What is Software License Management?

Pгszzle with Software names represents the complexity of Software License Management

What Is SLM?

Software license management (SLM) is the process of keeping track of the software licenses used in the company.

Whether you are ready or not, the digital transformation is here. Every company is a digital company now, and businesses rely on software to carry out their daily tasks. Spending on enterprise software has the highest growth rate within the industry and is projected to grow further. One of the driving forces here is the increased number of remote workers.

Person pointed to the Software License Certificate

Software licenses are legal instruments that grant and restrict your right to use the software. Software license violations cause copyright breaches. So, staying software compliant not only gets you good karma. It prepares you for software audits, which, if you are not ready for them, could cost you reputation and hefty legal fines.

However, the focus on license compliance may result in acquiring more software than is necessary. For example, there is a common practice to purchase extra licenses “just in case” to avoid possible difficulties if a shortfall occurs. Overprovisioning software can become an invisible yet significant cost. There are reports that prove that 30% of software was unused, with the average cost of unused software being about $259 per desktop during the four-year research period.

How to find a balance between under-licensing and over-licensing? This is where software license management comes into play.

What is software license management?

Software license management (SLM, or sometimes SWLM) includes processes and tools to monitor and maintain all software licenses your company owns. SLM is a part of Software Asset Management that helps you take control and reduce your overall software costs.

Are we ready for a software audit? What are our license types, how many do we have, and when are the expiration dates? Do we need to purchase licenses for new employees, or we have some in reserve? Do we have unused licenses, and is it safe to cancel some subscriptions? — these are the questions that software license management helps you answer.

Types of software licenses you pay for

Software license management starts with a clear understanding of license terms. Let’s see typical types of software licenses that you should be aware of. We’ll skip free and open-source software license types and consider some types of proprietary software licenses, which are paid.

Pay terms: perpetual vs. subscription licensing

Perpetual software licenses are licenses for which you pay only once, and then you can use the software indefinitely. Subscription software licenses are paid on a monthly or annual basis, and you can use the software during the subscription period.

At first glance, perpetual licensing may seem to reduce software lifetime ownership cost, but it would require additional maintenance fees for upgrades and technical support. Subscription-based licensing models typically provide better service because they cover customer service, software maintenance, and upgrades.

Software as a Service (SaaS)

Like with subscription software, you pay the SaaS vendor a subscription every month, quarter, or year. However, you don’t own SaaS products; you rent the use of them. SaaS products are hosted by the vendor or a third party, like Amazon Web Services (AWS) or Microsoft Azure.

A SaaS subscription typically includes support, upgrades, and maintenance, with the ability to get additional services when you pay for a premium version.

User access: named users vs. concurrent users

Software vendors employ user access licensing to base their licensing fees on the number of users within your organization who will have access to the product.

Named user licensing is a pay-per-license model. It assigns each license to one particular user with a login name and password. Employees cannot share named user licenses. The number of named user licenses is limited; however, licenses can be permanently transferred between team members when needed.

Concurrent user licensing is a pay-per-use model. It limits the total number of users who can access the product at a given time, but do not care about their names. Staff members can share concurrent user licenses, and, commonly, the number of registered users exceeds the number of available licenses. If your employees access a software product at different times, the concurrent user model can significantly save your costs compared to the named user one.

Site licensing

Site licensing grants access to software to all users at a particular site (facility) or across an enterprise. Some site licenses allow an unlimited number of users to connect. Others support the concurrent licensing model, and the total number of simultaneously connected users is limited.

Per-user vs. per-device licensing

Some software vendors restrict access to their software to specific individuals, who can use it on multiple devices as long as they confirm their identity. Other vendors choose to license their software on a per-device basis. Per-device licenses are useful when you have more than one employee working on the same computer.

Per-core, per-socket, or per-CPU licensing

Vendors of enterprise software for virtual and cloud environments price their licenses on a per-core or per-socket basis, with the industry trend toward per-core licensing since multi-core processors entered the market. However, some virtualization vendors, such as VMware, stuck to the per-socket (or per-CPU) licensing model. Per-socket licensing allows you to leverage more dense processors and have more work done without increasing your license costs. Other vendors, such as Microsoft, have shifted to per-core licensing.

Network or floating licensing

Network, or floating, licensing models cover all computers on a single specific network—a local area network, an intranet, virtual private network, or the Internet. This type is often used for high-cost business software in enterprises with thousands of employees.

