A Small Business Guide to Software License Management

Software license management (SLM) saves you money by identifying unused software and licensing violations. The Blueprint covers the best practices to manage your small business's software licenses.

Updated July 8, 2020

Wasted time, money, and resources are the enemy of success at your small business. One hidden cost that can add up to hundreds or thousands of dollars a year is unnecessary and improperly used software licenses.

A software license management (SLM) plan helps you avoid these costs. We'll go over the multiple SLM benefits, best practices, and different software licenses to demonstrate why you need SLM at your small business.

Overview: What is software license management?

SLM tracks and maintains your company's software licenses. You almost never "buy" a piece of software; instead, you buy a license to use it under defined conditions and/or time periods. This includes desktop installs, web-based applications, and digital device applications.

SLM helps determine how many licenses are needed from each software vendor and distributes licenses throughout the company where they will have maximum impact. SLM is a subset of software asset management (SAM) in Information Technology Infrastructure Library (ITIL) 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.

ITIL is a collection of best practices to integrate IT activities with overall business processes and objectives. The ITIL software life cycle has five stages: purchase, deployment, maintenance, utilization, and disposal. SLM helps ensure each stage is efficient and cost-effective.

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. Lower costs

Year over year, business software spending is increasing, but waste remains a significant share of that expense. A recent, multi-year study calculated that U.S. companies lose $30 billion per year on unused software, which equals $259 per desktop, and that over a third of software licenses are rarely or never used.

2. Better budgeting

Don't buy wholesale bulk licenses you may or may not use; instead, implement SLM within the ITIL framework to better align IT spend with organizational requirements.

Your budgeting is more accurate with SLM because, beyond reducing waste, you can employ "best-fit" licensing: purchasing the licenses most appropriate for your company's needs.

3. Risk reduction

Software licensing compliance also reduces your potential liability if a software vendor conducts a usage audit. Penalties can be significant: The U.S. Army paid $50 million in 2013 to software developer Apptricity for thousands of unlicensed installs.

Software license management best practices

Effective SLM is no different than other processes like ITIL change management: Plan the work, and work the plan. Develop a comprehensive SLM program using these best practices to enjoy the resulting benefits.

Practice 1: Use IT asset management software

SLM is too complicated to track on an ad hoc basis, so IT asset management software is your best option. You can buy a standalone application for this, but a better solution is to use SLM features in IT service desk software such as Freshservice or SolarWinds.

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

The AssetSonar 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 multiply.

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

Practice 2: Obtain licensing documentation

Once you have SLM software capabilities, input pertinent information beginning with licensing documentation for your software applications.

Tips to aid in this process include:

  • Use a central repository: IT service desk software again proves its value here as the primary location to store, review, and update software licensing materials.
  • Assign a license manager: As the number of software licenses increases, a designated license manager ensures your small business stays in compliance.

Having your existing documentation in hand is critical when you compare it to software installs.

Practice 3: Identify software deployments

After you know the software you're licensed to use, perform a comprehensive audit to identify gaps between licensing and actual usage.

Two issues to track include:

  • "Shadow" IT installs: Over a quarter of IT spends occur outside IT departments, so you must identify applications installed by non-IT personnel.
  • Version control: Identify different software versions and standardize software installs across your company. Uniform version control simplifies license renewals and streamlines change requests and problem management.

Don't forget to catalog IT software assets installed on hardware not in use — servers, desktops, laptops — because those count against your licensing agreement limits.

Practice 4: Track usage

Identifying installed software allows you to track usage and configurations as well as how it's accessed. Information about real versus projected usage aids the budgeting process.

  • License usage: Track the number of installs and usage for each piece of software to minimize the amount of unused licenses and avoid violating the number of allowed users or installs.
  • Risk minimization: Run periodic checks for illicit software installs. Over half of employees admit to installing personal software on company computers, and IT managers report that 85% of unauthorized installs create problems, including the increased risk of malware.

Personal devices brought to work, thanks to the "Bring Your Own Device" (BYOD) trend, may trigger events requiring incident management when connecting to your company's network or accessing its applications.

Practice 5: Set software reminders

Schedule SAM alerts for critical events in the software life cycle 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 each IT license with minimal effort to keep your company in compliance.

Types of software licenses

Licensing software may seem simple — pay this for that — but the multiple types of licenses require careful consideration when choosing the best option for a given need at your business. Are you using public domain, permissive, or proprietary software? Should you get a perpetual, subscription, or metered-use license?

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

Type 1: Per user

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

Type 2: Per device

Software is deployed on one machine, whether it's a workstation or a server. Licensing per device can create compliance issues when users attempt to access the application from other devices, or the application is used in a test environment on another device.

Type 3: Per network

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 home computer or smartphone.

Control your software costs and liabilities

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

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