Contract Management

Software License Management: Best Practices and Benefits

November 2, 2023

software license management

If you're in an IT team, you know how the absence of a software license management tool or policy leaves you at your wit's end. 

Ideally, you want insights about software application usage, licensing contracts, and whether software licenses comply with developers' software license agreements and legal regulations. 

The lack of this information results in increased licensing costs, failure to meet legal compliance, and pass software audits. That's where software license management comes in. Without it, you can't possibly save thousands of dollars spent on unused seats, overused licenses, and duplicate software usage.   

From startups to enterprises, no company has a limitless budget. Because the amount of money spent on a software license can easily venture into the thousands, managing that spend should be top of mind to make the most of your SaaS budget

Regardless of what the program is used for, how many people are using it, or where it’s being used, nearly every software has a type of software license attached to it.

Types of software licenses

Below are the common types of licenses available to users. 

  • Free license, as the name suggests, is free for anyone to use.
  • Named user license is for a registered user to use a software platform.
  • Evaluation license serves software trial purposes and expires after a period.
  • Volume license uses one license to authorize multiple individuals to use a software product.
  • Processor license enables servers to host software solutions and run software components.
  • Concurrent licenses set a maximum number of users who can simultaneously use a software solution.
  • Original equipment manufacturer (OEM) license is a software license designed to be used along with specific hardware.
  • Enterprise agreement license is another type of license that a vendor issues a customer for using the vendor’s software for a definite period.  

Managing different types of software licenses can be overwhelming for any IT team. With proper software license management practices, organizations can accurately monitor software usage, meet compliance requirements, and prevent license overspending. 

To manage software licenses efficiently, start by monitoring software licenses, so you can comply with the end user license agreement (EULA) and eliminate unused licenses. 

How to track and manage software licenses

A centralized software license policy and workflow is the foundation of efficient software license management. Start by consolidating existing software license information, finding valid licenses, tracking software ownership, and monitoring licensing costs to meet software compliance requirements.

Below is a breakdown of these steps for you to follow.

Conduct software system inventory

A software inventory provides your IT department with a complete picture of software solutions and licenses. Now, the IT team can analyze software usage to find and reallocate unused or underused licenses. 

At this stage, a software license management tool helps the IT team to gather:

  • Service fees
  • Purchase costs
  • Software support details
  • Software maintenance contracts
  • Software maintenance expiration dates

Centralizing these details prevents your organization from missing renewal dates and paying additional reinstatement or maintenance fees. Moreover, you get to monitor license usage and manage available licenses efficiently. 

Validate software licenses and provide software ownership

Once you have gathered all the details, it’s time to work with legal and procurement teams to validate these licenses. Doing so lets you consolidate proof of purchase, review agreements, and create documented records for future audits. 

Consider pairing license agreements, contracts, and purchase records with related licenses. That way, you can easily find details of a software license at the moment of need. You can also remove unlicensed software and eliminate shadow IT practices at this stage.

Using a software license management tool helps you in multiple ways. For example, it centralizes all software-related records for different solutions your company uses. As a result, you will never have to worry about missing renewals or getting penalized for not meeting compliance requirements. 

Track software license costs 

The next step is about analyzing the budget and optimizing software spending. 

Software license mismanagement often stems from overspending on licenses, failing to estimate software expenses, and lack of visibility over software budget vs. actual cost per user.

A software license usage report provides you with insights into critical metrics that are key to planning and optimizing expenses. A software license management solution helps you visualize critical license data, saving time and money. 

Implement software license management policy

Now, you’re ready to deploy a license management policy that defines your organization’s software asset management (SAM) capabilities. It documents ways of monitoring, maintaining, and controlling software licenses and related costs. 

When using spreadsheets for tracking license details, consider tracking key information such as:

  • Number of licenses for each software solution
  • Expiry dates of these tools
  • Software vendor details
  • Software deployment methods

Monitoring renewals, maintenance, approvals, and license over-usage can be challenging to track, especially with spreadsheets. That’s why you should consider using a software license management tool.  

Benefits of software license management

One of the most obvious benefits of SLM is simply saving money, big time. But besides a financial win, software license management comes with a few more benefits. 

SLM provides transparency

Practicing SLM gives companies a clear view of all of the licenses being used across teams as well as how each particular software has been set up for use. When it comes time for a software audit, the information needed to assess risk and remain compliant will already be available to you. 

SLM keeps your business compliant

Having visibility of all software that a business uses enables IT to ensure that the software being used is compliant with the license. If a device is using unlicensed software or is not following the guidelines that the End-User License Agreement provides, fines or legal issues are to be expected. 

SLM helps identify unnecessary spending

Buying software is step one, but after it’s bought, is your company paying attention to how much that software is being used? Information from your SLM can help you determine how many people are actually taking advantage of the availability of that software solution so that your business can only pay for the necessary licenses. 

SLM helps you avoid malware

Effective software licensing management prevents users from installing or downloading unknown software packages, which can lead to cybersecurity threats or malware in the future.

A SLM policy also helps employees to learn the different ways they can request a new tool from the IT team. The result is a secure IT environment free from malware and ransomware. 

SLM increases efficiency

Managing software programs and their licenses becomes a nightmare for IT teams, especially when there's no way of tracking software deployment or usage.

