SaaS software has become integral to efficient operations in today's fast-paced and growth-oriented business landscape. However, heavy reliance on these tools can come at a significant cost, and organizations feel pressure on their IT budgets. 

The situation becomes even more complex when you realize that a substantial portion of cloud spending—around 50%, according to Gartner—is often underutilized. These unused resources are frequently a result of overlapping subscriptions or dormant licenses. In parallel, research by Flexera estimates that organizations, on average, squander nearly 29% of their software expenditure. This translates to millions of dollars in potential savings that remain untapped.

The challenge is clear: how do you navigate this complex software landscape efficiently and make the most of your IT budget? 

The solution lies in mastering the art of software license management—a practice that involves meticulous monitoring of licenses, subscriptions, renewals, and pricing changes. By adopting this proactive approach, organizations can trim unnecessary expenses and ensure their software ecosystem remains agile.

This blog post will delve into software license management, covering the types of licenses, their benefits, key features, and best practices. It will also address challenges commonly faced by IT teams in managing enterprise software licenses.

What is software license management?

Software license management (SLM) involves overseeing and organizing an organization's software licenses, encompassing procurement, tracking, and optimization. SLM falls under the broader domain of software asset management, focusing on monitoring and documenting how software licenses are utilized within a company.

Many businesses rely on specialized tools to facilitate license management, especially for SaaS applications. These tools maintain accurate license records, monitor usage, and generate compliance reports. They provide insights into a company's license landscape, usage patterns, and renewal timelines.

The business impact of software license management tools

The true value of software license management tools lies in their capacity to enhance license utilization. Organizations can optimize spending by gaining clarity on software needs making informed decisions about new software acquisitions and license renewals.

The software license management process holds significance for both financial and legal reasons. Effective management ensures cost-efficient usage, preventing unnecessary expenses. Moreover, it ensures legal compliance by upholding software agreements, safeguarding against legal repercussions.

Various SLM tools offer diverse features and advantages. Which technology you choose depends on factors such as the organization's software inventory size, the complexity of SaaS licensing agreements, and overall software management strategy.

Types of software licenses

To choose the right type for your needs and be compliant with legal requirements, let's run down through some common types of software licenses, their respective benefits, and some downsides:

1. Perpetual license

With a perpetual license, the user can use the software indefinitely after a one-time payment. Often used for desktop applications, this type of license remains valid for the life of the software and does not require renewal.

Advantages

• Once purchased, the software can be used indefinitely without additional recurring costs.
• Provides the security of owning the software outright, offering stability in terms of long-term planning and budgeting.

Drawbacks

• Future updates and support might not be included, leading to additional costs or security risks.
• The software may become outdated as new technologies and features are developed.

2. Subscription license

Subscription licenses involve a recurring fee to use the software for a specified period. Cloud-based services and SaaS platforms often use these licenses due to their flexibility and scalability.

Advantages

• Typically includes continuous software updates and support.
• Allows easy user numbers and feature adjustment, making it ideal for businesses with fluctuating needs.

Drawbacks

• Can become more expensive over time due to recurring payments, impacting long-term budgets.
• Creates a dependency on the service provider for continued access and functionality.

3. Concurrent, named, and user-based license

Concurrent license:

‍This allows a set number of users to access the software at any given time. 

Advantages of concurrent license 

• Ideal for software that doesn't require constant access, as it reduces costs by limiting the number of simultaneous users.
• Allows different users to access the software simultaneously, providing operational flexibility.

Named user license:

It is assigned to specific users, and only they can use the software. 

Advantages of named user license 

• Ensures that specific users have guaranteed access is essential for software requiring user-specific settings.
• Allows tighter control over who can access the software, enhancing security and compliance.

User-based license:

Tied to the number of users with access, regardless of who they are or how often they use the software.

Advantages of user-based license

• Easier to budget for as costs are directly linked to the number of users.

Some general limitations 

• There's a risk of paying for more licenses than are needed, leading to unnecessary costs.
• Tracking and managing who has access and ensuring compliance can be complex and time-consuming.

4. FLOSS license

FLOSS licenses allow users to use, modify, and distribute the software freely.  It is common in software development, where collaboration and modification are encouraged. 

The main types of FLOSS licenses include GNU General Public License (GPL), Apache License, and MIT License.

Advantages

• Users can modify and redistribute the software, encouraging innovation and customization.
• Often comes with a strong community for support and collaboration, enhancing the software's value and utility.

Considerations

• Integrating open-source software with existing systems or proprietary software can sometimes be challenging.
• Some open-source licenses have specific requirements for redistribution, which can be legally complex to navigate.

Benefits of software license management tools

One of the most evident benefits of software license management tools is their significant cost savings. Beyond this, SLM provides several additional benefits:

1. Identify unnecessary resource spending: Software license management services are key to monitoring actual software utilization post-purchase. It provides insights into user engagement with various software, helping to determine the precise number of licenses needed. This leads to cost-effective decisions and reduces spending on unused software licenses.
2. Improved compliance: SLM ensures that all software in your organization is used in line with licensing terms, offering clear visibility and compliance. This mitigates risks associated with unlicensed software use or non-adherence to license agreements, preventing potential legal issues and compliance.
3. Risk mitigation: SLM is essential for modern risk management as it enforces compliance with license agreements, preventing legal and financial risks. It also identifies and addresses security vulnerabilities from outdated or unauthorized software, enhancing cybersecurity and safeguarding your business.
4. Efficient asset management: These tools offer a comprehensive view of all software assets, enabling effective management and utilization. It identifies redundant or seldom-used licenses, allowing for reallocation or discontinuation, and aligns software investments with actual usage.

