What is Software License Management?

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.