Software license costs may seem low when you look at them in separation. However, when you add them up, it often turns out they’re pretty substantial. In some circumstances, they may even become a severe problem for a struggling business. What can you do to reduce them and save money? Here are 5 practical tips for software license optimization.
A license for a single software solution may not seem all that expensive, but when you add these costs together, they quickly pile up – sometimes to the point of becoming a real problem for the business. It’s one of the reasons companies tend to invest in custom software solutions when they get big enough.
However, this isn’t the only way to solve this problem – there are other things you can do. Software license optimization is a relatively new concept, but it can be very beneficial for your business if it’s done right. In this article, I’ll provide some helpful examples from my 10 years experience as a delivery manager, product owner and network administrator.
Before I move on to the main part of the article, I’d first like to answer an important question: why is software license optimization something you should consider?
The obvious answer is “money”, however, there are also other benefits to keeping your licenses in check. Let’s look at them in more detail.
1. Lower costs
I’ve already mentioned this, but it’s worth repeating nonetheless. The desire to lower costs is usually the prime reason behind software license optimization, and with good reason. According to a global study from 2018 conducted by Business Software Alliance (BSA), companies can save as much as 30% on software licenses. Now, consider how much money you spend on software each year. Can you see the piles of wasted dollars yet?
2. Improved security
To create a fully secure environment, you need to know precisely what it consists of. If you don’t know every important asset in your system, you can’t successfully identify potential vulnerabilities. Think about it this way: most unused, or very rarely used licenses are linked to passwords that give users some sort of access to your IT infrastructure. It’s also quite common that companies don’t keep track of licenses that aren’t in active use.
There may potentially be situations where log-in details for forgotten licenses fall into the wrong hands, and it may take quite a bit of time before someone becomes aware of that.
3. More control over renewals
With various subscription tiers, products, and optional services, the renewal process for licenses can be surprisingly complicated. The agreements themselves also tend to be very complicated – some would even argue they’re intentionally made this way. You often have to keep track of multiple deadlines, as well as various details regarding pricing, the changes that happened in the market, and your own business situation.
Overall, license renewal is often a painful process that takes way too much time. There’s a lot to gain from optimizing and simplifying it.
4. Reduced audit risk
Paying for licenses you’re not going to use is a waste and an obvious problem for a company. However, a reverse situation – where a license gets used more than is legally allowed – can be even more problematic. If the software vendors responsible for software you need decides to initiate a software license audit, your business may be in some real trouble.
Software license optimization can help you prevent this scenario by making you more aware of the costs and scopes of the assets you’re paying for and ensuring the proper license compliance.
There are at least a few ways you can categorize software licenses. First and foremost, you can look at how many users they’re meant for:
- Licenses for a single user – the software can only be used by one person or on one specific machine. The very popular End User License Agreement (EULA) is an example of a single-user license
- Multi-user licenses – you can install and run the solution on several different devices at the same time, but the number is limited.
- Pay-per-use licenses – you don’t pay for the number of people who access the software, but rather for the number of times it’s used
- Site licenses – they allow the installed software to be used in a specific location (like company offices), and there’s no limit on the number of machines. This is usually a great option for big companies, since it’s cheaper than buying EULAs for every single employee who needs to access a specific system
You can also distinguish several license types or models, such as Public Domain, Permissive (MIT Software License, Apache, BSD), Weak Copyleft (GNU), Copyleft (GPL), Commercial or Dual. They mainly differ in their approach towards copyrights, modification and redistribution of software, but that’s a topic for a different article – there’s no point in describing them in more detail here. If you’re interested in this subject, you can find more information regarding license types on Synopsys and Snyk. Moreover, it can be helpful to consider license management solutions that provide detailed information about licenses, subscriptions, contracts, and perpetual.
There are a few characteristics your software license optimization process needs to have if it’s to be effective:
- It’s an ongoing process – optimization isn’t a one-time thing. You have to do it constantly and approach it dynamically
- It has to consider the future – optimization allows you to better understand your company’s software needs – not just now, but also in the future
- It’s comprehensive – you can’t just look at licenses used by your employees. You also have to consider your databases, cloud costs, etc.
