There is a chance every day in your life you use a piece of software. You might create presentations or spreadsheets on Microsoft Office, enjoy Google’s software when looking for an answer to a question, or use a productivity tool like Notion or Asana to improve collaboration with your team at work. Software plays a critical role in our day-to-day.
In a commercial setting, using software comes with a responsibility: software license compliance.
When using a piece of software, you must adhere to the terms, conditions, and restrictions set forth by vendors in their license agreements. This means understanding and respecting the authorised scope, quantity, and duration of software usage. By ensuring compliance, organisations can mitigate legal and financial risks while fostering transparency and trust.
In this article, we will discuss what software license management is, why it is so important and how you can ensure that your company stays compliant with vendors’ agreements.
Understanding and managing software license compliance requires a holistic approach that encompasses license procurement, tracking, monitoring and auditing. By adopting best license management practices, organisations can optimise costs, mitigate risks, maintain vendor relationships, and align their software deployments with legal and ethical standards. Keep reading to learn more.
The importance of software license management
To properly conduct software license management, organisations must set up processes and tools to control the licenses for the software applications they use. Software license management involves monitoring, tracking, and optimising the allocation, usage, and compliance of software licenses throughout the organisation.
Some key aspects and steps of software license management include:
License inventory
Organisations must create an inventory of all software licenses they own. This includes identifying the types of licenses, their quantities, versions, and associated terms and conditions.
License procurement
Organisations acquire software licenses through various means, such as purchasing directly from software vendors, entering into volume licensing agreements, or subscribing to software-as-a-service (SaaS) solutions. License procurement should be managed carefully to ensure compliance and avoid unnecessary costs.
License tracking
It is important to track the deployment and usage of software licenses across the company’s infrastructure. This involves monitoring the number of licenses in use, which systems they are installed on, and who is using them.
Software asset management (SAM) tools can help automate this process by providing real-time visibility into license usage.
License compliance
Ensuring license compliance is crucial to avoid legal and financial risks. License compliance involves making sure that the number of software installations matches the number of licenses purchased, that licenses are used within the terms and conditions defined by the vendor, and that any license restrictions or limitations are adhered to.
License optimisation
Optimising software license usage helps organisations reduce costs and make the most efficient use of their licenses. This may involve reclaiming unused licenses, reallocating licenses from inactive users, or implementing license pooling strategies to maximise license utilisation.
Renewals and maintenance
Managing license renewals and software maintenance agreements is essential to ensure uninterrupted access to software updates, bug fixes, and technical support. Organisations should maintain an accurate record of license expiration dates and initiate renewal processes in a timely manner.
Audits and compliance reporting
Periodic license audits may be conducted by software vendors or third-party organisations to verify license compliance. It is important to maintain detailed records of software licenses, usage, and proof of purchase to demonstrate compliance during audits. Compliance reports can also be generated internally to track license usage and identify areas for optimisation.
Policy and governance
Establishing clear policies and governance procedures for software license management is crucial. This includes defining roles and responsibilities, specifying license usage guidelines, implementing approval processes for software acquisition, and educating employees on license compliance and usage best practices.
Why does it matter?
Effective software license management helps organisations avoid legal issues, reduce costs, and optimise their assets.
Compliance
Software licenses typically come with terms and conditions that govern their use. Organisations must comply with these license agreements to avoid legal consequences, such as lawsuits, fines, or injunctions. Non-compliance can result in reputational damage and financial loss.
Cost optimisation
By tracking license usage, organisations can identify underutilised or unused licenses and reallocate them to other users or systems. This reduces unnecessary expenses.
Effective license management also helps companies negotiate better terms in volume licensing agreements or subscription contracts.
Risk mitigation
Poor license management exposes organisations to various risks. Using software without proper licenses can lead to copyright infringement or intellectual property violations.
Unlicensed software may contain security vulnerabilities or malware, putting the organisation’s systems and data at risk. By managing licenses effectively, companies can reduce legal, security, and operational risks.
Asset management
Software licenses are valuable assets for an organisation. Managing licenses ensures that these assets are properly accounted for and tracked. It provides visibility into the organisation’s software inventory, including license types, quantities, and versions. This helps organisations make informed decisions regarding software procurement, upgrades, or retirement.
Vendor relationships
Maintaining good relationships with software vendors is important. License management facilitates transparent communication with vendors, ensuring compliance with their licensing terms and conditions. Demonstrating compliance during vendor audits or negotiations helps build trust and strengthens the vendor relationship. It also enables organisations to take advantage of vendor-provided support, updates, and enhancements.
Scalability and flexibility
License management allows organisations to scale their software usage according to their needs. It helps track license usage across different systems, enabling efficient license allocation and preventing over-deployment. This flexibility allows organisations to adapt their software deployments as their business requirements evolve.
Software asset planning
License management provides organisations with insights into their software usage patterns and requirements. By analysing license usage data, companies can make informed decisions regarding software procurement, upgrades, or renewal strategies. This planning ensures that software resources align with business needs, optimising productivity and efficiency.
