Last updated on: January 24, 2025
Did you know that companies employing 50 to 99 employees use an average of 24 SaaS applications? When it comes to companies employing between 100-499 employees, the average number of SaaS applications used doubles! These numbers are a clear indication that spending on software isn't going to reduce.
Whether your business is just getting started or is a large, established enterprise, you cannot afford to neglect software license management. But what exactly is software license management (SLM)? In this guide, we will delve into the world of SLM, its benefits, process, and how to effectively manage licenses to ensure compliance and cost savings!
What is SLM?
SLM is an important process under ITAM that involves the monitoring, tracking, and optimization of software licenses within an organization. It helps organizations ensure that they're staying compliant with licensing agreements and are making the most efficient use of its software resources.
History of SLM
SLM has evolved significantly over the years, starting from the early days of software development in the 1950s. Initially, software was freely bundled with hardware by the manufacturers, and users were not required to obtain a license. However, as software became more complex and valuable, companies started selling software separately and implementing license agreements to protect their intellectual property. With the rise of personal computers in the 1980s, SLM became more standardized, and companies began using serial numbers and activation keys to control usage.
Today, with the growth of cloud computing and subscription-based models, SLM has become even more crucial for companies to optimize their spending and enforce compliance. As technology continues to advance and new methods of software licensing emerge, the evolution of SLM (see image below) continues to adapt and evolve.
Evolution of Software License Management
Software in the early days
In the early days of software, hefty price tags accompanied bulky floppy disks. Managing this involved meticulous tracking of individual licenses and installations, all done by hand.
Moving towards shared access
As businesses embraced technology, the need for shared access arose. Vendors experimented with extending single licenses for limited network installations, a small step towards acknowledging collaborative workstyles.
Hardware dongles and increased complexity
The 1990s saw the rise of commercial license management systems and hardware dongles. These offered vendors a way to track usage and limit installations while allowing for some multi-user functionality. This era also saw a growing understanding of the importance of SLM from both vendor and client perspectives.
The rise of diverse licensing models
The software landscape diversified, leading to a wider range of licensing models. Perpetual licenses (fixed cost, permanent access) coexisted with time-limited ones (subscriptions) and more granular options based on features, users, or even usage itself (pay-per-use). This complexity made SLM even more critical.
The focus on cost control and compliance
Today, software spending is soaring, but cost control is a top priority for IT departments. This fuels the growth of SLM solutions. Additionally, stricter regulations and the risk of penalties make compliance a major concern. Here, effective SLM helps ensure organizations stay on the right side of the law.
Software license life cycle on autopilot: The future of SLM automation
In the future, automation in SLM could involve AI-powered contract analysis for auto-classification, real-time license usage monitoring for proactive compliance, and automated license optimization that adjusts deployments based on actual usage patterns. This would streamline workflows, minimize human error, and unlock significant cost savings.
Software license manager
A software license manager is a useful tool for organizations to keep track of their software assets and ensure compliance with licensing agreements. It helps them avoid potential legal and financial risks by providing better control and visibility of their software usage.
A software license manager helps organizations manage the entire life cycle of their software licenses, from inventorying them to monitoring license compliance and optimizing usage. By centralizing license data and automating tasks like tracking license usage, monitoring expiration dates, and generating renewal notifications, a software license manager can help organizations optimize their software usage, ensuring they have the right licenses for the software they are using, and reducing the risk of non-compliance audits and financial penalties.
SLM process
SLM is a systematic approach to managing software licenses within an organization where you develop and implement a clear SLM policy for your organization. This policy will outline procedures for software acquisition, usage, and compliance. It involves six stages that are mentioned below:
- Software inventory: Create a complete list of all software applications used by your organization across all devices. This can be done manually or through automated tools.
- License agreement review: Carefully examine the license agreements for each software application. This helps you understand the specific terms of use, including the number of allowed installations, user limitations, and any restrictions on how the software can be deployed.
- Compliance assessment and license allocation: Perform a compliance assessment to evaluate your current software usage in accordance with your license agreements. This will help identify any potential non-compliance issues, such as exceeding the allowed number of installations or unauthorized usage, and fix it. Based on the assessment, allocate licenses to users in accordance with the reviewed agreements to ensure compliance and prevent over- or under-utilization of licenses.
- Software usage monitoring: Track and monitor how software is being used within your organization. This might involve tools that identify active installations, user logins, and software features being accessed.
- License optimization: Analyze the software usage data to identify areas for optimization. You can potentially reallocate unused licenses, negotiate with vendors based on actual usage, or identify opportunities to consolidate software usage.
