Exit ServiceNow ELA – When an Enterprise Agreement Becomes a Liability
ServiceNow’s Enterprise License Agreement (ELA) is often touted as an “all you can eat” software bundle – a multi-year contract covering broad use of the platform.
During times of rapid expansion, an ELA provides convenient bundled pricing and volume discounts. However, once expansion slows, many customers find they’ve outgrown their ELA or are overspending on unused capacity. Read our comprehensive ServiceNow ELA exit guide.
Continuing under an ELA by default can turn into a costly habit. An agreement that once accelerated innovation can become a liability when usage plateaus is evident. Exiting or downsizing an ELA isn’t a failure – it’s a strategic move to realign costs with actual usage.
Leaving an oversized ELA lets you regain control of spending, tighten governance, and cut waste without losing any ServiceNow value your business truly needs.
Sign 1 – Usage Has Plateaued or Declined
Enterprise agreements are volume-based bets on growth. ServiceNow ELAs assume you’ll continually roll out more modules and onboard more users over the term. If your usage has leveled off or declined, the ELA quickly becomes a financial burden.
You’re essentially paying for growth that isn’t happening. Consider these indicators:
- New deployments stalled? Are new ServiceNow modules or major features no longer being deployed in your environment?
- User counts flat? Is your licensed user count flat or shrinking, instead of the double-digit growth you anticipated when signing the ELA?
- Activity dropping? Has usage per license (logins, transactions, records updated) decreased, indicating lower engagement on the platform?
In a steady state, ELA pricing often overshoots your actual needs – it’s common to see renewal quotes 25–50% above real usage when growth doesn’t materialize. You could be carrying thousands of extra licenses or dozens of modules that aren’t truly needed.
Mini-Scenario: A technology company with 15,000 ELA seats found real active usage steady at only 9,000 users. Despite no growth in adoption, their renewal quote still rose by 12%. Essentially, they were asked to pay more for the same usage – a clear sign the ELA was out of sync with reality.
Pro Tip: An ELA only pays off in growth mode – in a steady state, it becomes a tax on your IT budget.
Sign 2 – Shelfware or Underutilized Modules
“Shelfware” refers to modules or licenses you’ve paid for but aren’t actually using.
To uncover shelfware in your ELA, perform an honest audit:
- Inventory unused apps: List out which ServiceNow applications or modules you’re entitled to under the ELA and flag those that are not deployed or barely used.
- Identify unowned modules: Identify any module where no internal team “owns” its adoption. If you can’t name a leader responsible for it, chances are it’s not being used.
- Quantify unused licenses: Calculate what percentage of your licensed users or capacity is going unused. For example, if you have 10,000 licenses but only 6,000 active users, that’s 40% unused – a huge red flag.
Many enterprises find that 20–40% of their ELA entitlements sit unused. All that shelfware inflates renewal costs – you’re paying again for what you didn’t use – and can even invite compliance risks if it’s not monitored.
Pro Tip: If you can’t name the owner of every module you’re paying for, you’re funding shelfware.
Sign 3 – Cost Escalations Outpacing Value
Another clear signal to consider exiting is when the cost keeps climbing while the value plateaus. ELA renewals are notorious for built-in price hikes.
You might see a renewal quote that’s 10–15% higher than last term despite no growth in usage. Why does this happen?
- Automatic uplifts: Many ELA contracts include automatic yearly price uplifts, assuming your usage will keep growing.
- All-or-nothing renewals: ServiceNow often ties its deepest discounts to renewing the entire bundle. If you try to drop any piece, the price per remaining component jumps, erasing the savings.
Over time, you end up paying more for the same (or even less) value. That’s a clear sign your ELA is no longer passing the cost-benefit test.
Mini-Scenario: A European manufacturer saw its ELA renewal jump 20% (from €6 M to €7.2 M annually) with no added usage – a breaking point that put an exit on the table.
Pro Tip: ELA renewal inflation is often non-negotiable – but your decision to exit is entirely in your control.
Sign 4 – Business or IT Strategy Has Shifted
An ELA reflects the vision you had when you signed it, which might not match reality today. If your business or IT strategy has significantly changed, the ELA’s scope may no longer align with your needs. Your company’s strategy may also have evolved.
Mergers or divestitures could leave you over-licensed for a smaller organization. Our new tools might have replaced some ServiceNow modules (e.g., adopting a dedicated HR system instead of HRSD). In short, the ELA’s coverage may not fit your current operating model. You could be paying for features and capacity that don’t align with tomorrow’s priorities.
Pro Tip: Your ELA is a snapshot of yesterday’s IT strategy – make sure it isn’t holding you back from tomorrow’s.
