Software Asset Management: How Companies Can Manage Software Licenses Properly

When companies start to look for software licenses, the challenge is not simply purchasing the right software. Companies also need to know who is using it, how many licenses are available, when those licenses expire, and whether their usage complies with the vendor’s terms. This process is known as Software Asset Management (SAM).

Why Is Software Asset Management Important?

• Software Asset Management is the process of recording, controlling, and optimizing all software assets within a company.

• SAM helps reduce the risks of over-licensing and under-licensing.

• License reviews should ideally be conducted at least every 3–6 months, especially for subscription-based software.

• Companies can reduce unnecessary purchases by identifying users or licenses that are no longer active.

• When companies look for software licenses, SAM data helps procurement teams purchase more accurate quantities and license types.

How Does Software Asset Management Work in a Company?

In practice, SAM connects three key areas: IT, procurement, and finance.

The IT team knows which software is actually installed and deployed. Procurement knows which contracts and SKUs have been purchased. Finance manages costs, invoices, and payment schedules.

Problems usually arise when these three sets of data are not connected.

For example, a company has 150 employees and purchases 150 subscription licenses. After six months, 20 employees resign, but their licenses have not been revoked. This means the company continues paying for 20 seats that are no longer being used.

Therefore, when companies look for software licenses, they need to consider the number of active users, rather than simply looking at the total number of employees.

SAM also helps detect the opposite situation.

For example, a company may have purchased only 100 licenses, while deployment data shows that the software is being used by 120 users. This creates a gap of 20 licenses that could potentially lead to compliance issues.

Before companies look for software licenses, they should understand the license metrics used by the vendor. Software licensing models may be based on per-user, per-device, per-server, per-core, or concurrent-user usage.

Mistakes in this area can be costly. Server, database, virtualization, and security software licenses typically require more detailed calculations than standard office applications.

What Data Should Be Recorded?

At a minimum, companies should maintain an inventory containing:

• software name and vendor;

• SKU or package;

• number of licenses;

• users or devices using the software;

• purchase date;

• renewal date;

• contract value;

• license key or subscription ID;

• license metric;

• internal person in charge (PIC).

When companies look for software licenses, having this data readily available can speed up the quotation process and prevent the purchase of incorrect SKUs.

For companies using dozens of software applications, spreadsheets can still be sufficient. However, once the number of applications, users, or devices reaches the hundreds, dedicated SAM or IT Asset Management tools become more effective.

SAM Is More Than Just a Software List

A common mistake is assuming that SAM is simply an inventory system.

In reality, its ultimate goal is optimization.

For example, if a company purchases 300 licenses but only 230 are actively used, there are 70 idle seats, representing approximately 23% of the total licenses.

When companies look for software licenses, this information can be used to reduce license quantities during renewal and redirect the budget toward other business needs.

SAM also helps companies prepare for vendor audits. Invoices, contracts, entitlements, and deployment data can be compared and verified more efficiently.

Practical Steps for Managing Software Licenses

• Create an inventory of all software used within the company.

• Record the number of entitlements and actual deployments.

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

• Set renewal reminders at least 30–60 days in advance.

• Review software usage every 3–6 months.

• Separate perpetual licenses from subscription licenses.

• Make sure proof of purchase is properly stored.

• Before you look for software licenses, review your actual user, device, and infrastructure requirements.

FAQ

What Is the Difference Between Software Asset Management and IT Asset Management?

SAM focuses specifically on software and software licenses. IT Asset Management has a broader scope because it also covers hardware assets such as laptops, servers, monitors, and network equipment.

Do Small Companies Need Software Asset Management?

Yes, although the process can be relatively simple. For companies with around 10–50 users, a well-structured spreadsheet can be sufficient as a starting point.

How Often Should Software License Data Be Reviewed?

Ideally, license data should be reviewed every 3–6 months and before each renewal. When companies look for software licenses, up-to-date data helps ensure more accurate purchasing decisions.

What Is Over-Licensing?

Over-licensing occurs when a company purchases more licenses than it actually needs. The main impact is unnecessary spending and wasted budget.

What Is Under-Licensing?

Under-licensing occurs when software usage exceeds the number of licenses or entitlements owned by the company. This situation can create compliance risks.

How Should a Company Handle Licenses Assigned to Employees Who Resign?

Revoke their access, deactivate their accounts, and then check whether the license can be reassigned to another user according to the vendor’s licensing terms.

Can All Licenses Be Transferred to Another User?

Not always. The rules depend on the vendor and the type of license. Therefore, when companies look for software licenses, they should review the vendor’s reassignment rules before making a purchase.

What Indicates That SAM Is Working Effectively?

An effective SAM process allows a company to quickly determine the number of active licenses, expiration dates, annual costs, assigned users, and compliance gaps without having to collect information from multiple departments.

Ultimately, Software Asset Management helps companies control costs while maintaining software compliance. With well-organized data, purchasing decisions no longer need to be based on estimates. Before companies look for software licenses, they can clearly identify what they already own, what is actually being used, and what truly needs to be purchased.