- Maintenance and reporting: Regularly update your software inventory and license agreements. Generate reports to track license compliance, identify renewal dates, and optimize software costs.
Overall, the software license manager eases the process of managing software licenses, enabling organizations to reduce expenses and avoid legal risks.
How does SLM
streamline software licenses for organizations?
Zylker, a leading technology company (fictional), faced challenges in managing software licenses of a hybrid workforce. With a significant portion of their employees working remotely, managing software licenses has become a crucial task. This is where SLM comes into play. The use of unauthorized software can lead to potential security breaches and data leaks.
Zylker's SLM solution provides visibility into the software used by remote employees, ensuring compliance and minimizing the footprint of shadow IT. With SLM, Zylker can track and manage licenses for their remote employees efficiently, ensuring they have access to the necessary software tools for their roles. This not only boosts productivity but also prevents the use of unauthorized software, mitigating potential security risks.
SLM also allows Zylker to optimize their software license usage, reducing unnecessary expenses. With the ability to track and monitor license usage, Zylker can identify any unused or underutilized licenses and reallocate them to other employees who may need them. This ensures that the company is not overspending on software licenses and can make informed decisions when it comes to purchasing new licenses.
Overall benefits of SLM
Did you know?
The estimated market size for SLM is projected to reach USD 2.08 billion by 2029
from 1.29 billion in 2024, indicating the industry's recognition of the significance of SLM.
(Source: Mordor Intelligence)
SLM includes keeping track of license expiration dates, usage, and compliance with vendor agreements. Fail to properly manage software licenses, and you may end up paying hefty fines and even face legal consequences! That's why it is essential for organizations to have a robust license management strategy in place. ITSM tools and processes play a big role in automating and streamlining this process, ensuring compliance and cost savings for businesses. But more on that later.
For now, let's check out the six key benefits of having a SLM process in place:
Improved compliance
Organizations can avoid costly penalties and legal issues by maintaining audit-readiness through tracking software licenses and complying with licensing agreements.
Cost savings and effective procurement
Proper management of software licenses enables businesses to budget and acquire licenses with precision, preventing excessive spending on unnecessary licenses.
Enhanced security posture
SLM promotes productivity and security by ensuring up-to-date and secure software versions.
Better vendor relationships
Maintaining accurate records of software licenses and compliance with agreements helps build stronger relationships with software vendors.
Increased transparency
By maintaining accurate records of software licenses, organizations can have a transparent view of their software assets, enabling better decision-making and resource allocation.
Better decision-making
Gathering insights into software usage patterns to make informed decisions about software purchases, deployments, and subscriptions.
Key concepts in SLM
In the ITSM landscape, there are a lot of processes involved (as shown in the gif below) including SLM. The key processes under which SLM falls is—software asset management (SAM), which falls under a broader category—IT asset management (ITAM).
What is a software license?
A software license is a legal agreement between the software vendor and the user (in the ITSM context, an organization) that outlines the terms and conditions of using the software. It grants the user the right to use the software while protecting the developer's intellectual property rights. A standard end-user license agreement (EULA) outlines the specific number of licenses acquired, the corresponding number of authorized installations, and the consequences if the number of used licenses surpasses the number of licenses purchased.
Types of software licenses
There are various types of software licenses that organizations need to be aware of in order to effectively manage their software assets and ensure compliance.
- Perpetual license: The user pays a one-time fee to use the software indefinitely. The user also receives updates and support for a specified period of time.
- Subscription license: The user pays a recurring fee for a specific period of time to use the software. This allows for flexibility and scalability as the user can choose to renew or cancel the subscription based on their needs.
- Cloud-based license or Software as a Service (SaaS): Users accesses the software through the internet on a pay-per-use or subscription basis. The software is hosted and managed by the vendor, providing convenience and scalability for the user.
- Open-source license: User can access software for free and modify it, but it comes with certain conditions and restrictions outlined in the license agreement. This type of license allows for collaboration and customization of the software.
- Freeware: The user can use it free of cost. However, it is important to note that not all freeware is open source, and it may still have restrictions on redistribution and modification.
- Freemium: The user can use it for free for a limited period of time, after which the user is required to purchase a license to continue using it.
- Enterprise license: This type of software license is designed for large organizations and allows for multiple users to access the software. It typically includes volume discounts and centralized management of licenses.
- User-access-based license:
- Named user
A user can be assigned a single license with a login name and password, ensuring that only that specific user has access to the software. It can be permanently transferred to another employee. - Concurrent
A specific number of users can use the software simultaneously. - Site-based
Users across a particular site or an enterprise can access the software. The number of users allowed to use the software simultaneously can be limited or unlimited for different software.