Read our exit plan, ServiceNow ELA Exit Plan – Transitioning from an Enterprise Agreement to Individual Modules.
Sign 5 – Lack of Internal Visibility or Governance
A lack of internal visibility is a hidden danger. If no one has been measuring what’s actually used under your ELA, you’ll be at a severe disadvantage come renewal time.
Checklist – ELA Visibility & Governance:
- Usage metrics in hand? Can you produce a detailed usage report by module and user? Do you know how widely each application is actually used?
- Accountability? Do you have clear owners for each module or entitlement? Or has responsibility blurred over the ELA term?
- Regular true-ups? Have you performed an internal license audit or true-up in the last year?
Without data and governance, you’ll be negotiating on ServiceNow’s terms, not yours. The vendor will have its own (generous) usage estimates, and you won’t be able to counter with facts. Worse, you might discover too late that you have far fewer active users than you’re paying for – but only after committing to another expensive renewal.
Mini-Scenario: A U.S. healthcare provider faced its renewal with incomplete usage data, leaving it no choice but to renew the ELA on ServiceNow’s terms – likely overpaying for another cycle.
Pro Tip: If you don’t know your usage, ServiceNow will define it for you – and you’ll pay according to their numbers.
Sign 6 – Better Flexibility Outside the ELA
Ironically, an ELA’s all-inclusiveness can reduce flexibility – you’re locked into a broad, multi-year commitment. Outside an ELA, you can tailor licenses to your needs and remain agile as requirements change:
Outside the ELA model, you pay only for what you use. If a module isn’t delivering value, you can drop it at the next renewal and avoid that cost. This agility means your licensing can evolve as business needs change – without waiting years for a contract to catch up.
Leaving the ELA “bundle” makes costs more transparent: you see exactly what each product costs and can benchmark the value of ServiceNow’s modules against alternatives. You regain clarity on where ServiceNow is worth the investment and where it’s not.
In practice, exiting an ELA often means downsizing into a targeted set of licenses or a smaller agreement. Many savvy buyers negotiate partial or product-specific renewals: keep the core ITSM and a few critical modules on standard licensing, and drop the entitlements that were just “nice to have.” This restores your control – you can always add licenses or modules later if needed, but you won’t be paying for them in the meantime.
For clarity, here’s a comparison of staying in an ELA versus moving to a more flexible licensing model:
| Aspect | Staying in the ELA (Status Quo) | Exiting the ELA (Selective Licensing) |
|---|---|---|
| License Scope | Covers most modules enterprise-wide, whether used or not. | Only the needed modules/users, with scope adjustable each term. |
| Cost Structure | Multi-year fixed spend (often with yearly price hikes). | Pay as you go; maybe higher unit costs, but likely lower total if usage is modest. |
| Flexibility | Access to all features, but rigid contract – can’t drop anything mid-term. | Can drop or add modules at each renewal; easier to trial alternatives. |
| Ideal Scenario | Best for rapid expansion when you plan to roll out many modules/users (predictable cost). | Best for steady or evolving needs where agility and cost control matter; you can pivot without overcommitment. |
Pro Tip: The freedom you gain by exiting an ELA is a feature you were paying for all along – if you never used that flexibility, it wasn’t true value. Outside the ELA, flexibility comes from smarter spending, not just broad entitlements.
Building Your Case for an Exit
Deciding to end your ELA is a significant move, and it requires a solid business case to get executive buy-in. You’ll need to demonstrate that the financial and operational benefits outweigh the convenience of the status quo.
Checklist – Preparing an ELA Exit Business Case:
- Build a module-level ROI report (cost vs. utilization for each part of the ELA).
- Calculate cost per active user or per workflow for key modules to highlight inefficiencies.
- Get buy-in from stakeholders (IT owners, finance managers) on what can be reduced or cut, ensuring alignment on the plan.
- Plan the transition (e.g., a short bridge or phased approach) to ensure no disruption.
Pro Tip: Build the case with data, not emotion – hard numbers will get the approval for change, where gut feel or frustration won’t.
5 Key Questions to Ask Before Your Next ELA Renewal
- Are we still expanding our ServiceNow footprint – or just maintaining it? If you’re not in growth mode, an ELA might be oversized for your needs.
- How much of our current entitlement is actually in use? Know your utilization percentage – low usage means you’re paying for shelfware.
- Will renewing the ELA lock us into any outdated modules or pricing tiers? Avoid committing to elements that don’t fit your future strategy.
- Could we meet the same needs with a more modular or hybrid licensing approach? Explore if targeted licenses or a hybrid model could cover your requirements more economically.
- Do we have the internal visibility to negotiate from data, not estimates? Ensure you can back up your position with usage data – otherwise, you’re at the vendor’s mercy.
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