Features of an effective license management tool

Here are key features that make a software license management tool stand out:

1. Upstream integration

SLM integrates seamlessly with procurement and vendor management systems. This ensures that new software acquisitions are immediately accounted for and managed within the license management framework, maintaining an up-to-date inventory and aiding in compliance from purchase.

2. Automation

The tool should have automation capabilities for routine tasks, including license renewals, compliance audits, and inventory management. Automation streamlines these processes and significantly reduces the potential for human errors, leading to more accurate license management.

3. Delegation

Effective SLM tools facilitate the delegation of specific tasks and responsibilities. This functionality is crucial in larger organizations, enabling different teams or departments to collaboratively manage and track software licenses efficiently.

4. Security

Security is a non-negotiable feature in SaaS environments. The SLM tool must have robust security protocols to safeguard sensitive licensing data. This is vital to prevent unauthorized access and ensure compliance with data protection standards.

5. Relationship mapping

An advanced feature of a good license management tool is the ability to visually map the relationships between licenses, users, and devices. This insight is invaluable for understanding software deployment across the organization and optimizing license allocation and usage.

6. Real-time updates

Keeping abreast of the latest changes in software licenses is crucial. Hence, the tool should provide:

• Real-time updates and tracking
• Ensuring that the management team always has the most current and accurate information for decision-making
• Avoiding licensing pitfalls like non-compliance or over-licensing

Best practices for software license management

To elevate your software management, start with a specialized tool for software license management. It's a strategic measure, going beyond the fragmented approach of managing licenses. This tool offers a consolidated view of all your software, making implementing best practices simpler and transformative. It's about bringing efficiency and clarity to managing every software license in your organization from one central point.

Now, let's review some best practices for impactful SLM:

1. Policies and workflows

Establishing clear policies and structured workflows in software license management involves setting guidelines for acquiring, using, and retiring software licenses. Well-defined workflows ensure consistent management practices across the organization, reducing risks of non-compliance and inefficiencies.

2. Tool utilization

Maximizing the use of your license management tool is key. It's not just about having the tool but using it to its full potential. This means regularly updating the software inventory, monitoring compliance, and using the tool's analytics to make informed decisions about software needs and usage.

3. Employee training

Employees need to be well-versed in the organization's software policies and the use of the license management tool. Regular training sessions raise awareness about the importance of software compliance and how to use the tool effectively for day-to-day tasks.

4. Centralized reporting and management

Implementing a centralized system for reporting and managing software licenses brings numerous benefits. It provides a unified view of software assets, facilitating easier monitoring, management, and decision-making. Centralized reporting helps identify usage patterns, compliance status, and opportunities for cost-saving.

Getting started with software license management tools

To maximize the ROI of your licensing software, focus on some key points about software license management tools.

1. Selecting the right tool: The first step is choosing a software license management tool that aligns with your organization's size, complexity, and specific needs. Consider factors like compatibility with existing systems, ease of use, scalability, and the range of features offered, such as automation, software security, and real-time tracking.
2. Deploying the tool to your infrastructure: The next phase involves its deployment across your IT infrastructure. This should be done in a manner that minimizes disruption to existing processes. Ensure the SLM tool is properly integrated with other IT management systems and that all relevant staff are trained.
3. Creating and managing an inventory: The next task is to create a comprehensive inventory of the organization's software licenses. This inventory should be meticulously maintained and regularly updated to reflect new purchases, renewals, and changes in software usage.
4. Establishing responsibility and accountability: It's important to define clear roles and responsibilities for managing software licenses. Assign team members accountable for different aspects of license management, such as compliance monitoring, inventory updates, and handling renewals. This ensures that all aspects of software licensing are consistently overseen and managed effectively.

Some common mistakes to avoid

Often, organizations make simple yet common mistakes that could be avoided with some foresight and planning, such as:

1. Poor tool selection: Avoid choosing a software license management tool that doesn't fit your organization's needs. Inadequate features can lead to inefficiencies and compliance issues. Ensure the tool offers essential functionalities like real-time updates and integration capabilities.
2. Incomplete licensing information: Refraining from maintaining a complete and updated record of licensing information is a common pitfall. This includes license expiry dates, usage terms, and compliance requirements. 
3. Lack of cross-functional teams: A single department should not handle licensing software. It requires collaboration across various functions, including IT, procurement, legal, and finance. The absence of a cross-functional approach causes a lack of shared understanding and coordination, which leads to mismanagement of licenses. 

Streamline your software license management with Spendflo

Unnecessary software and SaaS expenses often occur due to a lack of awareness, collaboration and foresight. Therefore, you must focus on software license management, streamline onboarding and offboarding processes, and effectively address shadow IT through efficient SaaS management. These are essential for cost optimization and compliance.

A unified software management solution like Spendflo can simplify this process and help you save more.  This AI-driven SaaS buying and optimization platform provides dynamic license management where you can:

• Automate license harvesting, reclamation, and downgrades using real-time data from your apps 
• Integrates with multiple popular apps to give you the most accurate data
• Determine when a license becomes inactive by looking at the last time it was used, and then start the license management process
• Simplify employee onboarding and offboarding
• Controls shadow IT issues

This approach enables efficient operations, cost savings, and regulatory compliance. To learn how much you can save in your next SaaS procurement, get your free saving analysis today!