15 best practices to ensure software license compliance
Software license management is essential for every company, and one particular reason why it is so important is compliance.
Failing to comply with vendors’ agreements can put your company at risk. Here are some of the things organisations should consider to ensure software license compliance:
1. Understand license terms
Thoroughly review and understand the terms and conditions of software license agreements. Familiarise yourself with the permitted usage, restrictions, and any specific guidelines outlined in the agreement.
Pay attention to the following aspects of your license agreement:
Authorised usage
License terms define the authorised scope of software usage. They outline how the software can be used, whether it is limited to specific individuals, departments, or systems, and if there are any usage restrictions or limitations.
Quantity and deployment restriction
Pay attention to the number of installations or users your license agreement specifies, ensuring that the software is deployed within the permitted quantity.
Geographic restriction
Some software licenses may have geographic restrictions specifying where the software can be used. Be aware of these restrictions to ensure that the software is not used outside the designated regions.
Copying and modification limitations
License terms often address whether the software can be copied, modified, or reverse-engineered. Ensure that the organisation does not engage in unauthorised activities that breach the terms of the license agreement.
License transfer and substitution
Note whether the license is transferable to another organisation or individual. It is important to understand the transferability rights to ensure compliance when there are changes in organisational structure, such as mergers, acquisitions, or divestitures.
Similarly, license substitution or swapping between different software versions may have specific terms and conditions that need to be understood to maintain compliance.
Upgrade and maintenance rights
Agreements may include provisions for software upgrades, updates, and maintenance.
2. Maintain centralised license inventory
Establish a centralised repository to track and manage software licenses. The accurate inventory should include license quantities, version numbers, associated systems or users, and relevant documentation.
With better visibility of licenses, companies ensure that no licenses go unnoticed or unaccounted for. I also facilitate license renewal and auditing.
3. Implement license management tools
We have discussed the importance of license management and how crucial it is to set up processes to stay compliant.
Software license management tools or solutions automate tracking, monitoring, and reporting of license usage, streamlining compliance efforts and providing real-time visibility into license deployments.
4. Conduct regular audits
Perform regular internal audits to ensure license compliance. Conduct periodic checks to verify the number of licenses purchased matches the number of installations and users. This helps identify any discrepancies and potential non-compliance issues.
5. Document proof or purchase
Maintain proper documentation of software license purchases, including invoices, receipts, and license agreements. This documentation serves as proof of purchase during audits or vendor inquiries.
6. Track license usage and assignments
Monitor and track license usage, including installations and user assignments. Keep records of who is using the software, which systems it is installed on, and the number of licenses allocated to each user or system.
7. Enforce license restrictions
Ensure that software usage adheres to the license restrictions. This includes limitations on the number of installations, geographic restrictions, and usage within specific timeframes.
8. Educate employees
Train employees on software license compliance and the importance of adhering to license terms. Raise awareness about the risks of non-compliance and provide guidelines on proper software usage.
9. Implement approval processes
Establish approval processes for software procurement and deployments. Ensure that all software acquisitions are authorised and comply with the organisation’s licensing policies.
This practice involves establishing structured procedures and guidelines, creating awareness among employees about the importance of software compliance and preventing unauthorised software acquisition.
Approval processes also allow for license validation before acquiring software and help organisations manage costs.
10. Track and manage license renewals
Keep track of license expiration dates and initiate renewal processes in a timely manner. Failure to renew licenses may lead to non-compliance and potential disruption of software access.
Maintaining a centralised inventory and using software license management tools can help companies track what is about to expire and act accordingly.
11. Monitor vendor updates
Stay informed about software vendor updates, patches, and new releases. Ensure that the organisation has valid licenses to support these updates and upgrades.
Software updates are extremely important to ensure the safety and security of your systems.
12. Regularly review license agreements
Periodically review license agreements to stay updated on any changes or amendments made by software vendors. Understand how these changes may affect the organisation’s license compliance.
13. Establish software usage policies
Develop clear software usage policies that outline acceptable use, restrictions, and penalties for non-compliance. Communicate these policies to employees and enforce them consistently.
14. Implement software asset management processes
Adopt robust software asset management processes that encompass the entire software lifecycle, from procurement to retirement. This includes tracking software installations, usage, upgrades and decommissions.
15. Seek professional advice
If you are unsure about license compliance or facing complex scenarios, seek professional advice. Experts with knowledge in software licensing and compliance will be able to guide you when it comes to interpreting agreements and navigating licenses.
Professional advice can also make your asset management more efficient. Make sure to work with reliable organisations and professionals to smoothly run your business and remain compliant with vendors’ agreements.
Conclusion
As we discussed, software license compliance is a fundamental aspect of responsible business operations. Conducting efficient software license management means complying with legal obligations and mitigating potential risks.
By following the practices we have listed in this article, organisations can optimise their software usage, reduce costs, and avoid legal and financial consequences associated with non-compliance.
As the software industry continues to evolve, introducing new licensing models, companies must stay proactive and adapt their strategies to meet these changing dynamics. Software license compliance and management should be viewed as a strategic imperative.
