24 May 2024

SaaS license management (Image by Octobits)

Octobits Blog – Effective SaaS license management doesn’t just improve your bottom line. In fact, businesses can see substantial savings by taking control of their subscriptions.

As you know, as your reliance on SaaS grows, so too can the complexities of managing subscriptions, licenses, and costs.

Therefore, by understanding and actively governing your organization’s SaaS usage, you can reduce unnecessary spending, ensure you’re getting maximum value from each tool, minimize security and compliance risks, and gain better control over your software landscape.

Nidhi Jain, CloudEagle founder and CEO, highlights this in TechCrunch, stating that smart license management can cut software spending by 10% to 30%.

So, let’s get started on how to get SaaS licensing organized.

Definition and Scope of SaaS Licensing

SaaS licensing grants customers the right to use cloud-based software applications over a defined period, typically via a recurring subscription fee.

Instead of purchasing software outright, the SaaS model centers around subscriptions.

Vendors host and maintain their applications on remote servers, allowing customers to access them via the internet in exchange for a recurring fee.

This model introduces unique considerations in terms of permissions, usage limitations, and how businesses can optimize their SaaS investments.

SaaS licensing agreements dictate how many users can access the software, whether there are restrictions on data storage or other resource consumption, and outline software updates and maintenance.

Understanding these terms is crucial for staying compliant and getting the most out of your SaaS tools.

Effective SaaS license management extends well beyond awareness of the licensing terms.

It’s about gaining complete visibility into an organization’s SaaS landscape ––  the various applications used, associated costs, and how employees interact with the software.

This allows for proactive optimization, pinpointing underutilized licenses, identifying redundancies, and reclaiming funds that may be wasted on unused software features.

Additionally, rigorous license management ensures compliance with software agreements, industry regulations, and security requirements.

Proactive tracking of renewals also prevents unexpected price hikes or service interruptions that can derail operations.

Different Types of SaaS Licenses

Choosing the right SaaS licensing model directly impacts how your organization can utilize the software, how costs are calculated, and the overall flexibility offered. 

So yes, choosing the right model contributes to right-sizing your SaaS environment, reducing the risk of under-provisioning or overpaying for unused capacity. Here’s a closer look at the primary types.

Subscription-Based Licensing

This common model involves customers paying a recurring fee, monthly or yearly, to access the software.

It’s flexible, allowing for easy scalability and updates, and is particularly beneficial for services that are continually updated and supported​​.

For more details about SaaS subscriptions, kindly check What is a SaaS Subscription? How It Can Simplify Software Management.”

Named User Licensing

In this model, licenses are assigned to specific individuals within an organization.

It’s ideal for applications that are critical to particular users who need constant and guaranteed access.

This model ensures that only designated users can use the software, which simplifies compliance and security management​​.

Concurrent User Licensing

Also known as floating licensing, this model allows a set number of users to access the software at any given time but does not limit the total number of users who can have access credentials.

This model is cost-effective for organizations with employees in different time zones or those who use the software at varying times​​.

Feature-Based Licensing

Here, access varies depending on the features included in the selected pricing tier.

This model allows businesses to scale their software usage up or down based on feature needs, which can be more cost-effective for companies that do not require the full suite of features offered​​.

Usage-Based Licensing

This model charges based on the actual use of the software, such as the amount of data used, the number of transactions, or other measurable metrics.

It is particularly advantageous for businesses with fluctuating usage levels, as it aligns costs directly with consumption, ensuring companies only pay for what they use​​.

SaaS License Management’s Impact on Business Operations

Effective SaaS license management extends well beyond simple software inventory management and has profound implications for several core business areas.

Firstly, it acts as a powerful tool for cost control. By pinpointing unused or underutilized licenses, businesses can eliminate unnecessary subscriptions and streamline their SaaS spending. 

They can also leverage this data to negotiate better contract terms at renewal time.

Beyond monetary concerns, SaaS license management mitigates risk by offering enhanced visibility into all software subscriptions used within the company.

This allows for quick identification of potential shadow IT, where employees adopt unsanctioned software that might jeopardize compliance guidelines (like GDPR) or pose security threats.

The Zylo 2024 SaaS Management Index reported that 65% of expensed SaaS applications carry significant security risks, often due to a lack of oversight on shadow IT.

Additionally, by eliminating redundant software, SaaS license management improves operational efficiency.

Employees don’t waste time navigating a complex software landscape, allowing them to dedicate their energy to productive tasks.

Finally, SaaS license management provides valuable data that empowers better business decisions.

Analyzing usage patterns can justify software renewals, identify opportunities for downgrading subscriptions, or highlight the need to invest in additional tools that fill productivity gaps.

Strategies for Effective SaaS License Management

Successful SaaS license management goes beyond simply knowing what software your company uses. It involves proactive approaches and a focus on optimization.

Start by establishing a centralized discovery process, aiming to create a comprehensive and up-to-date inventory of all SaaS subscriptions.

This visibility extends into uncovering any instances of shadow IT where software might be in use without formal approval, posing potential compliance and security risks.

