A Business Guide to Software License Management

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Software License Management (SLM) saves you money by identifying unused software and license violations. The Ascent covers best practices for managing software licenses for your small business.

Wasting time, money and resources is the enemy of your small business success. A hidden cost that can run into the hundreds or thousands of dollars a year is unnecessary and misused software licenses.

A Software Licensing (SLM) plan helps you avoid these costs. We’ll review the multiple benefits of SLM, best practices, and different software licenses to demonstrate why you need SLM in your small business.

Overview: What is Software Licensing?

SLM tracks and maintains your company’s software licenses. You almost never “buy” software; instead, you purchase a license to use it under defined conditions and/or periods. This includes desktop installs, web apps, and digital device apps.

SLM helps determine the number of licenses needed for each software vendor and distributes licenses throughout the company where they will have the greatest impact. SLM is a subset of software asset management (SAM) in ITIL (Information Technology Infrastructure Library) methodology.

A chart displays the seven categories of software governance and compliance activities in IT asset management.

SLM is part of the software governance and compliance framework. Image source: author

ITIL is a set of best practices for integrating IT activities with overall business processes and goals. The ITIL software lifecycle has five stages: purchase, deployment, maintenance, use, and disposal. SLM helps ensure that every step is efficient and profitable.

Benefits of Software License Management

SLM impacts your most important key performance indicator (KPI): the bottom line. Effective SLM requires IT management software or another software license management tool, but the returns justify the expense.

1. Cost reduction

Year over year, spending on enterprise software is increasing, but waste remains a significant portion of that spending. A recent multi-year study calculated that American companies lose $30 billion a year on unused software, which equates to $259 per workstation, and more than a third of software licenses are rarely or never used.

2. Better budgeting

Don’t buy bulk licenses that you may or may not use; Instead, implement SLM within the ITIL framework to better align IT spending with organizational requirements.

Your budgeting is more accurate with SLM because, beyond reducing waste, you can use the most suitable licenses: purchase the most appropriate licenses for your business needs.

3. Risk reduction

Software license compliance also reduces your potential liability if a software vendor performs a usage audit. Penalties can be significant: The US military paid $50 million in 2013 to software developer Apptricity for thousands of unlicensed installations.

Software License Management Best Practices

Effective SLM is no different from other processes like ITIL change management: plan the work and work the plan. Build a comprehensive SLM program using these best practices to reap the resulting benefits.

Exercise 1: Using IT Asset Management Software

SLM is too complicated to be followed on a case-by-case basis. IT asset management software is therefore your best option. You can buy a standalone app for this, but a better solution is to use SLM features in IT service desk software like Freshservice or SolarWinds.

Robust service desk software automatically detects, monitors and sends alerts regarding your software licenses, as shown below with AssetSonar.

AssetSonar's IT Asset Dashboard creates alerts for upcoming software license payments and expirations and overused licenses.

Automated software license management is essential as your IT assets grow. Image source: author

The benefits of service desk software extend beyond tracking software licenses. Your IT support agents will have tools to improve their help desk skills, expedite service requests, and review their performance analytics.

Practice 2: Obtain license documentation

Once you have the SLM software capabilities, enter the relevant information starting with the licensing documentation for your software applications.

Here are some tips to help you through this process:

  • Use a central repository: IT help desk software again proves its worth here as the primary location for storing, reviewing, and updating software license documents.
  • Assign a license manager: As the number of software licenses grows, a designated license manager ensures your small business stays compliant.

Having your existing documentation on hand is essential when comparing it to software installations.

Exercise 3: Identify software deployments

Once you know the software you are licensed to use, perform a full audit to identify discrepancies between license and actual usage.

Two issues to track include:

  • “Ghost” computer installations: More than a quarter of IT spending occurs outside of IT departments, so you need to identify apps installed by non-IT staff.
  • Version control: Identify different software versions and standardize software installations across your business. Uniform version control simplifies license renewals and streamlines change requests and issue management.

Remember to catalog computer software assets installed on unused hardware – servers, desktops, laptops – as these count against the limits of your license agreement.

Exercise 4: Track usage

Identifying installed software allows you to track usage and configurations and how they are accessed. Information about actual usage versus projected usage helps the budgeting process.

  • Use of license: Track the number of installations and usage of each software to minimize the number of unused licenses and avoid violating the number of authorized users or installations.
  • Risk minimization: Run periodic checks for installations of illicit software. More than half of employees admit to installing personal software on company computers, and IT managers report that 85% of unauthorized installations create problems, including an increased risk of malware.

Personal devices brought to work, thanks to the “Bring Your Own Device” (BYOD) trend, can trigger events that require incident management when connecting to your company’s network or accessing its applications.

Exercise 5: Set soft reminders

Schedule SAM alerts for critical software lifecycle events to avoid falling behind with renewals, routine maintenance, and other changes.

  • Renewals: Use current usage information when renewing licenses to upgrade or downgrade plans.
  • Maintenance: Schedule regular asset maintenance to install updates, patches, upgrades, or other change management activities.

Set up reminders with your service desk software and your license manager can track every IT license with minimal effort to keep your business compliant.

Types of software licenses

Software licensing may seem simple – pay for it – but the multiple types of licenses require careful consideration when choosing the best option for a given business need. Are you using public domain, permissive or proprietary software? Should you get a perpetual, subscription, or limited-use license?

The three most common proprietary software licensing models for businesses are per user, device, and network.

Type 1: By user

Each user receives login credentials for the software and must validate their identity to access it. Problems arise when employees share their login information with other users to avoid paying for additional licenses.

Type 2: By device

The software is deployed on a single machine, whether it is a workstation or a server. Per-device licensing can create compliance issues when users attempt to access the app from other devices or the app is used in a test environment on another device.

Type 3: By network

The software is used by devices on a specific network. Employees can create problems when accessing an application on devices outside the network, such as a personal computer or a smartphone.

Control your software costs and responsibilities

Controlling expenses and minimizing risk are essential for your small business. Implement a software license management plan today to avoid paying for unused software, license violations, or unauthorized applications creating IT incidents.

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