What is SaaS license management?

Managing SaaS licenses is the process through which a team examines their SaaS products to ensure that they are using the most streamlined options.

Managing SaaS licensing can be a complex task, and it only gets more complex as a business grows. SaaS license management provides a solution, promoting ownership, agility, visibility, and accountability of SaaS and software vendors throughout your business. It prioritizes agility and potency, guided by IT and procurement. Above all, it helps align focus on the modern buyer, who expects more from the technologies and consumer apps of the enterprises he or she chooses to do business with.

SaaS license management is a subset of software asset management (SAM), dedicated to cloud-based applications and services. And as modern business becomes more cloud-centralized, new and established SaaS products demand better tracking and management options. SaaS management provides the solution.

Graphic showing the impact of SaaS license management.

SaaS can provide a number of opportunities; as on-premises and legacy software are replaced with SasS solutions can lead to productivity increases, communication and collaboration become more streamlined and more effective, employee satisfaction improves, and businesses are able to attract better talent.

However, the advent and acceleration of SaaS applications in business brings with it new challenges, tasking software asset managers, finance, and procurement with a number of growing responsibilities. Securing business data, enforcing compliance, managing tech and SaaS spend, and helping to ensure effective employee work are only a few. In addition to these tasks, other challenges to SaaS license management include the following:

The looming risk of shadow IT

Shadow IT is when employees purchase and deploy SaaS applications without the knowledge of IT—this is entirely too common. There could be a breakdown in communication between teams, and one team may pay for SaaS that another team already has, or that IT does not approve for compliance.

Wasted money on lost discounts and redundant tools

Certain employees or teams could purchase SaaS licenses on a one-by-one basis and forgo the opportunity for potential enterprise-level discounts. Individual teams can also purchase SaaS applications that may serve a similar purpose as another team, which can cause redundancies and hinder collaboration.

Security and compliance issues

IT does not have the opportunity to thoroughly evaluate an application that is purchased by teams outside of IT. This can expose companies to security risks and compliance issues with regulations like GDPR, HIPAA, and CCPA.

Usage

As many as 38% of SaaS licenses go unused, and many SaaS users log in to a product less than once per month. A lack of understanding of applications and how they are being used can lead to a waste of resources. Some SaaS products automatically renew and a lack of managing licenses can cause costs and licenses to creep up—a company could unknowingly keep a subscription to a product they don’t use. Conversely, companies can over use SaaS applications if there is not enough user access or the subscription is not scaled properly. Each presents its own unique risks.

Under-utilization and overutilization

Without proper SaaS management, companies may find that they are under-utilizing licenses, or paying for licenses that have gone stale and continue to go unused. For example, employees who no longer work for the company can sometimes still have a license assigned to them after they leave. At the same time, current employees who haven't logged in to an application within a certain timeframe and haven't performed meaningful activity inside the application may still be costing the company with an unnecessary license assignment. On the other end, over-utilization occurs when the number of licenses being used exceeds the number of licenses purchased. Essentially, this involves a violation of the licensing agreement, and may result in penalties, revoked licenses, or further legal action.

User

Each user who uses the SaaS gets their own license.

Usage

A company pays for the use of a SaaS application, whether or not they use it.

Flat rate

A flat rate is usually billed on a recurring basis, usually monthly or annually.

Tiered

The price increases as more features are added.

Excess licenses

Companies can end up with extra licenses if they are no longer used—this can come from ad hoc purchases that lead to overbuying. Licenses can also become excessive if companies don’t leverage enterprise agreements, and don’t track the use and installation of SaaS applications.

Inactive licenses

There are sometimes licenses that are purchased that are never used, even if there is intent to use them. A lack of managing users can lead to too many users if some need to be de-provisioned, which can be expensive if the app is paid for on a user-by-user basis.

Users who leave companies also need application access revoked, as this can pose a security risk when people outside the organization still have access to applications that are only meant for employees.

Licenses that aren’t optimized

There are some applications that charge more for premium features. Consider whether every individual who uses the application needs access to certain features if they do not need the features to perform their job.

Disorganized renewals

Not all SaaS applications are purchased at the same time, which can lead to renewal issues if they are not organized accordingly. Most applications will warn you about an upcoming renewal, but not all applications do. It’s important to track renewals, whenever their dates may be. Disorganization can also lead to unnecessary costs if a license is no longer needed, or if price negotiations are possible.

Risk management

Some applications offer features in tiers, and not all users need access to all features. For security reasons, it’s advisable to grant the least amount of access to an application that a user needs to perform their job. It is also important to let IT vet a product before purchasing it to ensure that it follows proper security protocols.

There are important best practices to consider when managing SaaS licenses.

