Software License Management (SLM) 101

Benefits, Risks, and Best Practices

A software license is a contract that provides users with guidelines on how to use different applications in a manner that is legally binding upon agreement.

These terms provide users with conditions that dictate fair use policies and intellectual property agreements. 

The main function of a software license is to present the rights of both the developer/vendor and the user on the use of a particular software application.

This is expressed through a contract known as an end-user license agreement (EULA).

Terms and conditions are included in this document, including the level of access the users may have to its source code, how many users can use the license, on how many machines can the application be installed, the period of time it can be used, technical support and maintenance, geographic limitations, etc.

As the company expands its software portfolio, the sheer number and variety of software licenses that it owns can make license management become very strenuous and complicated.

Some companies employ entire teams just to properly manage their software license portfolio.

Thus, effective software license management becomes crucial for smooth business operations.

What is Software License Management?

Software license management (SLM) is one of the most important fields in the broader IT asset management (ITAM).

It is the process of documenting, tracking, controlling, and right-sizing the software licenses of a company.

SLM is employed by companies with growing software portfolio to monitor and maintain the various licenses and entitlements they own.

It provides visibility over the company’s vital license information, including entitlements, limitations, availability, usage, versions, and expiration.

It helps mitigate the risks of non-compliance with software vendors and avoid the hefty penalties associated with a compliance breach.

It can also increase digital agility and improve end-user experience.

To properly implement effective software license management, a deep understanding of different licensing models that the company owns is necessary.

There are generally 5 types of software licenses based on restrictiveness: public domain, less general public license (LGPL), permissive, copyleft, and proprietary.

Most end-users are familiar with proprietary licenses, which allow users to use the software applications based on terms and conditions expressed in the EULA.

To protect their proprietary software products, developers and vendors offer a number of licensing models.

Generally, these licenses are deployed in 3 ways:


Licenses are tied to the application and does not require additional trigger to activate the application.


Licenses are deployed from a license server, which manages the checkout and check-in of licenses from the available license pool.


Licenses are deployed via the internet. In some instances, the application itself is accessed via the internet through Software-as-a-Service (SaaS), which is a software distribution model where applications are hosted in a cloud environment.


The number of licensing models continues to increase as software vendors introduce news ways of selling licenses based on current trends and market demands.

Here are some of the most common licensing models: 


The software is purchased once, and the user can use it in perpetuity. However, software application support and maintenance would have an expiration date and may need to be renewed for additional fees.


Purchased in bulk to permit multiple users under a single licensing code, concurrent licenses pave the way for easier software license management.


Shared among a group of users, floating licenses have set limitations on the use of the licenses, including total number of licenses, user access, etc.


Usually restricted to free trial periods, metered licenses limit the access of users to specific features and total use-time.


This is a fixed-term license where access to the software application ends after a defined period unless the subscription is renewed.


This is locked to a specific user but may be installed on a limited number of devices.


Also known as machine-based license, this kind of license is locked to one or more hardware devices. Any user of the device may use it.


This uses USB ports to activate software applications, making it more portable and easier to share among various users.


Usually used on top of concurrent licenses, pay-per-use or usage-based licenses is billed by the vendor based on the products and/or features that were actually used by the user in a specific timeframe.


This is a type of prepaid usage-based license where the user buys a number of tokens, which may then be used to access specific products and/or features. Each product or feature are assigned a number of tokens that will be charged against the token pool periodically.

Benefits of Software License Management

Ensure Software License Compliance

Managing software licenses keeps companies stay on track of their license entitlements and expiration dates.

By using software asset management tools, administrators can monitor whether the organization’s license usage is going beyond the established terms and conditions of the software.

This can help in avoiding hefty penalties and damage to the company’s reputation.

Gain an Advantage during Vendor Negotiations

With software license management, the company will have the data, analysis, reports, and raw usage information that can be used as an advantage during negotiations.

Cut Down Unnecessary Costs

A lot of factors can contribute to unnecessary software costs – projects that have varying levels of need for specific applications, mergers and acquisitions, additional or reduction in the number of employees, etc.

With the right tool, administrators can take apart usage data and generate reports that will show opportunities for cost reduction.

Reduce Security Risks

Software license management is not just for reducing costs.

By tracking who, when, and where the software is being used, any unauthorized usage of software licenses can be immediately seen.

Keeping a record of the ebbs and flows of the company’s software usage trend can also help identify sudden and unexpected surges or dips in the company’s license usage.

Improve Work Efficiency

IT chargeback or showback is one of the strategies under software license management.

This creates accountability and improves productivity among end-users as it makes them aware of how they are using their time during working hours.

Risks of not having a software license management plan

The value of software license management can be observed in different departments within the organization.