- Named user
- Device-based license:
- Per user
A single user can access the software on multiple devices upon authentication. - Per device
Users can access the software on a single device only. It's useful when multiple users work on a single device.
- Per user
- Metered or pay-per-use license: The user is charged based on the use of particular features, modules, data, or other resources within software.
What is software license compliance management?
Software license compliance is the act of ensuring that your organization's use of software aligns with the terms and conditions outlined in the EULAs. Software license compliance management includes obtaining the appropriate number of licenses for all installed and utilized software, adhering to any usage restrictions (such as the number of users or for specific purposes) and keeping accurate records of purchases and deployments. However, maintaining compliance with regulations and software licenses is not solely about following rules. It is also a crucial risk management strategy.
Navigating software license compliance
Failure to comply with software license agreements can lead to legal and regulatory consequences, including copyright infringement, piracy, and audit risks. Let us understand these compliance considerations better:
- Copyright: Software creators are granted legal protection, allowing them to maintain control over the reproduction, distribution, and alteration of their work. Failure to showcase a valid license may result in legal repercussions, including fines, for violating copyright laws.
- Piracy: When someone copies, shares, or uses software without the owner's permission, it is termed as piracy. This is a big problem for companies that make software, because it costs them a lot of money. To stop piracy, software companies use license agreements and product activation keys to make sure only people who are allowed to use the software can access it and restrict unauthorized access.
- Audit risks: Software vendors may perform audits to ensure that their products are being used in accordance with the license agreements. This involves checking the number of licenses purchased and comparing it to the actual usage of the software. If any discrepancies are found, the user may face legal consequences and financial penalties. Therefore, it is important to be aware of audit risks and comply with license agreements to avoid any potential consequences.
SLM ensures that software is utilized in accordance with the terms and conditions established by the software vendor, thereby aiding in the prevention of any compliance complications.
Risks of poorly managed software licenses
As the famous quote by Benjamin Franklin goes, "By failing to prepare, you are preparing to fail." This rings true for SLM, as it is crucial for businesses to have a well-organized and efficient system in place.
Improperly managed software licenses can trigger a domino effect of problems for businesses. From financial penalties to security vulnerabilities, the consequences of improper management of software licenses can have a detrimental impact on an organization's operations. Many software vendors like Microsoft, Oracle, and IBM conduct regular compliance audits to ensure their software is used according to license agreements. While their primary goal is to bring organizations into compliance, non-compliance can lead to hefty fines.
Moreover, unused licenses represent wasted resources, while under-licensing can cause business disruptions and delays in software updates due to non-compliance.
The risks that come with poorly managed software licenses can essentially be categorized under operational, financial, and security (see the table below).
| Operational risks | Financial risks | Security risks |
|---|---|---|
|
|
|
SLM best practices
Check out these six essential best practices for implementing a successful SLM process:
1. Find a single place to track all the existing software and associated licenses
Establishing a central repository for software and license data is crucial for organizations to gain comprehensive visibility into their software inventory. This can aid in maximizing software usage, complying with licensing agreements, and improving software asset management and security. It can also help monitor over-licensed, under-licensed, and compliant software and ensure IT asset managers have accurate information about all active software being utilized within an organization.
2. Document the procurement process for every single software purchased
Track and document purchases of each software license, as it helps in maintaining a record of all the software licenses and agreements, which can be useful for future reference or audits.
3. Deploy a powerful ITSM platform
Managing software licenses can be a complex and time-consuming task, which is why a license manager is essential to streamline this process. While standalone tools can only help with ticking the basics of SLM, ITSM platforms with SLM capabilities can help you understand the big picture by tying data about software licenses with the ITAM inventory. Further, purchase orders and contracts can be associated with specific software, helping ensure spotless IT audits. It can also help implement real-time notifications of upcoming renewals and alert relevant parties of any prohibited software installations.
4. Conduct regular scans of workstations to identify any license violations or unauthorized software
In order to maintain compliance and protect company assets, regular scans of workstations are essential after you have implemented an ITSM solution for creating a centralized repository. These scans serve as a critical step in identifying any potential license violations or unauthorized software usage. By proactively identifying and addressing any potential violations, organizations can mitigate the risk of legal issues and penalties, detect unauthorized software, and take actions to mitigate risks and protect their network from cyberattacks.