Gather SaaS licenses & related Information

Any SaaS strategy will depend on your ability to accurately identify and catalog existing SaaS assets. As such, before you can develop your strategy, you need to understand the state of SaaS licensing within your organization. Hunt down every licence currently in use, and then determine who is licensed to use it, whether there are any duplicate licenses, if shadow IT is occurring, and what associated purchase costs, service fees, and maintenance contracts may be included.

Track costs, usage, and spending

Not all organizations have the know-how to track and manage SaaS costs, and there may be a lack of visibility into what software is being used on which devices. Take time to break it down to better understand the past, present, and potential future costs of the use of SaaS applications. Future use is particularly important to track, as it can help an organization plan and budget out any needs for future SaaS applications.

SaaS license management fundamentally changes the posture of IT and procurement from a centralized, reactive approach to an empowering, insight-driven management of the ever-evolving SaaS vendor stack. To implement most effectively, the type and quality of data matters. Below are the four streams of SaaS data needed for the most accurate picture of your SaaS stack.

Four streams of SaaS data:

  1. Financial payment data: A healthy scrub of the expense side of the general ledger and expense data is required to paint a picture of the total vendor footprint with which the business is currently engaged. Actuals are interesting, but budgeted information can also be piped in to paint a picture of budget versus actuals.
  2. Vendor contract data: Deals can range from enterprise agreements, SOWs, SLAs, and security reviews to a simple email receipt in someone’s inbox. Knowing where you stand with each vendor is key for navigating that relationship and mitigating risk, increasing value, and controlling cost.
  3. Vendor licenses and consumption data: Pricing drivers are constantly changing in the software industry, from license-based to consumption- based, to a mix of multiple drivers in most of today’s contracts. Understanding usage correlates to business value—are you getting what you paid for?
  4. Tribal knowledge (spreadsheet): Most companies have some form of a spreadsheet or database of information. From renewal dates to ownership, to licenses and approximate cost, all kinds of things end up in this spreadsheet. If a column exists, it must have been valuable enough to track. That’s why it’s important to compile that data into one platform.

SaaS license management would suggest that after combining all streams of SaaS data into one integrated platform, all the business stakeholders from IT, procurement, software owners, and budget holders must be involved.

Set reminders

It can be difficult to remember when licenses need to be renewed or when they expire. Set reminders for everything from license renewal dates to maintenance times to keep everything compliant, up to date, and secure.

Communicate the value of license management

All necessary parties need to be aware of the importance of SaaS license management and why it must be carefully tracked and watched. Outlining the process on its own is not adequate. IT teams need to take the reins on managing SaaS applications by outlining processes and procedures, explain them to the necessary parties, and ensure that everything is compliant.

Unused licenses or forgotten subscriptions

This can occur as a result of a lack of communication between the admin of a SaaS application and the billing department, who might continue to pay for an app without the knowledge of its cancellation. There is also the possibility that a team leader subscribes to a free trial of an application and enters credit card information, then forgets about the trial.

Underused licenses

A team could be subscribed to an app, yet they may not be using the app’s full set of features. This provides the opportunity for a downgrade in subscription or a limitation in user roles if certain members of the team aren’t using the application. There may also be other applications that are a better fit financially and feature-wise.

Redundant apps

There is the possibility that teams are using different applications that have overlapping features and functionalities. IT teams should regularly evaluate the SaaS applications used by each team, either free or paid, eliminate any redundancies, and select an application that serves the purposes that are needed by each team.

Companies spend over a hundred thousand dollars on SaaS applications—in fact, they spend more on SaaS applications than they do laptops for employees.

IT admin

The individual who holds administrative rights over the SaaS application. They add users, remove users, or change permissions across the organization.

Contract owner

The primary buyer or decision maker who chooses the SaaS application. Usually a team leader.

Billing recipient

The person who holds the contract to the SaaS application.

User

Any team member who uses the application. Each user’s access level is typically defined by the IT administrator—this is usually granted at onboarding or when there is a change in employee status.

Software/asset manager

Oversees the management, deployment, maintenance, and utilization of the software assets.

Cloud operations

Monitors SaaS applications in the cloud as they are deployed, used, and closed out.

Onboarding

Employees must be effectively onboarded as they join the organization. The onboarding process can be tackled on an ad-hoc basis, which can be difficult to manage. Access should be granted on day one to help them be productive and prevent any unnecessary downtime.

Changes in role

There is always the chance that an employee will progress through an organization, and they may change departments or roles. Employees will need different access and responsibilities, which means that they should be granted certain privileged access. There are also some who may no longer require admin status, which means it needs to be revoked.

Offboarding

Once an employee departs from an organization or is terminated, it is crucial to immediately turn off all of their access to SaaS licenses. Access to a SaaS license can open someone to sensitive company data, which makes it crucial to instantly revoke all access.

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