It is not just limited to license administrators or IT managers, making the case for why SLM is an important business strategy.


An effective software license management plan allows the IT department to streamline their resources, making it easy to ensure that the organization is compliant in accordance with their license entitlements.

It also gives administrators a view of the entire IT estate, which help them create strategies to optimize their software and hardware assets.


Engineering licenses from vendors, such as Autodesk, MathWorks and Dassault Systemes, are costly.

Multiply the price of one license by thousands of end-users and there will be an eye-catching string of numbers in the software budget plan.

Without software license management, it would be difficult to trace and show back the incurred costs to the responsible departments.

Procurement & Supply

Without historical and real-time reports, it would be difficult for those leading the procurement & supply of software licenses and other IT assets to forecast the right number of licenses to be purchased for a specific period.

Production & Design

Employees in the production & design department value seamless access to the applications that they need to get their jobs done.

Without software license management, end-users may experience license denials which may hamper their productivity.

Delays in one area can have a detrimental effect to the whole production line.


Executives who lack visibility over their software assets may under- or overestimate the value of the projects they are currently investing in.

There is a case where the customer decided to reevaluate one of their projects after tracking their software license usage.

Best Practices in Software License Management

Software license management can be a tedious task. However, the right process and the right tools can help immensely in managing software licenses effectively and smoothly.

Set goals

It is crucial to define the goals before implementing anything because every action that follows would be based on the set goals.

Understand the License Agreement

The EULA would define the correct metrics for to be used in reporting.

Understanding the license agreement and its nuances would allow administrators to know what they could and couldn’t do, and what measures they could implement within the parameters of the license agreement.

Collect data

It is crucial to collect correct accurate usage data from a wide variety of sources in the license servers and workstations. Current challenges in data collection, such as segregated networks and remote work setups, can be mitigated using the right tools.

Consolidate data

To protect the integrity of the data, it may be necessary to consolidate all the usage data from various license servers, including segregated networks, and workstations into a single secure data repository. This would also make data aggregation and processing easier for a quicker report generation. It would also be much simpler to view real-time and historical data of different licenses on a centralized dashboard.

Analyze data

Analyze the data in relation to the license agreement and the set goals. For instance, if there are named user licenses, then analyze the report on distinct users. And if there are concurrent licenses, then analyze the report on maximum concurrent users and license efficiency. Different licensing models would require different reports.

Implement action points

One of the major challenges in the effective implementation of SLM is following through with the necessary action points based on the analyses conducted.

Some organizations already know what to do because the data analysis has already provided the answers, but they fail to act on this important part of the process.

It is also important to get the buy-in from users and other stakeholders in the organization.

Transparency is key. It would be much easier to implement the necessary action points when users and other stakeholders are all involved in the process.

How can Open iT help in your software license management initiatives?

Whether your organization is just starting out or if you are looking for new ways to optimize your current software license management initiatives, Open iT can help your team reach your business goals.

Open iT products and solutions enable companies to take control of their software assets through enterprise-wide monitoring, IT chargeback, ROI analysis, and optimization of software license usage.

Through an advanced analysis and reporting system, Open iT equips customers with the data that they need to become better equipped during vendor negotiations.

Open iT LicenseAnalyzer, the flagship product, provides license administrators with three levels of functionality.

It supports over 6000 applications (standalone, network-based, or cloud-hosted) and over 35 license managers.

Level 1 – In this level, you can collect Runtime Usage data from a wide variety of sources to track checked-in and checked-out licenses.

You also have access to both real-time and historical usage reports as well as proactive alerts, helping you uncover areas where you can realize cost savings by cutting down excess license purchases.

Level 2 – This level provides a closer view of your license usage trend by metering the True Active Usage of your running applications. 

With level 2, you can track whether your licenses are being actively used by metering CPU, I/O, keyboard, and mouse activity, and comparing it to set policies and thresholds.

Level 3 – The third level takes software license management to the next level through Managed Usage.

It automates the process of license optimization through the discovery and suspension/termination of inactively used applications.

This releases idle licenses back to the pool, allowing others to use the application.

Open iT also offers point solutions that are dedicated in optimizing specific technical and business applications.

  • Analyzer for Autodesk®
  • Analyzer for Ansys®
  • Analyzer for MathWorks®
  • Analyzer for SOLIDWORKS®
  • Analyzer for Siemens NX®
  • Analyzer for Materialise®
  • Analyzer for Bentley®
  • Optimizer for SAP® Licensing

However, beyond these powerful tools is Open iT’s in-depth knowledge and accumulated years of experience in creating data-based strategies that optimizes the value of its customers’ software investments, touching on topics and providing insights that are perfectly suited to each organization. 

Are you ready to start an optimized software license management journey? Connect with an Open iT Business Solutions Consultant today.

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