A definitive guide to software license management

Contract Management

A software license management solution centralizes your licenses and helps you cut costs. Here's everything you need to know about managing your company's library ofSaaS licenses.

Vendr | Synergy in vendor management
Written by
Emily Regenold
Published on
September 12, 2022
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99% of businesses use at least one SaaS solution. Additionally, SaaS license usage is projected to grow by as much as 44% in the coming years. 

If you’re a business working with a slew of different applications, it’s easy to lose track of it all. A proper software license management system is critical to establishing control and overseeing all your software spending.

To remedy possible overspending, here’s a walkthrough defining software license management, the types of licenses managed, and the benefits that proper software license management practices afford businesses. 

What is software license management?

Software license management, or SLM, is the process of tracking, organizing, controlling, and managing software usage across an organization. SLM is usually a branch within software asset management, and its functions revolve around cutting license costs and monitoring software usage. SLM is largely beneficial for both software developers and sellers. 

For example, a dependable SLM system will remind you about an upcoming software license’s renewal data or even the over or under usage of the software features you licensed. With full clarity of your company-wide software usage, IT teams can better manage their future software investments and cut current software costs.

Once you break down a software license to its components, you start to see its different management needs. To illustrate, a software license generally includes sections like: 

Usage terms and conditions

  • Usage limitations
  • Restrictions
  • Disclaimers
  • Protections

Once you know what software license management is, it’s worth exploring the features that create a reliable management system. What should you implement to ensure you’re managing all your licenses optimally? 

Features of software license management system

As we mentioned earlier, most solutions to a disparate software license management workflow boil down to software. Its cloud features are convenient, and it cuts out time-consuming processes while minimizing the errors that come with manual processes. 

If you want to implement a software license management solution, here are a few key features to look for: 

Contract term and renewal alerts

  • Reporting and analytics
  • Features to reconcile licensing issues
  • Collaborative tools
  • Configuration management
  • Software usage metrics
  • IT asset management

Interestingly, how software solutions parse their pricing varies across the board. A feature-rich SaaS management solution gives you total control and visibility over licensing tasks. 

According to DevSquad:

  • 38% of SaaS businesses charge on usage
  • 40% use value-based price settings
  • 50% of Saas companies go by user-based pricing

Vendr | Pricing Models

Image: DevSquad

That’s a lot of different pricing frameworks and renewal processes to consider. Below, we talk about the types of software licenses you need to know. 

Types of software licenses

There are five software license models companies use to deal with various software applications and business arrangements. 

Public domain license

When software is in the public domain, anyone can use and modify it without restrictions. It operates on a permissive basis, allowing anyone to adopt the coding into projects or applications to reuse the software as desired.

Using software with a public domain license is doable because it isn’t protected under copyright laws. However, it’s important to note that the definition of “public domain” can change by jurisdiction. These types of licenses are rare—they’re the exception, not the rule. 

GNU/LGPL

With an LGPL (Less General Public License), developers can link to open source libraries within their software. They can license the resulting code under any other license type, including proprietary.

With an LGPL, if you copy any part of the library into the code or change it, the original LGPL’s terms will apply to the developed code.

Copyleft

A Copyleft license, sometimes called a reciprocal license, is more restrictive than other license types. Generally, they’re not as commercial friendly. Under Copyleft terms, developers can modify the licensed code, combine it to proprietary code, and distribute any new product based on it. 

Here’s the catch—these licenses need source code distribution with every new project. So the license of a proprietary work, including a GPL licensed code, needs distribution of proprietary source code. But exposing the source code to competitors or users isn’t something companies like to sign up for—which is why they try to avoid using software with these licenses.

Permissive

Permissive or attribution style licenses have the fewest restrictions on modification and distribution. They are one of the most common licenses out there. 

Once you get granular, there are variants in how you can preserve license notices, copyright guidelines, or trademark requirements. 

Proprietary or commercial

Out of all license types, commercial or proprietary licenses are the most restrictive. These licenses are mostly used for commercial software where the copyright holder has varying conditions for granting any rights. 

With a proprietary or commercial license, software is ineligible for distribution or modification. It’s designed to protect the interests of the creator of the software to ensure it isn’t used without proper authorization. 

Benefits of software asset management

Proper software license management offers the following benefits. 

Reduced costs and increased profits

With a software license management system, you can gain better clarity and understanding of the license and how it’s being used within the organization.

