A Guide to Software License Management Best Practices

A software license management (SLM) program’s primary goal should be to maximize the value derived from the software, and not simply to track them. As a business-wide initiative, the practice requires cross-functional collaboration to ensure that your software investments align with your overall business goals. Quite naturally, it’s a complex undertaking when you consider the sheer variety of software licenses, each with its own terms and conditions, type, and deployment that a typical enterprise manages. 

Once considered a niche practice, SLM has now evolved into a critical field, so much so that IT professionals can even get certified in it. Thankfully, there’s a growing ecosystem of tech tools designed specifically to track and automate SLM.

In one of our earlier articles, we touched upon the full lifecycle of software licenses and how understanding the lifecycle helps enterprise leaders identify opportunities for software consolidation, optimization, and cost savings. In this article, we explore the complexities of modern licensing models while discussing the best practices for optimizing an SLM program, so you can understand how those practices can help your organization achieve its strategic goals.

Summary of SLM best practices

Develop a hybrid licensing strategy for the modern IT stack

Modern enterprises use a hybrid ecosystem as a smart way to balance cost and flexibility, but this also means they have different types of licenses to manage. For instance, a company might have a perpetual license for Microsoft Office for office users but use a subscription-based license for Salesforce in the cloud. 

When leveraging virtualization, it is important to assess the vendor terms of licensing clearly. When using virtual machines (VMs), you need to understand how your licenses are calculated in a virtual environment. Some vendors may require a separate license for each VM, while others may allow you to use a single license for multiple VMs under certain conditions. 

Containerization introduces its own licensing complexities as well. As applications running in containers are often created and destroyed rapidly, traditional licensing models are less effective. Be sure to thoroughly review your existing software license agreements to see if they explicitly address containerized environments. If not, engage with the vendor for clarification or potential amendment. 

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It is equally important to keep track of the number of running containers and their resource consumption to accurately determine the required licenses and avoid overspending. If the options are available, consider vendors that offer licensing based on resource consumption (like CPU cores or memory usage) for a more flexible and cost-effective container environment.

A typical hybrid licensing workflow

It is also a good practice to explore and adopt licenses that offer cross-compatibility between on-premises and cloud versions. There are license mobility options that allow employees to use software on different devices and locations. For example, Microsoft’s License Mobility through Software Assurance program allows for the transfer of certain on-premises licenses to approved cloud providers.

The ideal approach for keeping things organized is to adopt a license metering tool for reconciling what software is installed on your office computers, what’s running on your servers, and what cloud subscriptions you’re paying for. Let’s say you find out that you have 100 licenses for MS Office, but only 50 employees actually use it. Comparing these lists is the easiest way to make sure you’re not paying for more licenses than you need. You can also model the total cost of ownership (TCO) for various licensing options and identify which deployment model is best suitable for each software application. For example, a cloud subscription might seem cheaper up front, but it could end up costing more over time if your usage increases.

Track license usage at a granular level

Some vendors offer feature-level licensing to help you purchase only the specific features your users need. However, to take full advantage of this, your SLM practice (and the tools you use) must be capable of tracking software usage at a granular level – down to the feature or even the individual user. The practice should focus on collecting data on which features are being used most frequently, by which users, and for what purposes. 

Leveraging Software Asset Management (SAM) tools like Device42 can offer a significant advantage for enterprises of all sizes looking to automate the collection and analysis of granular usage data. An automated tool can provide significant benefits by identifying peak usage times and potential bottlenecks that a manual tracking system might often miss. Finer granularity allows you to make informed decisions not just about license allocation but also software selection. 

For example, you might discover that a particular department is using a high-end software package when a more basic version would suffice. The finding could also uncover instances where specialized tools are being underutilized and there is a need for a shift in workflows. Or you might find that a significant number of licenses are going unused, presenting an opportunity to reclaim those resources or reallocate them to other business units in your organization. 

To ensure that everyone is paying their fair share for software, chargeback and showback models can leverage the findings and flag each department with exactly what their software use is costing the company. This way, those using more resources can be more mindful about optimizing their software usage. 

Adopt license optimization strategies

Software license optimization processes can help you squeeze every last drop of value from your software investments. These involve a combination of analysis and strategies to analyze your software usage patterns and recommend the most cost-effective licensing strategies. 

The ideal time to create or implement a license optimization process is when an organization has a significant investment in software licenses and is looking for ways to optimize its software spending. This could be when it is experiencing rapid growth, undergoing a merger or acquisition, or simply looking to improve its SLM practices.

Choosing the right approach depends on your specific licensing models and usage patterns. For instance, if you have a mix of subscription-based and perpetual licenses, you’ll need processes and best practices in place that can handle both models effectively. Similarly, if your software usage fluctuates throughout the year, you’ll need an adaptable approach that can adjust to those changes.

Once you’ve chosen the right strategy, integrate it with your existing SLM tools and usage data for accurate, actionable recommendations. While the application of generative AI in SLM is still an emerging field, there are promising indicators supporting its potential to offer insights. As a prime example of AI’s potential in this evolving field, Device42 leverages machine learning for intelligent asset discovery and dependency mapping.

