst offenders.
| Seat type | What it entitles | Where it wins |
|---|---|---|
| Named user | One identified person | Stable teams, low attrition |
| Concurrent user | Any user, up to a simultaneous limit | Shift work and 24/7 coverage |
| Device seat | A workstation, any occupant | Shared floors and hot desking |
| Read-only seat | Viewing without transacting | Supervisors, auditors, clients |
Concurrent licensing repays study in outsourcing. A floor running three shifts needs roughly a third of the named seats, because the same entitlement covers each shift in turn.
True-ups are the third cost. Annual reconciliation against actual assigned seats can produce an unbudgeted invoice, and the contract should state when the count is taken.
Examples
Seat pricing is easy to buy and easy to waste, so the difference between two organisations on identical contracts can be substantial. These four cases show where the money goes.
A financial services firm buys named seats for a case management platform used by an offshore team. Attrition runs high, leavers are deprovisioned weekly, and the licence count tracks headcount closely.
A retailer buys named seats for a 24/7 support desk. Three shifts each hold their own entitlement, and moving to concurrent licensing later cuts the count by more than half.
A healthcare provider never reclaims seats from departed contractors. An audit finds that a fifth of assigned licences belong to people who left over two years.
A logistics firm negotiates a quarterly true-up rather than an annual one. Cost rises are visible as they happen instead of arriving as one uncomfortable invoice.
Related terms
Three different things in outsourcing are called a seat, and only one of them is a licence. The entries below separate them, because the cost behaviour is completely different in each case.
- Seat leasing: renting physical desk space and infrastructure, not software access.
- License outsourcing: handing licence administration itself to a third party.
- XaaS outsourcing: the subscription packaging most seat pricing sits inside.
- Rate card: where pass-through seat costs should be listed explicitly.
- Vendor management outsourcing: the function responsible for reclaiming unused entitlements.
- Full-time equivalent utilization: the measure that reveals how many seats are genuinely needed.
- Total cost: the view that surfaces licence waste before renewal does.
FAQ
Named or concurrent seats?
Named suits stable single-shift teams; concurrent suits shift patterns and shared coverage. Concurrent costs more per seat and usually far less in total for round-the-clock work.
Does a dormant user still get charged?
Yes. The charge attaches to the entitlement, not to any login, which is precisely why deprovisioning discipline saves real money.
How is this different from pay per seat outsourcing?
That model prices a staffed production position with a person in it. This one prices access to a system, with no labour attached at all.
Who should own seat reclamation?
A named role inside vendor management, with a scheduled review. Leaving it to the service provider creates an obvious conflict of interest.
What is a true-up?
A reconciliation between contracted and actually assigned seats, usually annual. Quarterly true-ups cost the same and remove the year-end surprise.
Can seat costs be bundled into a service fee?
Often, and it simplifies the invoice. The risk is losing visibility of the underlying count, so the contract should still report seats separately.
Compare providers who itemise platform seats rather than burying them, through the Outsource Accelerator directory.
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