A software licensing management tool increases an IT team's efficiency by automatically monitoring software purchases, deployments, usage, and license terms. You can also set reminders for audits, renewals, and expiring licenses. 

Risks of poor software license management

Inefficient software licensing management leads to operational, security, and fiscal consequences. For example, your organization may need more visibility into software licenses to pass software audits or prevent overspend. 


Is the estimated annual SaaS waste among companies, which translates into roughly $17 million per organization.

Source: Flexera

Below are some common risks companies experience without a robust software license management plan. 

  • Failing to pass software audits: A software audit is an internal or external review of a software system and its ability to meet regulatory standards. Whether conducted internally or externally, these IT audits can attract hefty penalties and software costs in case of EULA violations. 
  • Higher software expenses: Organizations lacking a license management plan have no visibility into how much budget is allocated to which software products and how many licenses. This decentralized workflow reduces license visibility. As a result, companies end up overspending on software licenses. 
  • Challenging software purchasing process: The absence of a software license management tool makes it difficult for an IT team to spot shadow IT practices. Moreover, an organization may not need to renew each license every year. They can only spot these solutions with a license management system. Without it, the software procurement process becomes challenging.

Software license compliance management

Software license compliance management involves following specific guidelines to ensure employees only use authorized software solutions. These guidelines are crucial to meeting license agreements and minimizing financial and security risks. 

Comparing the number of licenses in use vs. the number your organization purchases is crucial for managing and implementing software compliance regulations. You can also consider tracking software installation, usage, and understanding licensing terms to meet SaaS licensing guidelines better. 

Organizations typically use one of the following ways or both to manage software license compliance.

  • Software metering is the process of analyzing software usage to determine unwanted renewals, prevent overuse of owned licenses, and reduce software expense overhead. IT teams use software licensing tools with metering capabilities to control software installation process, conduct license compliance audits, and discover discrepancies within their organization. 
  • Real-time IT asset management dashboards aid organizations in tracking critical software licensing metrics and resolving issues. 

What are software license management tools?

Software licensing managing solutions ease how organizations track and optimize software usage. The right software provides you control over vendor relationship management and insights into software usage. It also enables you to automate time-consuming license allocation and maintenance tasks in a way that complies EULAs. 

Did you know? G2 Track simplifies how employees discover and request access to different software solutions available within your organization. Beside creating an app catalog, you can also use the platform to manage software vendor contracts, track software usage, and meet GDPR and SOC II regulations.


Want to see G2 Track in action? Sign up for the free forever plan today! 

Software license management best practices

Before best practices can be implemented, it’s recommended that your organization invest in software to manage your software. While this might seem silly or repetitive, the benefits of being able to see everything you’re using in one place are worth quite a bit.

G2 Track is an example of a solution that thousands of companies use to manage their SaaS and contracts. With a solution like G2 Track, these best practices aren’t hard to follow. 

1. Standardize your software procurement process

How does your business go about obtaining a software license? Before implementing SLM, your team may be fairly organized, or licenses could be saved in all sorts of folders. No matter which end of the spectrum your team falls on (or if you’re somewhere in the middle), now is a great time to standardize those processes. Who’s in charge of obtaining those licenses? Where are certificates being saved? Take a step back and reorganize. 

2. Identify your tech stacks and software usage

What software licenses does your company already own? When setting up your SLM, make sure that each and every software solution used by every team at your company is listed. Doing this can help you determine whether you’re at risk for a compliance audit or if you’re paying for too many seats. 

3. Measure licenses need for each software

The next step is to review your organization's license inventory and ensure you have licenses for all installed software applications. Also, consider measuring the licenses needed for each tool and applying product use rights to get the most out of licenses. 

4. Eliminate redundant software licenses

Organizing your licenses and identifying their functions may provide your company with an opportunity to determine an integration solution, meaning that instead of having to use (and pay for) two software, one solution might be able to do the same job. 

5. Update license and software inventories

Software usage habits keep changing, depending on the IT environment in your organization. That's why it is best to track new software downloads, program upgrades, downgrades, new purchases, and contract milestones. Capturing this data helps you to manage software licenses, while maintaining compliance efficiently. 

6. Use software license management tools

G2 Track and other SaaS spend management software are capable of taking note of all software usage in every employee’s desktop. While automation is nice, physical audits are just as important to ensure that data collected by the automation process is accurate.

7. Monitor usage with software licensing reports

Software license management solutions enable IT teams to gain complete visibility into used/unused licenses, software usage trends, and license spending. Monitoring these metrics with licensing reports helps you optimize spending and manage licenses efficiently. 

How does G2 Track help with software license management?

As an IT team, you're likely juggling multiple things: license compliance, software audits, licensing needs, and vendor relationships, to name a few.

G2 Track makes your job easier with a single source of truth about your software stack, licenses, contracts, expenses, and compliance. 

For example, the platform enables you to configure custom approval workflows that employees can use to request access to new tools.

Moreover, you can also integrate Track with SSO and OAuth platforms to discover where employees use each software available to them. G2 Track also provides license-level insights to help you understand software utilization and optimize contract spending. 

Need a reminder of what your current software licenses entail? Check out our resource on software licenses for a refresher.

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