Use API-driven SLM solutions

Using API-driven solutions is another smart way to manage your software licenses. A typical integration can be between your SLM tool and systems such as HR databases, project management tools, or even the software applications themselves. Having different tools and systems integrated lets you see how your licenses are being used, what you’re allowed to do with them, and whether you’re following the rules. An interconnected system lets you make quick, properly informed decisions, potentially saving money in how licenses are utilized.

For example, when a new employee joins your company, the API integration with your HR system can automatically trigger the provisioning of the necessary software licenses. If you’re using cloud software with usage-based pricing, the API can continuously pull usage data from the software provider, allowing your SLM tool to track usage in real time and alert you before you exceed your limits. 

To make the most of API-driven solutions, pick one that’s easy to customize and works with your existing systems. Try to automate as much as you can, like giving out licenses or checking usage, so your IT team can focus on bigger projects. 

At the same time, it is important to note that APIs are vulnerable to cyberattacks. Consider implementing an API gateway as a centralized point of control for your SLM APIs. A gateway can handle authentication, authorization, rate limiting, and other security functions of your API infrastructure and provide a consistent security posture across all your APIs.

Monitor licenses for compliance risks

It’s not uncommon to find legacy software still chugging along in a hybrid setup. Take for instance, an old, on-prem CRM system that’s still in use by a few departments: The vendor no longer offers support or updates, but the cost of migrating to a new system is considerably high. In a situation like this, eventually you’ll be stuck with outdated software that isn’t compliant with regulations and offers limited functionality. A similar situation can occur with perpetual licenses for a software suite that were purchased several years ago. While you no longer need all the features, upgrading may not make sense because you’ve already invested in the licenses.

First, take a hard look at the risks and costs of sticking with the legacy software, which could expose your organization to compliance violations, legal issues, and potential financial penalties. If the risks are too high, consider a phased migration option to minimize disruption. Open-source alternatives or cloud-based solutions can be equally good options. 

If you are on a tighter budget, you can start with a few essential modules of an open-source software product and gradually add more or move to a priced tier as your needs grow. As with perpetual licenses, if underutilization is significant, explore selling or trading unused licenses. Another option is to negotiate with the vendor for an upgrade path or request a more flexible licensing model that takes your existing investment into account.

How unlicensed software are linked to higher number of malware encounters (Source: IDC)

An even greater challenge with maintaining compliance arises when your employees misunderstand or unknowingly violate your company’s licensing agreements. A Business Software Alliance (BSA) survey reports that a significant portion of unlicensed software usage stems from employee negligence or lack of awareness of licensing policies. Most software vendors have audit clauses built into their contracts that are typically meant to give them broad powers to audit such noncompliance or check for compliance after a change in your company’s size or structure.

Managing software licenses with Device42

Accurate records are always your best defense when it comes to prepping for vendor audits. Adopt a rule of thumb of reconciling your license entitlements with actual usage to ensure compliance. Internal audits are a good starting point to uncover software installations on devices that are already associated with a different active user.

Modern IT asset management tools like Device42 streamline license compliance monitoring by automating tracking, analysis, and reporting, giving you real-time visibility into potential issues. Some organizations may want alerts for minor overages, while others may only want notifications for critical violations. To help with this, the platform allows you to customize alerts based on your organization’s risk tolerance and enforce software standards by flagging prohibited software. For instance, you can set thresholds for each license (e.g., maximum installations or concurrent users) and receive notifications when usage nears these limits or an unapproved license is discovered.

Device42’s Software License Management (SLM) module enables the comprehensive tracking and management of software licenses across your entire IT infrastructure. It automatically scans Windows and Linux machines to identify installed software whether or not it’s currently running.

The SLM module also supports flexible licensing models, including user-based, device-based, client access licenses (CALs), and CPU/core-based, allowing you to track any type of license you use. Comparing the count of running software instances against purchased or licensed counts can offer you real-time insights into over-licensing or under-licensing situations.

In addition to its comprehensive tracking capabilities, Device42’s SLM module also provides a number of other features that can help organizations optimize their software usage and reduce costs. These features include:

• Software categorization: Categorize software by type, vendor, or other criteria.
• License modeling: Create and manage different licensing models, such as user-based, device-based, or concurrent-use.
• Alerting: Set up alerts to be notified when prohibited software is found on a user’s machine or when a license is about to expire.
• Reporting: Generate reports on software usage, licensing compliance, and other metrics.

Additional details on Device42’s software license models and management can be found here. 

Conclusion

While software debt is often top of mind, the hidden cost of underutilized licenses can silently erode your bottom line. Unused software is also a known breeding ground for vulnerabilities, which eventually require updates and workarounds that drain your IT resources. A robust SLM practice can protect your organization from both financial and operational risk. 

Remember, effective SLM is an ongoing process, and not a one-time fix. 

Ready to transform your approach to SLM? Explore how Device42 can streamline license management, reduce risk, and maximize your software ROI. Start your free trial today.