Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.

Are You Spending Too Much On Software?

Are You Spending Too Much On Software?

Finding the right balance of licensing as much software as needed, but not more, is one of the challenges addressed by software license management (SLM)

It is hard to imagine running a business today without software. From desktop applications, like word processors and spreadsheets, to back office systems, like relational databases and content management systems, software is an essential component of most business processes. There is no argument we all need software in our organizations—the key question is how much and what kind. If we do not have the software we need, then we run the risk of inefficient operations or worse: If we license too much software or use the wrong kind of software we may find ourselves paying too much.

Software License Management (SLM)

Software license management (SLM) is a process for controlling software costs while maintaining compliance. SLM practices and systems help answer three driving questions:

  • What software is owned?
  • What software is used?
  • Who is using it? 

With answers to these three questions, IT administrators and managers can optimize the allocation of software licenses, choose the most appropriate licensing model, and avoid potential costly non-compliance.

To answer the question of whether you are spending too much on software, we must first start with an inventory of software assets. You could, of course, send support desk staff to visit every desktop or remotely connect to every computer and manually catalog all the software on each system, but fortunately there are better ways.

Free tools, such as the Microsoft Software Inventory Analyzer (MSIA), can scan computers on a network and generate reports on the Microsoft products installed, as well as the number of licenses and the license types in place. MSIA is designed for small networks (less than 250 devices) and only detects Microsoft products.  Other free products, such as Spiceworks software inventory management tool, can collect data on all software on a device, including Mac OS X and Linux systems.  Large enterprise can scale their software asset management operations with applications such as IBM Tivoli IT & Software Asset Management system.

Deployed Software And Licenses

Software asset management tools can help you understand what software is deployed in your organization. That information should be compared to your licenses in place. This is often much more difficult than it should be. Licensing information may be distributed in multiple places throughout the organization. For example, IT might manage all Microsoft desktop software licenses but other departments might manage their own licenses for specialized software, such as computer aide design or mathematical modeling systems use in engineering. In some cases, a single unit within the organization might manage licensing information but the information might be tracked in multiple systems or even ad hoc spreadsheets. This lack of centralization makes software license management more difficult and error prone.

Ideally, software license information should be tracked in the same application as software asset inventory information. This allows for ready comparison between the number of software assets deployed and the number that are licensed. Combining deployment and license data will allow license managers to identify cases in which there are more licenses than deployed instances or more deployed instances than licenses. In the first case, an organization may be paying more than necessary for software licenses. At the very least, licenses should not exceed the number of deployed instances.  In the second case, the organization is not in compliance and the data from the software inventory can be used to correct the problem.

Why You May Be Paying Too Much For Software

Having more software licenses than deployments is just one way you may be paying too much for software.

There may be cases in which you have software deployed that is unused or under used.For example, a number of employees may have Microsoft Access installed but have never used the database.  The software might have been installed under the assumption that the database might be needed in the future.  In other cases, the software may have been installed in for use with a custom Microsoft Access database that is still under development.In the first scenario, the desktop database might or might not be used while in the second case it is likely the software will be used in the foreseeable future.One needs to understand the business requirements driving the deployment software to determine when unnecessary licenses are driving up your software costs.

Depending on the types of software licenses your have in place, finding unused software may not lead to cost savings.  For example, your business might license Microsoft Office applications in a bundle that includes the word processor, spreadsheet and presentation software.A user might make heavy use of Word and Excel but never open PowerPoint.  There would be no cost savings associated with removing the presentation software from that user.  Similarly, if you have negotiated an enterprise or site-wide license for an application, reducing the number of instances deployed in the enterprise or site will not reduce your licensing fees.  If this is the case, it is time to reconsider the way you license software.

There are advantages and disadvantages to various licensing models.One model may be the best option when you first license software but that may not continue to be the case if your requirements change.  For example, with a small number of users, individual licenses for each user may be appropriate but as the number of users grows, a concurrent user license may be more cost effective.  Also consider how the software is used. Concurrent user licenses work well when users can share the license without disrupting their workflows.  Named user licenses, unlike concurrent user licenses, limit users to a fixed set of individuals and may not provide the flexibility your organization needs.

Keep in mind that a change in your license model can require changes to how you manage and monitor applications.  For example, you might need to implement software metering to monitor and limit the number of concurrent users.Software metering data can provide valuable information about how and when software is used in your organization.

Controlling Costs With SLM Tools

Once you have conducted a software inventory, compiled licensing information, retired unused licenses, procured additional licenses and optimized your license model you will be in a position to implement best practices for software license management.

Best practices for software asset management, which includes software license management, have been developed and documented in the Information Technology Infrastructure Library (ITIL), a set of best practices for IT service delivery. These practices include formalized procedures for conducting software inventories, establishing procurement procedures, reconciling licenses and software use, and tracking licenses.

Software As A Service (SaaS) Licensing

The growing adoption of cloud computing, especially software as a service products, is adding a new twist to software license management.In addition to software on the desktop, employees may be using cloud services as well.  For example, an employee may use locally installed versions of Microsoft Word and Microsoft Excel while in the office, but use the Web-based Microsoft Office 365 versions of those products when working remotely.

SaaS licenses are not amenable to the same kinds of discovery tools used for locally installed software.Licenses for cloud services will need to be tracked and inventoried differently, typically by using documentation generated when the service was procured.

Cloud-based services may also provide an opportunity to reduce licensing costs. Not all users will take advantage of full-featured desktop applications. In some cases, users’ needs may be met by lower costs and less feature rich SaaS products. When evaluating what software is needed for the various roles in your organization, consider substituting lower cost SaaS services for full featured applications. SaaS alternatives for desktop applications include Microsoft Office 365Google Apps for Business, and Zoho productivity apps.


Software license management is an essential practice to help avoid paying too much for software. Fortunately for administrators, we have tools available to help perform software asset inventories, track licenses, and meter software usage. Even with these tools though, administrators still need to assess who needs particular software packages and when shared-use models are most appropriate. Software license management has its own lifecycle and requires formalized procedures to maintain a well managed state. One of the key benefits of implementing these practices is that it helps generate data about software use that you can use to optimize your software license strategy.