SaaS License Management

What is SaaS license management?

SaaS license management is the process of monitoring and reviewing the procurement, usage, renewal, and compliance of software licenses.

It is a vital component of software asset management (SAM) and ensures that organizations – and more specifically, procurement teams – are effectively managing their software investments.

As an organization grows, so too does the number of software licenses required to stay functional. The problem is, with the average organization now using an average of 132 applications, the management of these licenses can very quickly spiral out of control.

By keeping track of the lifecycle of each and every license, from procurement to renewal, SaaS license management helps avoid legal and financial risks associated with non-compliance or over-purchasing.

How can SaaS licenses be optimized to reduce costs?

Wasted software spending is a huge issue for the vast majority of companies. In fact, data from Vertice shows that as many as 33% of software licenses are either barely used or not used at all, contributing to millions of dollars being wasted annually on SaaS spending.

This inefficiency stems from several key factors:

• Overprovisioning of licenses – The fact that a third of all software licenses are either unused or underutilized is largely due to the fact that companies purchase more than is required. There are often several reasons for this:
  
  • Overestimation of usage
  • Anticipation of scaling the business, even if their current usage doesn’t justify it
  • To take advantage of bulk pricing
• Overpaying for SaaS – The unfortunate reality is that 90% of companies pay an average of 26% more than is necessary on SaaS subscriptions. This is often because:
  
  • They aren’t aware that SaaS prices are negotiable and that vendors will almost always offer discounts or more favorable terms, even for the lower-value purchases considered to be tail spend.
  • They don’t have the negotiation leverage to secure the best possible price and terms.

See how one company saved as much as $155,000 on a single software contract by obtaining the necessary leverage and executing a solid negotiation strategy

• Duplicate or redundant applications – Companies often purchase overlapping or duplicate software applications that provide similar features and functionality.

An effective SaaS license management strategy helps tackle each of these problems by identifying underutilized or redundant software, optimizing license allocation, and ensuring cost-effective contracts.

Strategies for managing your software licenses

‍Track software licenses

With 89% of contracts including auto-renewal clauses, it is crucial that you are effectively tracking and managing these renewals to avoid unwanted costs or service interruptions.

When it comes to tracking these SaaS licenses, you have two options:

• Use a manual spreadsheet – Keeping track of your software licenses manually is not only unsustainable as your company grows, but it also puts you at risk of:
  
  • Human error, such as miscounting licenses, under-allocating or over-allocating licenses, leading to either shortages or excess costs.
  • Missing renewal deadlines, leaving you paying for unwanted licenses and often at a heftier price – Vertice’s data shows that prices increase by an average of 9% when auto-renewed.
  • License compliance issues, such as failing to adhere to usage limits or user account restrictions, can result in contractual breaches, potentially leading to financial penalties or legal action.
  • Spending a substantial amount of time handling administrative tasks, which takes away from more strategic procurement initiatives.
• Invest in an automated SaaS management platform – This not only ensures you have a far more robust system of record in place to keep track of your sprawling tech stack, but it also:
  
  • Tracks renewal deadlines and notice periods, providing automated reminders and preventing missed deadlines.
  • Provides full visibility of your licenses and procurement spend
  • Identifies licenses that are not being utilized
  • Flags cost-saving opportunities
  • Ensures compliance by keeping track of contractual obligations and preventing breaches

Request the removal of auto-renewal clauses

While some procurement teams see auto-renewals as a convenience, they can quickly become difficult to manage, at least without a robust SaaS license management software solution in place.

It’s not even the renewal deadlines that you need to be mindful of, though. Most contracts will have a notice period to terminate or amend a contract – often 30, 60, or 90 days – which can further add to the complexity of tracking these license renewals.

It’s therefore best practice to request the removal of an auto-renewal clause within a contract – in our experience, this is something that many vendors will accommodate.

According to Vertice’s own Head of Procurement EMEA, Nick Riley, Vendors will almost always remove an auto-renewal clause when asked to do so. If they don’t, ask them to include a separate clause that states that they will contact you, in writing, 90 days ahead of the renewal date to remind you of the upcoming renewal”.

Be prepared for a software license audit

While software license audits are unlikely to happen without cause or warning, it is important that you’re prepared for them. Proactively managing and tracking your software licenses ensures that you are compliant with vendor agreements and licensing terms, and can quickly address any discrepancies, minimizing potential costs or penalties if and when an audit does occur.

Plan for growth in negotiations

When negotiating SaaS contracts, always ensure that flexibility is built into the agreement to accommodate potential growth. Establishing terms that allow for easy scaling, whether up or down, provides the flexibility to adjust your licenses in line with your organization’s evolving needs. This ultimately prevents you from paying for unnecessary licenses or incurring costly overage charges.

Optimize license allocation

Optimizing the allocation of software licenses is key to reducing unnecessary expenses. By ensuring that licenses are assigned only to the users who need them, you can avoid over-purchasing and ensure that each license is being utilized effectively.

Implementing a strategy for regular review and reassignment of unused or underused licenses can maximize ROI, allowing your organization to make better use of its current licenses and reducing the need for additional purchases.