Once you have complete visibility, focus on implementing rigorous usage monitoring.

Specialized tools can help track how each license is used, by whom, and for which applications.

Data collected during this process will become invaluable –– it highlights underutilized licenses, identifies areas for switching to more cost-effective subscription models, and pinpoints redundancies within your SaaS environment.

Right-sizing your SaaS landscape is an ongoing process. Usage data reveals if you consistently have excess licenses or are paying for subscription tiers with features that are never used.

This allows for informed adjustments, leading to significant cost savings.

Additionally, implement a proactive renewal management strategy. Track renewal dates, automate alerts, and use historical usage data as a powerful tool in negotiating favorable renewal terms.

Best Practices for SaaS License Management

Effective SaaS license management relies on well-defined processes and ongoing adjustments tailored to your organization’s evolving needs.  Let’s break down some essential practices.

Conduct Regular Reviews

Regularly review all your SaaS subscriptions and usage patterns.  Think of it as spring cleaning for your software resources.

This helps identify underutilized software, potential redundancies, or shifts in business needs that might require adjusting your SaaS portfolio.

Implement Strategic Access Controls

Define and implement access restrictions based on employee job functions.

This safeguards data by limiting access to only necessary software tools, and it streamlines workflows for your team.

Optimize Contracts and Renewals

Proactively review your contracts before each renewal cycle. Analyze your usage data to identify opportunities to adjust subscriptions or negotiate better terms.

It’s your chance to ensure your SaaS spending aligns with your actual needs.

Utilize Software Asset Management Tools

Depending on the size and complexity of your SaaS environment, consider using dedicated Software Asset Management (SAM) tools or specialized SaaS license management platforms.

These tools automate discovery, provide detailed usage reporting, and help streamline the entire license management process.

Clear Ownership and Effective Communication

Designate someone responsible for overseeing SaaS licenses, including procurement and renewals. Additionally, foster open communication with software vendors.

This clarity and communication support contract negotiations and help you get the best possible support.

Educate Your Workforce

Regularly communicate the importance of software compliance and careful resource management throughout your organization.

This awareness promotes responsible software use and optimizes your SaaS investments company-wide.

Best Practices for SaaS License Management

Effective SaaS license management relies on well-defined processes and ongoing adjustments tailored to your organization’s evolving needs.  Let’s break down some essential practices.

First, prioritize regular reviews of your entire SaaS portfolio and analyze detailed usage data.

These reviews function like a software audit, revealing licenses that are rarely used, situations where multiple tools serve the same purpose, or shifts in business requirements that may necessitate adding or removing subscriptions.

By proactively conducting these reviews, you’ll gain the insights necessary to make informed decisions about resource allocation.

Next, focus on implementing strategic access controls. Configure software access based on employee roles and responsibilities.

This minimizes security risks by ensuring each user only has access to the tools they need and helps maintain compliance with regulations.

Additionally, optimize contracts and renewals by thoroughly reviewing your contracts before each renewal cycle.

Analyze usage data to determine if you can negotiate better terms, downgrade subscriptions, or adjust the number of licenses held.

Consider integrating Software Asset Management (SAM) tools or specialized SaaS license management platforms, especially for larger or more complex SaaS deployments.

These tools offer features that automate software discovery, usage analysis, and license optimization tasks, saving time and reducing errors.

For details about SaaS integration, you can read Is Managing SaaS a Headache? Let’s Streamline it with SaaS Integration

Finally, establishing clear ownership and fostering effective communication is critical.

Assign a designated point person for SaaS license management, responsible for renewals, procurement, and optimization. Encourage transparent communication with SaaS vendors.

This clarity of ownership and open communication will lead to better negotiations and allow you to get the most out of your vendor support.

Lastly, emphasize a company-wide culture of software compliance and resource optimization.

Regularly educate employees about responsible software use to ensure alignment with licensing terms and to promote cost-conscious behavior across the organization.

How to Simplify SaaS Management and Optimize Costs

As you’ve discovered in the article above, effective SaaS license management involves several aspects.

Like many business processes, navigating the complexities of SaaS operations takes ongoing attention and the right tools. This might highlight some challenges your company faces.

Please note that our goal isn’t to cause concern but rather to offer realistic insights and potential solutions.

That’s why we invite you to explore  Octobits, our all-in-one SaaS user management dashboard. And yes, you can use Octobits for free.

Octobits is designed to simplify SaaS management, providing features that help you monitor licenses, control costs, and ensure compliance.

This can be particularly helpful for managers and finance personnel who need clear visibility into their company’s SaaS spending and usage patterns.

If you’d like to learn more about how Octobits can streamline your SaaS management processes, please feel free to visit our Octobits contact page for further discussion.


Smart SaaS license management is essential for any business wanting to get the most out of their software investments.

By carefully managing your licenses, you’ll gain better control over how your company spends its software budget.

Plus, SaaS license management will minimize the risk of compliance issues while ensuring your team has the tools, they need to stay productive.