Software as a Service (SaaS) products use a subscription model that typically requires a one to three year commitment. Customers are invoiced, usually on a monthly basis, and the license typically uses some sort of billing metric based on resource usage, such as the number of end users that can access the product. The flexibility of SaaS licensing models enables organizations to expand the use of the product according to their needs during the term of the subscription.

For instance, decreasing the number of subscribed licenses is usually permitted during the course of the subscription, or at least on its renewal date. The ability to reduce or increase the number of licenses, as needed, is beneficial to organizations if they can closely monitor use so that all licenses purchased are actually being used.

However, many organizations fail to adequately monitor SaaS product use, resulting in over-licensed situations where subscriptions are paid for but not fully used. Software License Optimization best practices, processes and technology can and should be applied to SaaS software use (in addition to on-premises, virtualized, and other forms of cloud software).  Doing so would result in highly valuable visibility which would allow IT Asset Managers to help ensure the licenses subscribed to, correspond with the actual use of the product – thus enabling savings.

How Software License Optimization Works

Applying Software License Optimization to traditional on-premises software often results in as much as 25% cost savings.  To understand why this is the case – we’ll focus on the traditional enterprise desktop application.  These products are usually sold using perpetual software licenses that employ a per-device or per-user licensing metric whereby each installation or end user needs to be licensed.

There are two distinct areas of potential waste that Software License Optimization can resolve for desktop applications. First, organizations can be out of compliance with their software license agreements because they are using more licenses than they’ve purchased.  Secondly, they may not be using all of the licenses they’ve purchased (they have “shelfware”), or they may not be leveraging all of their rights to the software – meaning the licenses are being under-utilized and therefore waste is still occurring.

Software License Optimization solutions solve these problems at every level to minimize all instances of waste.  For instance, inventory tools within the solution can assess software usage, enabling organizations to make sure actual software use is aligned with the number of licenses purchased. If there are unused licenses (i.e. unused copies of the software allocated to end users or devices), organizations can reclaim licenses that are not actually being used, instead of having to purchase more software.

License optimization goes further, not only helping ensure all licenses are in use but also ensuring that license entitlements are fully leveraged.  A Software License Optimization solution does this by aligning “product use rights” – specific rules in the contract that dictate the ways in which customers are entitled to use the product (i.e. such as the right of second use, downgrade and upgrade rights, multiple installation rights on the same device, etc.) with how the product is actually being used.  If all the rights are not being leveraged – an organization may be able to avoid purchasing additional software until all the entitlements have been applied and consumed.

Software License Optimization for SaaS

In the SaaS world, compliance is generally ensured by the SaaS provider.  Enforcement mechanisms, such as active accounts having access to the SaaS applications, are controlled by the provider and used as the basis for monthly invoices.

However, ensuring that every employee that has been given a license is actually using the SaaS solution is much more difficult, and most organizations don’t monitor for this.  This means that most organizations are not “optimized,” meaning they’re paying for more licenses than they’re actually using, and hence wasting significant money.  Optimization techniques similar to those used for on-premises software can and should be performed on SaaS software to monitor usage, ensuring that the organization’s subscribed licenses match the use of the product.

Moreover, over-licensed situations for SaaS products may occur in a couple of different ways. The first occurs when resources counted toward the SaaS license do not match the actual use. The most common example is found when SaaS products use the number of end users (i.e employees or contractors) as the licensing metric. Enterprises can easily drift to an over-licensed situation when end users leave the organization or simply no longer require the use of the product. In these scenarios, the license should be reclaimed for use by another employee that does need it and, if permitted, the corresponding subscription terminated for the prior user. Without proper processes and usage monitoring, organizations will keep paying for end user subscriptions that are no longer being used, or in some instances, for employees who have never used the product.

The second over licensed situation can occur when the license type assigned to an end user does not match his or her actual use of the product. SaaS product subscriptions are generally offered at different price levels depending on the scope of features that can be accessed. It is very common for end users to be over-licensed because they are not using all the features made available to them at that licensing level, and should instead be assigned to a less expensive subscription. Here again Software License Optimization can lead to significant savings.

Monitoring SaaS product usage is more challenging than traditional desktop software, however.  For instance, on-premises software products are locally installed on devices and can be monitored through an “agent” that can run on the local device. This agent tracks when the executable file corresponding to the product is running or not. Advanced monitoring techniques can also be applied, such as tracking if the window hosting the application is the active (front) window.  Other techniques can be used for optimization purposes, such as monitoring keystrokes and mouse clicks, which are good indicators of whether the software is being used.

Similar techniques can be applied to optimizing SaaS applications.  Internet browsers and URLs corresponding to each SaaS product can be monitored – though doing so is more complex. For instance, different browsers might be used to access the SaaS product, each requiring a specific plug-in to track the end user activity.  In addition, URLs need to be matched against a valid SaaS product.

Furthermore, another limitation of using an agent to monitor SaaS product usage activity is that agents only provide a partial picture.  Because web applications can be used from any device – not just corporate owned devices. The increased use of personal devices for business purposes—via Bring Your Own Device (BYOD) may prevent an accurate monitoring of SaaS product usage because they are beyond the reach of the agent.

An alternative solution is to rely on usage data, when available, furnished by SaaS providers. This is difficult to do manually, however, because the data must be gathered from across different SaaS products and folded into a single enterprise report –a single “pane of glass.”  This challenging because each provider has its own user interface or API to expose this data. Manually accessing each provider’s data on a monthly basis, and reconciling it with the business rules and users would be prohibitively time consuming. A Software License Optimization tool would be needed to automate these tasks.

SaaS applications seem to be easy to manage. However, they can generate hidden waste when organizations do not have sufficient processes or tools in place to ensure that all licenses being purchased are needed, and all users are leveraging their rights to the SaaS product to their fullest.

About the Author

Vincent Smyth | Senior Vice President EMEA at Flexera Software | Connect with Vincent

Vincent is responsible for driving revenue, market share and customer satisfaction in the independent software vendor, high-tech manufacturer and enterprise account domains. Prior to Flexera Software, he has held several sales management responsibilities for Business Objects, PTC and Computer Associates. He has extensive experience of doing business across Europe and the Middle East.

About Flexera Software

Flexera Software helps application producers and enterprises increase application usage and the value they derive from their software.  Our next-generation software licensing, compliance and installation solutions are essential to ensure continuous licensing compliance, optimised software investments and to future-proof businesses against the risks and costs of constantly changing technology.  Over 80,000 customers turn to Flexera Software as a trusted and neutral source for the