5. Ensure timely software updates
Don’t make your company dependent on outdated technology; install the latest software updates and patches in time. Keeping software up to date is crucial for security and functionality. Regularly checking for updates and installing them in a timely manner can help prevent potential vulnerabilities and improve overall performance.
6. Integrate across your IT ecosystem
Integrating other business processes such as ITAM and CMDB within your organization is crucial for effective SLM. This can greatly benefit processes like employee onboarding and offboarding and purchase order management, as licenses can be automatically updated, allocated, or removed as needed. To ensure seamless SLM, it is essential to seamlessly integrate your entire IT management ecosystem for maximum license utilization and compliance.
Presenting
ServiceDesk Plus
A unified service management platform that combines ITSM essentials, ITAM, and CMDB with ESM capabilities
The unified service management platform from ManageEngine comes with PinkVERIFY™— certified ITAM that can immensely help improve your SLM. All of the best practices mentioned above can be easily implemented in ServiceDesk Plus to ensure a smooth SLM process. Need to know how many software licenses you have? Who is using them? Are they close to expiration? Are they prohibited in your organization? ServiceDesk Plus can answer all these questions and more!
ServiceDesk Plus facilitates the management of software licenses throughout their life cycle, from purchase orders to deployment, scanning existing software to tracking licenses and agreements, managing upgrades and downgrades, and eventual expiration or renewal. ServiceDesk Plus supports you every step of the way.
Check out how ServiceDesk Plus helps you in your SLM journey.
Single source of truth for software inventory
Ditch the spreadsheets. Manage a central repository for all the software applications in your organizations along with relevant manufacturer details, number of installations, and more with ServiceDesk Plus.
Centralized license tracking
Do away with tracking licenses at disparate locations. ServiceDesk Plus allows you to consolidate and manage all your software licenses from a single, centralized repository. This provides a holistic view of your entire software licensing landscape. You can track available licenses, allocated licenses, license category, active and inactive statuses, and more.
Customizable license types
Organize your licenses for efficient management. ServiceDesk Plus allows you to categorize your licenses based on parameters like individual, enterprise, or OEM. This categorization simplifies license identification and retrieval when required.
Automated discovery
Save time and minimize manual effort. ServiceDesk Plus can automatically discover IT assets (workstations, servers, software, etc.) during the scanning process. The appropriate software licenses can then be assigned to these discovered assets, ensuring accurate license tracking.
Associate license agreements to software and vendor
Avoid audit risks. Adhere to software licensing terms by linking license agreements with the appropriate software and vendors.
Check software installations across the organization
Effortlessly identify the number of workstations utilizing each software that can help you further carry out required installations or removals of unnecessary ones. Also, check out how many of these software installations are licensed and unlicensed, and take appropriate action.
Manage available licenses and usage
Check out all the different types of purchased licenses associated with the software, auto-allocate them to different sites, and more right from the software details page.
Manage software contracts
Streamline your workflows by linking contracts to their respective software licenses and receiving advance notifications for contract renewals.
Other service management capabilities in ServiceDesk Plus
Incident management
Streamline the incident management process from logging and routing tickets to resolution and reporting.
Problem management
Identify and resolve the root cause of every incident to prevent recurring incidents.
Change management
Plan, implement, and solidify modifications within an organization using built-in workflows and approvals.
CMDB
Map relationships between different CIs and analyze the business impacts of any IT disruptions or changes in your business operations.
Service request management
Streamline the incident management process from logging and routing tickets to resolution and reporting.
Reporting
Gain insight into your service management procedures by examining service desk data through out-of-the-box reports or by creating personalized reports across various modules.
IT project management
Create projects, manage resources, track progress, and seamlessly integrate projects with ITSM processes to enhance your overall IT service delivery.
Still thinking whether you need a strong SLM process in place? Consider this:
- Do you have difficulty keeping track of your organization's software inventory?
- Do you struggle to monitor available and used software licenses?
- Do you find it challenging to manage license allocations for various users, departments, and sites?
- Are you concerned about prohibited software being installed in your organization?
If your answer is yes to any of these questions, that's an indicator for you to invest in the right SLM solution today!
Author's bio
Aditya Oswal is a product marketer at ManageEngine, A division of Zoho Corp., where he drives several marketing initiatives and contributes with marketing collaterals on all levels. He has authored guides on managed service providers (MSPs), PSA software, and field services management for MSPs in addition to managing various user education and thought leadership webinars addressing ITSM challenges experienced by enterprises worldwide. He specializes in organizing campaigns for product releases, user education programs, and more for ManageEngine's flagship ITSM products and shares a keen interest in managed services and the customer support industry.
