Strategic License Management


Managing software effectively means treating it as a high-value business asset. Managing software assets can be difficult to manage for two primary reasons — the increasing complexity of licensing and the lack of adequate software asset management tools.

According to IDC, 33% of software customers in medium and large companies now manage more than 70 software contracts.1 Managing multiple software contracts requires constant negotiations as different licenses require renewal at different times.

There are a variety of software acquisition methods and license types which differ from vendor to vendor and even department to department. These include software preloaded on computers, software downloaded via the Internet, volume purchases made directly from publishers or through resellers and hosted applications.

Further complicating matters, licensing may also include multi-user software with enterprise, transaction, processor, concurrent user or named user constraints. Given these options and variables, it’s no wonder that 70% of customers surveyed by IDC say the complexity of managing software contracts has increased in the past year.2

Until recently, effective software asset management tools that streamline management and prevent misuse have not been available. The resulting lack of visibility into how, when and by whom software is being used causes enterprises to over-license some applications and underlicense others.

Faced with ongoing budget constraints, corporations increasingly recognize the value of software asset management. According to IDC, companies spend $140 billion on software each year, and 65% of software customers surveyed state that it is likely they will start collecting more accurate usage data to help guide purchase decisions in the next year.3

To help IT managers navigate through the software licensing maze, Flexera Software is offering this guide to the business and IT communities. It includes a five-step implementation plan and management tool selection criteria designed to help managers maximize the value of their software assets. With an effective license management strategy in place, managers will be able to:

  • Increase productivity through global license sharing/ pooling
  • Optimize IT spending with usage-based purchasing
  • Simplify license administration by centralizing licensing operations

Pitfalls of Software Mismanagement

Ensuring applications will install and run predictably on Managing software assets effectively means minimizing costs while providing sufficient capacity and flexibility to meet business requirements. While most managers understand how to manage physical assets, 67% of companies polled noted that they do not track their software usage.4 Few know how to manage software licenses as business assets—despite the fact that they may be responsible for—tracking millions of dollars worth of software products.

Because IT managers lack visibility into actual software usage, they frequently overestimate or underestimate their software needs in their efforts to balance cost control and end user productivity. These mistakes can significantly impact the profitability of the entire enterprise, as the following scenarios show.

Excess licenses (“shelfware”). To ensure that users have access to all the software they need, IT managers routinely buy more licenses than their organizations actually require. This eliminates denial-of-service problems, as in situations where a user tries to access a license to a particular application but is “denied” access because other users have already checked out available licenses. But it also increases software costs and lowers corporate profits—not an acceptable outcome for most businesses.

Insufficient licenses. To contain software costs, managers may purchase too few licenses. This often results in denial of service when end-users need access to applications. Although this approach cuts software expenses up front, it can create productivity problems that cause delays and erode profitability, as is the case when a product arrives late to market. Again, this is not a good outcome for most businesses.

Excess and insufficient licenses. Sometimes a software application is over-licensed by one department and underlicensed by another within the same organization. Sharing licenses would save costs and promote productivity, but most managers have only a limited, local view of their software assets, making it difficult to identify—let alone resolve— these kinds of allocation issues.

Using Strategic License Management to Optimize Expenses and Increase Productivity

Most IT managers currently make software purchase and renewal decisions by relying on whatever local usage information they have available. They allocate current licenses and “guesstimate” the number and type of licenses they will need in the future on this basis. This approach may sound reasonable, but in real-world terms it is fundamentally flawed. Without a global view of their licensing operations and actual usage data to base decisions on, they frequently miscalculate their licensing needs. As a result, they commit costly errors by buying too many or too few licenses, which perpetuates the self-defeating cycle illustrated in Figure 2.

The key to avoiding these and other costly errors is a strategic license management solution that provides comprehensive information about the organization’s actual license usage. Butler Group recommends the use of software asset management tools to centralize licensing operations, leverage usage statistics to track the number of licenses an organization holds, and determine the effectiveness of software.5

Implementing Strategic License Management: A 5-Step Methodology

The two main components of strategic license management are 1) license sharing and 2) usage-based purchasing. Simply put, these measures allow enterprises to purchase and pool software licenses in a way that corresponds exactly with their usage needs. No more money wasted on shelfware, no more productivity lost from denial-of-service delays. With strategic license management, organizations obtain the maximum return from their software investments by optimizing every dollar spent on software-related costs.

Following is a 5-step methodology for implementing strategic license management that illustrates the value of license sharing and usage-based purchasing across the enterprise. At each step, unnecessary spending is reduced, under-utilized licenses are redeployed, and end-user productivity is enhanced.

Step 1: Centralize All Licensing Operations

Decentralized licensing, a common feature of today’s IT landscape, makes it difficult to see how, when and where licenses are being used. This lack of visibility can result in too many or too few licenses purchased (see Figures 3 and 4). It also has the unfortunate side effect of forcing multiple administrators to become licensing “experts”, resulting in staff redundancies and operational inefficiencies.

1 IDC Future of Licensing Study, 2004.
2 Software Licensing, The Recognition of Value, IDC, May 2004.
3 IDC Future of Licensing Study, 2004.
4 Ibid.
5 Pressure Forces Flexible Software Licences, by Arif Mohamed and Steve Hill, August 4, 2003.

This is an excerpt. Download the entire pdf: Strategic License Management