SaaS license management: solutions to 6 key challenges

Contract Management

Learn what’s involved in SaaS license management, why it's important to master, and how to overcome six common challenges associated with the practice.

Vendr | Joint success in procurement
Written by
Vendr Team
Published on
October 27, 2022
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The average company today has over 250 SaaS licenses.

That’s 250 contracts to oversee, 250 vendor relationships to manage, and 250 risk analyses to conduct on a regular basis.

Managing SaaS licenses, then, is a critical practice in which all procurement managers should be proficient.

Learn what’s involved in SaaS license management, why it's important for scaling companies to master, and how to overcome common challenges associated with the practice.

What is SaaS license management?

SaaS license management is a practice that oversees the various SaaS licenses of a company. This management practice holds and aims to provide more visibility into software vendor relationships. It’s a subset of software asset management (SAM), also known as IT asset management.

A license is, essentially, a permit to use a given SaaS product.

Before SaaS became commonplace, companies would buy software outright (known as perpetual licensing). They’d pay a one-off invoice and then own the product into perpetuity, installing and hosting the software on their own servers.

While this legacy model still exists, the SaaS subscription model is much more common. In this scenario, you pay a monthly or annual fee which grants you a license to access the platform.

SaaS license management is concerned with the supervision and administration of these licenses, overseeing:

  • SaaS license compliance
  • License distribution and utilization
  • Individual and group user permissions
  • Contracts and renewals
  • Security and compliance
  • Maverick spend and overlapping SaaS spend

Benefits of SaaS license management

The primary benefits afforded by a comprehensive SaaS license management program include:

Reduced SaaS expenditure

Companies can cut software costs by identifying areas of overlapping spend or eliminating inactive user licenses.

Enhanced risk management

Monitoring software utilization closely helps reduce SaaS security risk, for instance, by limiting access to certain features through user permission sets.

Improved contract terms and renewal processes

Procurement teams focusing on SaaS license management are better positioned to negotiate favorable terms (for example, negotiating a lower per-user price as you’ve doubled your headcount in the last 12 months).

6 SaaS license management challenges & how to solve them

  1. License underutilization
  2. Overlapping SaaS subscriptions
  3. Non-compliant software licenses
  4. Unmanaged vendor risk
  5. Internal security risk
  6. Runaway SaaS spending

1. License underutilization

License underutilization—when software licenses aren’t used often or at all—is a key problem in SaaS subscription management.

Here are a few common examples of license underutilization IT teams might be familiar with:

  • You pay for 100 user licenses, but only 60 of them have actually been used in the last quarter.
  • A product license is used very rarely, such as once a month by each user.
  • The software has been forgotten altogether. Someone purchased it for a specific project that is now complete and has neglected to cancel the subscription.

The solution to license underutilization

To overcome this challenge, SaaS license management teams must regularly track and report on license utilization and take appropriate action:

  • If a software platform isn’t being used at all, cancel the subscription.
  • If licenses are rarely used, investigate whether the software is actually required—if the function can be managed without software or by using another SaaS tool for which you already have a license.
  • If there is a significant percentage of unused licenses, renegotiate the license agreement.

2. Overlapping SaaS subscriptions

It’s not uncommon for organizations to pay for multiple products that offer similar features, resulting in overlapping spend.

This often occurs when SaaS purchasing is decentralized or occurs outside of the official procurement process. Then, different department heads purchase licenses independently.

For instance, your sales and finance team leaders each purchase project management tools without consulting one another or following the established approval workflow.

The solution to overlapping SaaS subscriptions

While overlapping spend can be identified manually, this is a cumbersome and labor-intensive process, especially for large enterprises with hundreds of SaaS licenses.

What’s more, it’s not always obvious where software apps overlap.

If your finance team bought an Asana subscription, and your sales team purchased ClickUp, it’s clear that both are project management platforms and can be consolidated.

But it might not be immediately obvious that ClickUp can be used to build a sales CRM, and therefore it might overlap with your existing CRM tool.

To spot and solve all areas of overlapping spend, talk to Vendr. Vendr works with you to analyze your tech stack and suggests opportunities to consolidate licenses and reduce your total SaaS expenditure.

