24 May 2024

Software license management (Image by OCTOBITS)

Octobits Blog – Companies of all sizes rely on a wide array of software programs to function. With this kind of reliance comes a critical responsibility – software license management (SLM).

From the email programs you use every day to the complex systems managing customer data, each piece of software comes with its license agreement.

Software license management (SLM) is how you manage these licenses – ensuring your organization uses software correctly, tracks what you own, and maintains compliance with the rules set by the software creators.

Not having a good handle on SLM can be costly. It can expose your organization to unexpected software audits, fines, and even potential legal trouble.

According to the 2023 GlobalNewswire report, the global market for license management is expected to reach $3.5 billion by 2030, growing at a CAGR of 11.9% from 2022 to 2030.

This growth is indicative of the increasing importance and complexity of software license management in today’s business environment​ 

And in this guide, we’ll take a detailed look at what SLM involves, why it’s so important for your business, and how it can help you proactively manage your software assets.

What is Software License Management?

Software License Management (SLM) is the systematic process of documenting, controlling, and enforcing the terms and conditions governing software use within an organization.

It’s a framework that enables organizations to optimize software investments, maintain compliance, and mitigate legal and financial risks.

With the ever-increasing complexity of software licensing models, like perpetual, subscription, open-source, and cloud-based, effective SLM has become an absolute necessity.

A software license is a legally binding agreement between the software vendor (creator) and the end user (the business or individual).

SLM typically defines the following critical terms:

  • Installation rights: The number of devices or users authorized to utilize the software.
  • Distribution rights: The ability to copy or share the software within the organization (or restrictions on the same).
  • Usage period: Whether the license is perpetual (a one-time purchase) or time-limited, such as a subscription.
  • Modification rights: Whether the user is permitted to alter the software code and under what circumstances.

To get broader insights about IT risk management in the software license spectrum, kindly check How to Standardize Your IT Risk Management to Avoid Drowning in Alerts?

The Importance of Software License Management

One of the foremost reasons for prioritizing SLM is to ensure compliance with the terms set forth in software licensing agreements.

Failure to adhere to these terms can result in severe legal consequences, including fines and litigation.

Implementing SLM practices enables organizations to monitor and manage their software assets effectively.

This approach ensures they remain within the bounds of their licensing agreements and comply with legal requirements.

Next, SLM translates directly into smarter software budgeting. By revealing how software is actually being used, you get visibility into wasted spend.

Unused or underused software represents money that could be reinvested elsewhere.

SLM also leads to broader IT cost optimization. Proactive practices such as license reharvesting –  reallocating licenses from inactive users or projects – minimize the need for new purchases.

Additionally, usage data can highlight situations where alternative licensing models – subscription-based, cloud-based, or volume agreements – could potentially offer major savings.

And, of course, SLM puts you in the driver’s seat during software negotiations.

So, instead of relying on vendor estimates, your team can present historical usage patterns and accurate install counts.

This positions you for greater leverage and the ability to secure more favorable pricing or contract terms.

Components of Software License Management

Let’s delve into the key components that form the backbone of a successful SLM strategy.

Entitlements Management

A strong SLM framework starts with a meticulously maintained, centralized repository of all software licenses owned by the organization.

This is your line of defense when audits occur and includes proof of purchase, renewal schedules, seat counts, and any unique usage terms.

Diligent entitlements management ensures you have the documentation to prove your organization’s use of the software is lawful and avoids costly disputes.

By maintaining a comprehensive inventory, your company can readily assess its compliance status and prepare more effectively for audits.

Inventory Management

The next component is regular scanning of the entire IT environment, using either automated SLM tools or manual methods.

This creates an up-to-date catalog of all software installed across desktop systems, servers, and even virtual environments.

This inventory is critical for understanding if you’re operating within licensed capacity – a mismatch between your entitlements and this inventory indicates the risk of accidental over-installation, a common compliance problem.

Regularly cleaning up and organizing the license inventory ensures that all upcoming renewals are easily traceable, streamlining the management process​.

Consumption Tracking

While inventory tells you what’s installed, consumption tracking drills deeper – monitoring how often and how deeply your team actually uses specific software.

Are there licenses assigned for expensive software that’s rarely logged into? Could some users switch to less-featured and less expensive versions?

Robust consumption tracking uncovers opportunities to optimize software spend by reassigning or reducing licenses or even by renegotiating contracts with vendors based on actual usage data.

Software usage logs can be crucial for SLM purposes. They help identify instances of potential license violations, such as installations exceeding the allowed limit.

Therefore, you need to understand the topic of log management. Start gaining insights inGuide to Log Management; Security, Data Protection & Avoiding Fines.’

EULA Management

Understanding the terms of End-User License Agreements (EULAs) before making purchase or renewal decisions minimizes the risk of non-compliance.

It’s essential to have a thorough understanding of these terms before software is widely deployed on your systems.

A careful review of EULAs highlights potential restrictions – some software might be limited to specific departments, while others might prohibit making any changes to the code.

Overlooking these details can expose the organization to compliance risks.

In addition to these components, managing the risks of non-compliance is of paramount importance.

Non-compliance can lead to severe consequences, including fines and penalties, damage to reputation, and business disruption.

Implementing a simple and effective SLM program, possibly with the assistance of software license management solutions like Cubes SLM, can help organizations ensure compliance, optimize license usage, and provide cost evaluation insights​.

What Are the 2 Most Common Software Licenses (and More)?

Let’s start with two of the most common models and then explore a few other important ones.

Perpetual Licenses

This license grants the user indefinite rights to a specific software version.

This usually involves an upfront cost, with additional fees for optional maintenance and support agreements. Think of this model as buying the software outright.

It can be cost-effective over time if you don’t anticipate major upgrades being needed, but you won’t receive new features without purchasing those updates.

Subscription Licenses

On the other hand, allow software use for a set period, like monthly or yearly subscriptions.

The subscription approach brings the advantage of always having the latest version and vendor support.

It’s a good choice for flexibility, but it’s important to factor in long-term costs.

But let’s not forget two other prevalent license types.

Open-source licenses offer users extensive rights to use, modify, and even redistribute software, often without strict fees.

The freedom and potential cost savings are great, but open-source solutions usually require in-house technical knowledge as there’s no official vendor support.

Cloud-based licenses, often associated with Software as a Service (SaaS) involve software running on the vendor’s servers.

Expect faster setup, lower infrastructure costs, and easy scalability, but carefully evaluate vendor lock-in potential and ensure their security practices align with your own.


Software license management is a continuous process that, when diligently practiced, significantly reduces software-related risk.

By understanding licensing, actively tracking software usage, and implementing proactive strategies, you can optimize software investments while safeguarding yourself from compliance issues.

So, are your Software License Management (SLM) on the right track? Or do you need improvement?