When an authorized user needs to work with the software, they request a license from a central license server. If there is a license available, the server allows the employee to log in. When they finish their work (or when the allowed period expires), the license server reclaims the license, and it becomes available to other authorized users.

Metered or consumption-based licensing

Metered, or consumption-based, licensing models are also known as “pay-per-use.” The vendor charges for the usage of specific features, data, or other software resources. The software itself automatically meters the actual usage of its features or data you pay for.

Some companies like metered licensing because it is flexible and reduces waste. Others dislike metered software because the more your business relies on the software, the more you pay.

What are the benefits of software license management?

Stay compliant and audit-ready

Ensure software license compliance and avoid software audit failure. Software License Management (SLM) reduces financial and legal risks related to software license violations.

Enhance insight

Take control of all software licenses across the company. SLM helps you stay on top of all the licenses your employees use.

Minimize waste

Eliminate over- and under-licensing and optimize your software spending. SLM helps you reveal unused software licenses, so you can choose not to renew and reallocate excess spending.

Optimize IT spending and save software license costs

Optimize your software spending and find where you can save. SLM tracks upcoming subscription renewals and expiration dates, giving you additional time for renegotiation agreements and catching up on discounts.

Infographics that illustrated 4 benefits of Software License Management
Infographics that illustrated risks of poor SLM

What are the risks of poor software license management?

The greatest risk of poor software license management is a failed software audit. Software audits are measures that big software vendors and industry organizations take to ensure compliant license usage. One such industry organization is the Business Software Alliance. Microsoft established it as a trade group in 1988 to represent commercial software vendors. Since then, the BSA enforces software compliance among businesses around the globe. The BSA regularly conducts software audits to ensure that organizations are compliant with all software licenses. The BSA even offers rewards to employees for reporting non-compliant software usage within their own organizations.

A typical software audit procedure takes three to six months, eating up significant time and resources. If some license compliance violations are found, your company may be eventually asked to “true-up” your unlicensed software use and purchase licenses for all non-compliant installations at the vendor’s price. And last but not least, your organization may become subject to fines and penalties for copyright violations.

Remember that potential penalties following a failed software audit could harm your business significantly. The best practice is to conduct regular internal software audits to identify all vulnerabilities before the BSA or a large software vendor comes in.

What are the best practices for software license management?

Strong software management policy and control

Effective software license management starts with solid policies and transparent rules. Strict guidelines on who can purchase and install software minimize the risk of unauthorized or malicious software installed on employees’ computers.

Software asset management standards and practices

Manage the entire lifecycle of software assets in your company using best practices from industry leaders. Use software asset management (SAM) as a road map to help you turn your current practices into effective and mature processes.

Regular software inventory

Regularly scan your company network and keep information about software installations up to date. The best choice is an automated solution. You may also supplement your automated software discovery with physical audits to exercise greater control over your software assets.

Timely software updates

Don’t make your company dependent on outdated technology and install the latest software updates and patches in time.

Configuration management database (CMDB)

Understand the relationship between your software and hardware assets and know their place in your IT infrastructure and relations to other configuration items.


Monitor software usage and uninstall unused software or cancel unused subscriptions to reduce your total software costs.


Integrate software license management with other business processes in your organization. A good example is employee on-boarding and off-boarding processes, where software can be allocated or reallocated automatically. Another example is when your procurement and purchasing processes cover software assets.


Automation is a great way to streamline processes that would be very difficult to handle manually. The best candidates for automation are software discovery, usage monitoring, license allocation and reallocation, and tracking license compliance.

Measure and analyze

Set software cost-saving targets and track your progress.

How Alloy Software Asset Management can help

Alloy ITSM/ITAM platform includes a Software Asset Management solution that can help you optimize software spending, achieve and maintain software license compliance, and always be ready for software audit challenges.

Our strengths include:

  • Top-notch automated network inventory,
  • Software discovery with the retrieval of installation keys and serial numbers,
  • Automated and manual software license allocation,
  • Support for all popular licensing models,
  • Dashboards and reports for monitoring your software licensing compliance,
  • Full-featured Configuration Management Database (CMBD),
  • Relationship maps for effective IT decisions,
  • REST API for integration with third-party solutions,
  • Vast automation capabilities within the powerful Alloy workflow engine

The flexibility is endless, this product is capable of doing anything you design. It can output to batch files, automate tasks and digitize forms. The only limitation is your imagination.

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