Software License Monitoring: Keeping Costs Down Through Vigilance

Steve Manjaly June 23, 2022
- 9 min read

Software license monitoring is often viewed as a preventative measure against compliance failures and subsequent penalties. However, if we take a look at the statistics, this notion might be brought into question. 

Some reports suggest that organizations stand to save a lot of resources with a robust software license management strategy. For instance, the global spending on enterprise software is expected to be around $US 672 billion, an 11% increase compared to the previous year. And another report from 2020 showed that wastage on SaaS applications doubled from 2018 to 2019, with large enterprises seeing almost a 100% increase. 

But let's take a step back and explore:

  • The different types of existing licenses, so you can have a proper inventory.
  • The positive impact of having a software license monitoring strategy in place.
  • The drawbacks of not having one.
  • Tips on how to implement it.

So let's dive in!

What is software license monitoring?

Software license monitoring is the process of keep track of:

  • the various software used in an organization,
  • the number of users using these software,
  • the number of software licenses available,
  • the resources spent on these software. 

By doing so, you'll be able to make sure that there are enough licenses according to the demands.

The ultimate goal of software license monitoring is to keep the cost of software licenses low but at the same time ensure that the usage levels stay compliant with the software licensing agreement. As such, it is considered part of the broader IT Asset Management umbrella. 

Types of software licenses: proprietary and open source

In a nutshell, software licenses are agreements or permissions granted by software developers to organizations or individuals that allow them to use the software as defined by the agreement.

Although they vary a lot between developers and the type of software, they usually fall under one of these categories: proprietary (a.k.a. closed source) or free and open source (FOSS). These categories will most certainly have an impact on your software asset management strategy.

Here are the most common FOSS licenses:

  • Public domain license: Anybody can use and modify them for free.
  • Lesser General Public License (LGPL): With this license, users can link the libraries for this software in their own applications and sell it under any other license conditions. But the libraries themselves will have to be under an LGPL license. 
  • Permissive licenses: These licenses are similar to public domain licenses, but there will be some restrictions on how you can use or modify them. The restrictions vary between creators. 
  • Copyleft licenses: These licenses are similar to public domain licenses, but if you make any modifications or changes, or if you use them within your application, you’ll have to make the end product available under the same copyleft license. 

There are different types of software licenses within software license monitoring

With most of the above, you don’t have to worry much about license management. But proprietary licenses are different. 

Proprietary licenses are rarely free-to-use. Their use is restricted under the specific terms and conditions in the software license agreement. And these are the licenses that have to be monitored under software license management.

Different licensing agreements charge in different manners. Here are some of them:

  • Per-user: Here the software is charged per number of users. For example, if a CRM is charged per user, a user can use the desktop version, mobile app, and browser version of the CRM, all with one single license. 
  • Per CPU/PC: In this case, the application is charged per the number of PCs or servers it is installed on. 
  • Floating license/network licensing/concurrent licensing: This is similar to a per CPU/PC licensing, except that the licenses are not tied to individual workstations. The licenses can be used by any CPU or workstations within the network. For example, if you have ten workstations under a single network, and you have a floating license for five workstations, any five of these ten workstations can use the software at the same time. 
  • Subscription-based software: Instead of buying the software, you can get a subscription for the software. All SaaS software is included here. There are also some subscription models in which you get updates until the end of the license period, but if you choose not to renew it, you can continue using the last version without any further payments. The popular UI UX app Sketch had a licensing model like this. Subscription models offer a cheaper alternative to users and a sustained revenue source for developers. 

As you can see, software licensing is complicated. And organizations spend a lot of resources on software. A 2016 report based on 129 companies found out that there’s an average of 37% wastage on software licensing. 

Organizations stand to gain a lot and save a lot of resources with efficient software license monitoring. 

4 benefits of software license monitoring

SAM is a key part of an organization’s asset management strategy. Its most evident benefit is that it helps manage your budget for IT assets, but here are four other pros you should consider.

1. Software license monitoring ensures that you are compliant with the license agreement

As shown above, different software has different types of license agreements. And not complying with these agreements can cost you significantly. License monitoring keeps you prepared for an audit and avoids fines or other penalties. 

You can also ensure that the software used by your employees is compliant with your organization’s policies. 

2. SLM helps you optimize your spending on IT assets

In many organizations, there’s a huge wastage associated with software licenses. According to the study we discussed earlier, this comes to around $259 per desktop. The same study also showed that certain software like AutoCAD and Visio Standard often saw more than 50% wastage. 

At the same time, there may be situations in which processes are being slowed down due to the lack of enough software licenses. In such situations, maybe there’s an opportunity to move the licenses around or keep them in workstations where they’re commonly used. Or maybe you’ll need to purchase additional licenses. 