Want to get started on your own? Download our free SaaS stack template.

3. Non-compliant software licenses

SaaS applications purchased outside of established procurement processes (or at companies where such processes don’t exist) run the risk of non-compliance with internal IT regulations.

As a result, it may put your company at risk of a data breach or even endanger your compliance with legislation like GDPR, the European data security requirement.

The solution to non-compliant software licenses

First, you’ll need to assess all existing software licenses against internal and external regulations to ensure all expectations are met and to create a clean slate.

Then design, document, and distribute a strict procurement process to prevent non-compliant purchases going forward. For example, you might build a quick software compliance checklist for procurement managers and/or have new software purchases approved by the CIO before committing.

Learn how in our dedicated guide: How to build a procurement process at any stage of growth.

4. Unmanaged vendor risk

SaaS licenses that aren’t managed closely open companies up to a number of different vendor risks, including:

  • Operational risk — for instance, the possibility of extended software downtime
  • Reputational risk — for instance, the possibility of a vendor PR scandal negatively impacting your reputation
  • Cybersecurity risk — for instance, if your vendor experiences a data breach

The solution to unmanaged vendor risk

Implementing your SaaS license management practice involves adopting a set of risk management protocols. Create risk profiles for each of your SaaS vendors and include a thorough risk evaluation when vetting new suppliers.

For example, consider using a risk matrix like this one from Smartsheet, to understand the likelihood and severity of different risks.

Automated approval workflows can also help minimize this risk by ensuring all purchases are run past a senior leader. This is especially critical if procurement is decentralized and department heads are responsible for sourcing their own products.

Discover how to implement approval workflows here: Approval Workflows: Everything You Need To Know To Get Started.

5. Internal security risk

Unmanaged SaaS licenses also present a significant security risk from an internal perspective.

The most common example is when all users are given unrestricted access to a software platform that houses sensitive data, such as your company CRM.

Sharing customer information with anyone on your team is a risk, regardless of seniority. It is, of course, a necessary risk: Marketers and salespeople can’t succeed in their roles without access to this data.

The solution to internal security risk

Part of SaaS license management is managing and restricting access to certain types of data, functions, and processes within software platforms.

While some SaaS apps may allow permissions to be managed individually, this is particularly inefficient for larger companies.

The solution here is to create role-based permission sets. For example, all of your Sales Development Reps would, by default, get access to the same data and functions, and anything that isn’t required for their role would be restricted. These permission sets make managing and restricting access simple.

6. Runaway SaaS spending

Reducing your software expenditure is a key goal of SaaS license management, and taming runaway spending is a key aspect.

Runaway SaaS spending happens when your monthly bill continues creeping upward with a given vendor.

It can occur for a number of reasons, the most common being:

  • Overages, such as paying for additional storage space if you exceed your limit
  • Additionalseats, such as when scaling your sales team and adding more users to your sales outreach tool
  • Increased pricing due to lapsed contracts, such as when your agreement expires, and the price you negotiated for a 12-month term is no longer valid

The solution to runaway SaaS spending

The best way to curb runaway spending is to manage all of your software vendor relationships in a centralized platform like Vendr.

Vendr helps you:

  • Negotiate better terms to minimize overage charges
  • Get a high-level view of SaaS spend and deep-dive into any supplier to understand specific usage
  • Get in front of contract renewals with automated renewal reminders

Vendr is your SaaS license management partner

Managing SaaS licenses manually is ineffective and inefficient, especially in large or growing organizations.

Team up with Vendr, the SaaS management platform that streamlines software purchasing and helps you manage SaaS across the entire procurement lifecycle.

Use workflow automation to optimize your approvals process and ensure stakeholders make compliant SaaS purchases. Receive automated notifications when licenses are up for renewal, and leverage our teams’ software-buying expertise to secure the best deal possible.

Reduce shadow IT spending by instantly identifying areas of overlapping spend and consolidating software usage.

Use our free savings analysis to discuss exactly how much you could save by implementing a more effective SaaS license management practice

Vendr Team
Vendr Team
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Vendr's team of SaaS and negotiation experts provide their curated insights into the latest trends in software, tool capabilities, and modern procurement strategies.

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