5 proven ways to optimize software licenses
Here are several proven methods you can use to improve software license management in your company.
1. Conduct regular inside audits
This is probably the most important thing. To be able to optimize the costs of your licenses, you have to know precisely how many people use a given solution, and in what capacity. Conducting regular inside audits is a good way to keep track of your software needs. How many licenses do you really need to operate smoothly? This kind of software license data is the basis for any optimization steps.
However, the analysis shouldn’t stop at looking at users. You should also consider whether other licenses you use fit your company’s current business model well. For example, is your database license sufficient for your needs? Are you sure you aren’t overpaying for space you don’t really need right now? What is the software usage data? What about security?
Look at all every aspect of your business and every piece of software you use. Analyze statistics regarding server space, data usage, etc. Document everything and create a license inventory (e.g., a spreadsheet), then regularly update it (or make somebody responsible for that) with new data.
2. Use open-source software
Replacing some of the solutions used by your business with open-source alternatives is a great way to reduce your software licensing costs. For example, in the case of many companies a free Postgres/PostgreSQL database system will work just as well as an Oracle Database you have to pay for. The same goes for almost every piece of software you use. Just type “[software name] alternatives” in Google to find lists of open-source substitutes – but keep in mind to check out if they really have all the features you need.
3. Standardize the process of license procurement
Another important step is standardizing the process of procuring software assets in your business. Create clear rules and guidelines, and make sure your people follow them at all times. This will help you make sure no new licenses are bought without your knowledge, and it’ll help avoid costly mistakes. By acting in advance, you can also keep an eye on possible discounts.
4. Optimize your cloud resources
In the 21st century, the cloud is a very important technology for most companies, which means it’s also a crucial area of license optimization and general software asset management. The main idea here is the same as always – you have to fit the services you pay for to your business as well as you possibly can.
For example, if you use Amazon Web Services, consider if you really need to pay for EC2 machines and a database from Amazon. Maybe you can choose a different, free database in its place? Or maybe it’d be better to simply pay for computing power, set up your system as serverless, and use the public cloud?
You should also remember to plan your IT infrastructure well, and make sure it scales without incurring too many additional costs. Flexibility is the key here – a good infrastructure will only scale in the areas where it’s truly required. Using microservices or Kubernetes is a good way to achieve this effect.
Finally, it’s also a good idea to look at your SLAs (Service Level Agreements), since it’s another area that affects license costs and can be optimized to some degree. SLAs define the scope and nature of services between a company and a vendor, detailing various aspects of their cooperation (like system maintenance). Audit your SLAs and consider if they aren’t too extensive or restrictive for what your business needs at this. Renegotiate with the vendors if necessary.
As you can see, there are at least a couple of things you can do to optimize the software licenses used by your company. The most important thing is probably to actively keep track of what your business really needs in this regard, and keep a tidy software inventory. This allows you to scale software to your needs and avoid pointlessly burning money.
There are also some things you can do to improve your system infrastructure – to make it more cost-effective and efficient. Some of these really aren’t that hard to implement, so consider them, especially if you’re at the stage when you plan to reorganize your IT infrastructure.
If you’re unsure what would fit your business best, ask consultants for their expert opinion. Pretius has a great deal of experience with developing systems for companies in various industries, including really big corporations. Drop us a line at firstname.lastname@example.org or use the contact form below, if you want to cooperate. We’ll get back to you in 48 hours.
Software license FAQ
Here are answers to some of the most popular questions regarding software licenses:
What is a software license?
A software license is an agreement that allows a party – an indivudal, a company – to legally use the software created or managed by another party (a software vendor). Software licenses usually have the form of a written document which defines all the rules and stipulations regarding software use.
What is a perpetual software license?
A perpetual software license is a license that gives someone (usually an individual) the right to indefinitely use of a given piece of software.
What is an open-source software license?
Open-source software license is a type of license that allows free use, modification and sharing of software.
What is a software license agreement?
Software license agreement is another name for software license – it’s an agreement between two or more parties concerning the use of software.