You can also discover if any licenses aren’t being used at all or used improperly. This saves you from wasting resources, which reduces costs and increases profits.

Improved budgeting

With proper software license management, costs are easier to forecast and predict. You can plan your budgetary needs by aligning them with your overall business strategy for better decision-making rather than just anticipating future software needs without any historical data. 

Upholding business compliance

A software license management system centralizes all your licenses in one accessible dashboard. Your IT team can say goodbye to disjointed manual processes filled with errors. Business compliance can be properly upheld as visibility increases. This way, businesses are also steering clear of facing potential legal issues. 

Risks of poor software license management

There are plenty of benefits to sound software license management. Unfortunately many internal teams are still juggling the risks of poor license management. Are you experiencing any of the following in your organization? 

Failing to pass random audits

Random software audits, or even internal audits, can happen at any moment as a way to ensure software license compliance. If any violations are found, you stand liable for the software cost plus a penalty fee that can stretch into the millions depending on the software in question. 

Failing to pass random audits directly results from organizations failing to take a proactive approach to license management. Too often, organizations rely on software vendors to learn the crucial points of their license, which can have several negative consequences. 

Incurring more expenses than necessary

Another risk with poor software license management is overspending. You can do extensive budget planning at the beginning of every month, quarter, or year, but if you don’t track your licenses, how can you know if your investments are optimally allocated to the right software solutions? 

Working with decentralized license management workflows decreases license visibility. This ultimately creates a domino effect of higher software expenses than necessary, which throws budgets off. 

Decreased productivity

Chances of overspending are good without the right software license management software. It’s harder to stay updated on software use if you’re dealing with things like shadow IT.  

When you renew a license fee yearly, a portion of the IT budget is bound to be wasted. Without an SLM solution in place as part of a larger procurement process, buyer enablement becomes more challenging. IT teams might be missing the key data needed to buy better software options. 

Best practices for software license management

Let’s discuss five best practices for better software license management.

Collect information related to your software licenses

Create a list of your software licenses and collect them in one central source. This includes both cloud and desktop applications. Make sure you organize and collect data on maintenance contracts, purchase costs, and the service fees that come with each license. That way, you can extract license data that is actionable. 

Collecting all this information in one software inventory is no joke—it takes time and effort, but you can make it easier with a reliable software license management solution like Vendr

Make sure you keep a record of everything

To stay in line with every requirement, ensure you know what kind of documentation each vendor requires and match them with their respective license agreements. In other words, find a reliable way to keep a record of everything related to your licenses. 

It’s worth repeating that one of the most effective ways to do this is by onboarding software with license management features instead of trying to keep old-fashioned paper records. SLM is one of the most efficient ways to keep key stakeholders in the know, surface important software license metrics, and execute effective software license tracking. 

Track expenses

Create a breakdown of your software expenditures to get clarity regarding cost per user and as a whole. Doing this at scale requires data and analytics features.

By creating software license and usage reports, your IT team stands a better chance of tracking key expenses and eliminating unnecessary ones. The good thing is, if you’re proactive about tracking licensing expenses now, it leads to more cost-effective license agreements down the road. 

Set timely reminders

As your software stack grows, you can’t possibly keep track of every relevant point at all times. To avoid mismanagement, automate timely reminders for important dates like license subscription renewal, approval, and maintenance times. 

Failing to set reminders can cause you to fall behind on compliance guidelines, software license lifecycles, and renewals. This only increases your chances of getting penalized during auditing for non-compliance issues.

Incorporate software license management into your workflow

Proper software license management should be a business priority. Investing in a proper software license management solution for creating very well-defined processes ensures everything is managed according to regulations and company policy. 

Do more with a software license management solution

As CIOs are tasked with internal growth initiatives that push companies forward, IT teams and the results of their internal operations management are taking center stage. There are many moving parts to consider and control.

Growing organizations today need a suite of software management tools that afford them visibility, enable them to optimize resource usage, and let them establish strategies for growth. For SaaS management, a software license management tool like Vendr is worth integrating into your internal workflows. 

Vendr is designed to optimize the software buying process and expertly help businesses manage their license with cost savings at the forefront. 

Take the free savings analysis to learn how much you could save on SaaS year over year. 

Emily Regenold
Chief of Staff
Emily is the Vendr's Chief of Staff, leading the company's brand and external communications.

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