Either way, software license monitoring helps you optimize your IT budget and reduce wastage on software licenses. 

3. License monitoring solutions help you prevent shadow IT in your organization

Shadow IT is a situation in which employees use software and tools that are not authorized by the organization’s IT department. 

Even if the unapproved software doesn’t contain any malware or other apparent threats, their privacy, data storage, and data collection policies may present a threat; particularly in highly regulated industries like finance and health. 

By monitoring the software that your employees are using, you can find out any unauthorized solutions they’re using and either vet the solutions or provide safer alternatives. 

4. Software license management helps you make better software purchase decisions

With license monitoring, you can identify unused concurrent licenses and purchase only what’s needed by your employees. If you identify any shadow IT in your organization, you can get alternate solutions or verify the software used by your employees to make sure they’re compliant with your internal policies. 

You can also calculate the ROI on different software solutions used in your organization. If there are solutions that are not delivering any additional value and are costing your company, you can look into other solutions of lower cost and the same functionality. 

For example, maybe a workflow automation tool purchased by your organization may not either be used by your employees or is not delivering the expected value. Software usage statistics can help you identify such situations and help you make better purchase decisions. 

And of course, tracking licenses help you get a clear picture of the software that has to be renewed or upgraded. 

What are the risks associated with ineffective license management?

The main risk with ineffective license management is that you may fail a license compliance audit which can be costly. If the auditors find out that you’re exceeding the limitations of your license, you might face fines or even legal ramifications. In fact, BSA (The Business Software Alliance), consisting of companies like Microsoft and Adobe, has a bounty program that offers rewards of up to 1,000,000 for reporting unlicensed software usage. 

These out-of-compliance situations rarely happen intentionally; license agreements are complicated and when there are a lot of employees using a lot of different software, it becomes difficult to keep track of usage. Or sometimes you simply forget to renew a license. And software companies recognize this and offer true-up clauses in the agreement. In this case, if you’re found to be using more licenses than what’s paid for, you’ll have to upgrade for the extra licenses. 

In some cases this may be all right; you need extra licenses and you’re getting them. But sometimes excess usage may happen even when you don’t need it. For example, if a software was installed in two or so workstations just for convenience and most of the time it’s not used. But because of the true-up contracts, you end up having to pay for extra licenses. 

And as discussed above, ineffective license monitoring can put you at great cybersecurity risk in the form of shadow IT. 

5 best practices for software license management 

1. Implement a robust asset management strategy

The first step to keeping track of your licenses is to develop a robust asset management strategy. Develop an inventory of all of your assets - both hardware and software - and keep track of their status and usage. Get a clear picture of the software needs and usage in your organization and compare that with the licenses available. 

2. Automate software license monitoring

Invest in a robust asset management solution that can continuously keep track of software used within your organization. Manual audits only go so far and it cannot scale up as your organization grows. And you can’t keep track of software usage patterns manually. 

With a good asset management software such as InvGate Insight you can get a better picture of how much your software actually costs as well as the return on investment on them. You can use automated discovery tools to identify shadow IT in your network.

software license monitoring through InvGate Insight

These tools will also help you constantly monitor your assets, keep them updated, and raise alerts if they’re malfunctioning. 

3. Normalize your software inventory 

Often when you take an inventory of your software assets, some names may be duplicated, because of slight differences in the names. For example, Photoshop, Adobe Photoshop, or even Adobe PS all refer to the same software.

But as far as a license management tool is concerned, they are all different software. And this can complicate your license management. Normalization essentially tells the system the different names for the same software. 

4. Connect software with the ROI 

Correlating your software usage with the ROI is a good way of keeping your software license expenditure down. Organizations often invest in software that promises more efficiency or smooth workflows but fail to keep track of its benefits. Even if a software is good, if there aren’t enough people using it, or if people are not using it to get enough benefits, your organization may be draining money on it. 

But by putting a number on it, putting a value on the software, you can easily decide if you really need the software or if you can replace it. 

5. Build a culture of license compliance 

Have strong policies in your organization about software licensing. Ensure that all software used is with the approval of the IT department. Shadow IT occurs when going through the IT service desk is not easy or smooth. Make sure that requests for software are cleared quickly. Make sure that employees have the right tools to do their tasks easily and efficiently. And ensure employee participation when making software purchase decisions. 

Frequently asked questions

What is software normalization?

Software normalization is a process by which all the information regarding software is made consistent across your systems. For example, Microsoft Teams, Teams, or MS Teams all refer to the same software, but the different names make it complicated to manage software licenses using automated systems. Normalization makes sure that the license management systems know the different names for the same software.

Read other articles like this : ITAM, software license monitoring

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