What Is Software License Compliance and Why Is It Important for Companies?

When companies start to look for software licenses, price and features are not the only factors they need to consider. Companies must also ensure that their software usage complies with the licensing rights granted by the vendor. This is known as software license compliance.

Why Should Software License Compliance Not Be Ignored?

• Software license compliance refers to a situation where the quantity, type, and usage of software comply with the vendor’s licensing terms.

• Risks can arise when a company has 100 devices but only has usage rights for 70 devices.

• Non-compliance can lead to additional costs, retroactive license purchases, and findings during vendor audits.

• Internal reviews should ideally be conducted at least once every 6–12 months, especially for companies with large numbers of users or devices.

• When companies look for software licenses, they need to ensure that the SKU, number of users, devices, and license metrics match their actual environment.

How Does Software License Compliance Work in the Real World?

Software license compliance essentially compares two things: the license entitlement owned by the company and the actual deployment or actual software usage.

For example, a company purchases 50 user-based application licenses. After one year, the number of employees increases, and the software is now being used by 65 users. This means there is a potential shortage of 15 licenses.

Situations like this are quite common because software purchasing and deployment are not always handled by the same team.

Therefore, when companies look for software licenses, they should keep proof of purchase, invoices, license keys, contracts, subscription IDs, and renewal information in a centralized record.

Another important factor to consider is the license metric.

Vendors may calculate licensing requirements based on:

• user;

• device;

• server;

• processor;

• CPU core;

• virtual machine;

• concurrent user.

This means that purchasing one license does not automatically allow the software to be used by anyone or on any device.

When companies look for software licenses, misunderstanding the license metric can result in a situation where the company has purchased legitimate software but is technically still non-compliant.

Why Can a Software Audit Become a Problem?

Some vendors have the right to conduct a license audit according to the terms of their licensing agreements.

During an audit, companies may be required to provide information such as the number of installations, active users, servers, virtual environments, and proof of purchase.

For example, a company may have 200 users but can only provide proof of entitlement for 150 users. The difference of 50 users could potentially result in additional licensing requirements.

This is why, when companies look for software licenses, procurement teams should not focus solely on getting the lowest price. The validity of the reseller, SKU, usage rights, and licensing documentation should also be clearly verified.

Another potential issue is the use of shared accounts. Software that uses a named-user license model typically assigns the license to a specific user. Using a single account interchangeably among multiple people may not be permitted.

The same applies to virtualization. When companies look for software licenses, server, database, or infrastructure software should be reviewed more carefully because the number of VMs, cores, hosts, and clusters may affect licensing requirements.

Checklist to Keep Your Company Compliant

• Record all software used within the company.

• Compare the number of installations with the number of licenses owned.

• Identify the license metric: user, device, core, server, or another metric.

• Keep invoices, contracts, license keys, and proof of entitlement.

• Remove software that does not have a valid license.

• Review users who have resigned or are no longer active.

• Conduct an internal audit every 6–12 months.

• When companies look for software licenses, confirm usage rights before deployment.

FAQ

What Is Software License Compliance?

Software license compliance refers to a company’s adherence to the software usage rules established by the vendor, including the number of users, devices, servers, and the usage rights granted under the license.

Is Original Software Always Compliant?

Not necessarily. When companies look for software licenses, the software itself may be genuine, but the number of licenses purchased may still be lower than the actual number of users or installations.

How Can a Company Determine Whether It Has Insufficient Licenses?

Compare the license entitlement with the actual deployment. For example, if there are 120 active users but the company only owns 100 named-user licenses, there is a gap of 20 licenses.

Can Software Vendors Conduct License Audits?

Yes, depending on the vendor’s policies and the terms of the licensing agreement. This is why purchasing and deployment documentation should be properly maintained.

Can Software Accounts Be Shared?

It depends on the type of license. A named-user license is typically intended for one specific user, so sharing the same account among multiple users may violate the vendor’s licensing terms.

Are Server Licenses More Complicated?

Usually, yes. Some products use per-core, per-processor, per-VM, or per-host licensing models. When companies look for software licenses, they should understand their infrastructure configuration before determining the required number of licenses.

What Is the First Step to Improving Software License Compliance?

Start with an inventory. Information about software, users, devices, servers, contracts, and licenses should first be collected before determining whether there is a license shortage or surplus.

Software license compliance is not simply an IT administrative issue. It is directly related to cost control, security, audit readiness, and the legal use of software.

Therefore, before companies look for software licenses, they should map their technical requirements and understand the applicable licensing model. With this approach, companies can avoid unnecessary license purchases while reducing the risk of license shortages during an audit.