Analyze software usage

Regularly analyzing software usage across your organization can help uncover patterns of overuse or underuse. This insight is crucial for understanding which tools or licenses are critical for daily operations and which ones may not be necessary – either because you have similar tools within your tech stack or because you’ve overprovisioned them.

By leveraging this data, you can make informed decisions about license allocation, identify opportunities to reduce costs, and align your software investments with actual usage, ensuring that you only pay for what you truly need.

Eliminate redundancies

Overlapping SaaS applications almost always lead to wasted spend. To eliminate these redundancies, it’s important that you’re regularly rationalizing your software stack, ensuring that each tool serves a unique and essential function.

Start by conducting a thorough audit to identify any duplicate tools or applications that are fulfilling the same purpose. Our own data indicates that duplicate tooling is most prevalent among categories such as Vertical Industry, IT Management, Content Management, Security, and Project Management.

How SaaS license management software helps streamline procurement and optimize costs

SaaS license management software plays a pivotal role in optimizing software procurement and reducing overall costs.

By providing centralized oversight and automation, these tools help organizations take control of their entire software portfolio.

Software of this kind specifically helps to:

• Improve license visibility and allocation – SaaS license software provides procurement, IT, and finance teams with a comprehensive view of all software applications in use across the business, including renewal dates, usage metrics, and contract terms. This visibility enables you to allocate licenses more efficiently, preventing applications from becoming unused or underutilized. By identifying excess or redundant licenses, you can optimize your tech stack and reduce unnecessary spend.
• Improve vendor negotiations – With a solid understanding of software usage across your organization, you put yourself in a stronger position to negotiate with vendors. The best SaaS license management software providers will also offer insights such as pricing benchmarks, providing you with leverage to secure better discounts and more favorable terms.

Thinking about outsourcing your negotiations to an expert? See how we support companies like yours.

• Automate renewal management – License management software tracks renewals and sends automated reminders well in advance, allowing companies to assess whether to keep, amend, consolidate, or terminate their contracts. This proactive approach helps reduce the risk of paying for software that’s no longer required or hasn’t been used effectively.
• Eliminate redundant tools – With the average software stack having increased by 11% in the last year alone – a result of both strategic innovation and maverick spending – and vendors continually introducing new functionality to maintain a competitive edge, it’s easy to see how companies end up paying for similar tools with overlapping functionality. SaaS license management software helps to identify these redundancies, enabling you to consolidate your tools and eliminate unwanted subscriptions.
• Enhance compliance and risk management – To avoid legal or financial penalties, it’s important that you adhere to the software licensing agreements for each and every contract you’re subscribed to. Without a software system in place, this becomes an almost impossible task.

Key features of SaaS license management software

If you’re thinking of investing in SaaS license management software, here are some of the key features you should be assessing.

• Centralized license tracking – One of the most important features of any software management platform is centralized license tracking. This allows you to consolidate all of your software licenses into one unified platform, making it easier to manage your entire portfolio of SaaS tools. Look for a solution that offers real-time visibility across all licenses, including details about license types, expiration dates, and associated costs.
• Usage analytics – When evaluating software license management providers, seek to understand their capabilities around usage analytics, for example how advanced the insights they provide are. Ideally, a platform should be able to drill down into user-level insights, making it possible to determine each employee’s login frequencies, which can inform where license counts might need adjusting.
• Compliance management – Effective compliance management is essential to avoid legal and financial risks. When selecting a provider, check if their platform offers diligence insights into your software usage against contractual obligations.
• Renewal management – An effective renewal management system is key to preventing costly mistakes, such as missing renewal deadlines and paying for unnecessary licenses. The best SaaS license management providers won’t just flag upcoming renewals; they will also automatically route approval requests to the necessary stakeholders, ensuring that no renewal is missed.
• Spend optimization – When it comes to spend optimization, the quality of the data provided by your SaaS license management tool is paramount. A good platform should offer clear visibility into your software spending, breaking down costs by department, product, and license type. The platform should further help you identify underused or redundant licenses, uncover opportunities for consolidation, and offer insights into areas where cost-saving measures can be applied. The more accurate and actionable the data, the more effectively it can help you reduce waste and optimize your software investments.
• Negotiation as a service – Despite being both complex and time-consuming, contract negotiations are necessary for securing the best possible price and terms on SaaS. Looking for a provider that can offer negotiation as a service – and better yet, as part of their core offering – can be a great way to reduce the administrative burden of negotiations, while leveraging their intel and experience to secure the most lucrative deals across your entire software stack.

Get an unbiased evaluation of the best SaaS license management providers on the market in the latest Lionfish Tech Advisors Report.

Master SaaS license management and maximize savings with Vertice

Vertice simplifies software license management in four key stages – discovery, auditing, negotiation, and optimization – enabling you to easily track and optimize your SaaS licenses for improved efficiency and maximum cost savings.

Take a look at how Vertice helped one company achieve average contract savings of 30%, while saving another more than $330,000 in just three months.

Alternatively, see for yourself how Vertice can help your business reduce spend, increase efficiency, and improve license compliance by taking a self-guided tour of the platform.