How to keep software licence management under control: Microsoft, Oracle, SAP, and more

How to keep software licence management under control: Microsoft, Oracle, SAP, and more Prasanna Kulkarni is founder and product architect of Comparesoft. Comparesoft is an AI-driven asset management software recommender used by Invesco, PwC, Barclays and thousands of other businesses.

It is hard to run and set up IT systems without solutions from large players. Their offerings are now industry standards and make financial sense, with system compatibility and employee skills the main reasons for their success. While there are many advantages for using solutions from Microsoft, IBM and the like, they come with many strings attached. Hundreds of pages of clauses and terms make their licences hard to manage. Most notably in large organisations, managing licenses requires dedicated resources.

Why is it important to manage software licences?

The common mistake with regard to licensing is simply ignoring them. Once the licences are bought, it might be tempting to assign them and return to other activities. This approach will certainly lead to unexpected large audit bills or many unused licences. You can think of managing software licences like a game of blackjack. Stray too far from 21 and you will lose to the dealer. Go over 21 and you bust. In software asset management terms, you need to balance over-licensing with the risk of audits. Good SAM practices will help you optimise your licences and reach the sweet spot.

Vendor audit damage

If you don’t actively manage your software licences, you are likely to break compliance. This puts your business at high risk of being audited. Moreover, some vendors such as Oracle are notorious for aggressive audits. In fact, some predict that Oracle’s audits will worsen. This is due to the vendor’s push toward cloud solutions and Oracle’s revenue models. Their dedicated Licensing Management Services Team is known to use audits as a way to drive additional revenue. Other large vendors are not any friendlier to their customers. In a presupposed effort to help customers maintain control over their assets, Microsoft informed its clients that they should expect a yearly audit. It’s worth noting that the language used in the agreement allows Microsoft to audit at any time.

Over-licensing inefficiencies

Out of the fear of being audited, 76% of IT administrators prefer to over-license. While this is better than paying up to millions in audits, it’s far from efficient budget spending. In fact, an impressive $30 billion is being wasted on shelfware in the US alone. A study looked at 123 companies across 14 industries and how they used 1,800 applications across 3.6 million devices. They concluded that companies waste 37% of their IT budget on unused software. This would equate to roughly $259 wasted per desktop. Over-licensing is a sign of IT asset management immaturity and an inadequate reaction to protect against audits. At the same time, audits are the biggest driver for investing in IT asset management.

“You need to balance over-licensing with the risk of audits – so think of software licences like a game of blackjack. Stray too far from 21 and you lose to the dealer, go above 21 and you bust”

So, rather than wasting money on buying licences which will never be used, companies can actually reduce costs. Businesses have at their disposal a set of tools to help prepare against audits and optimize their licenses. To better manage software licences, you must improve on the following:

  • People: Organisational and behavioural improvements
  • Process: Lifecycle management
  • Technology: Software asset management tools

People: Organisational and behavioural improvements

This is arguably the most important aspect of IT asset management. A business is a collection of individuals working toward a common goal. If their interests are not aligned, the business will not be able to sustain itself. As such, companies need to drive good ITAM practices such as:

  • Good communication between IT and employees
  • Discouraging licence camping and hogging

Most employees are concerned with carrying their responsibilities successfully. Broadly speaking, this means that they are not actively working on ensuring an efficient use of software assets. This raises the need for dedicated governance roles to enforce policies.

Process: Lifecycle Management

A lifecycle for managing software assets is an incredibly important process. It ensures that your estate has a defined and logical method for controlling the assets coming in and managing the decommissioning of old ones.

A typical IT asset lifecycle includes the following: acquisition, deployment, release management, change management, incident management, problem management and retirement.

Technology: Software asset management tools

Today’s complex IT systems and ambiguous vendor agreements cannot be managed on paper. Thankfully, numerous software asset management applications are available. Typically, SAM tools include the following functionalities:

  • Software Discovery
  • Software inventory and cataloguing
  • Software usage assessment
  • License compliance monitoring
  • Asset depreciation
  • Audit scheduling
  • Automated reporting
  • Alerts and notifications

Most software asset management tools can provide the following benefits:

  • Hard cost savings
  • Reduce risks and liabilities
  • Strategic alignment with the business needs
  • Repurposing of unused licences
  • Suggestions and bulk discounts

Now that we have a good understanding of how SAM can help, let’s look at vendor-specific practices. We’ll be looking in terms of audits.

Managing Microsoft licences

Microsoft asserts its dominance in enterprise IT through Windows and the Office suite. As those are indispensable for most businesses, you have to ensure compliance at all times. We’ve mentioned earlier that Microsoft conducts at least yearly audits. To successfully manage Microsoft licences, you must be aware of the following:

  • Cloud migrations: More and more businesses are choosing to move their operations to the cloud. This move makes sense for a number of reasons. However, it is both a technical and licensing challenge. Microsoft Azure is a comprehensive platform, and migrating to it requires careful management. The changes in the licensing agreements can leave companies vulnerable to audits
  • Make sure to solve any discrepancies between Microsoft’s records of your estate and your own internal records of your assets
  • Be aware of the impact of hardware changes on licensing for Microsoft’s data centre solutions

Managing Oracle licences

Oracle has an aggressive auditing process driven by its LMS team. The most important aspects that you need to be aware of are:

  • Virtualisation: Oracle’s technology relies heavily on virtualisation. IT asset managers must be familiar with the difference between hard and soft partitioning. Hard-partitioned environments are considered ‘approved’ which can limit the number of required licences for any product installed on that environment. Soft-partitioned environments on the other hand are not approved as a method to limit the number of required licences
  • Audit-to-Cloud technique: Oracle is using audits in order to push its latest cloud offering onto clients. When an audit bill worth thousands, even millions, is looming, buying a cloud solution and having the bill wavered off seems to be a solid choice. To avoid being reaching this scenario on the defence, try going yourself to Oracle. It is highly likely that you will need cloud solutions in your business. Do your research and go to negotiate a deal which will make you advantageous

Managing IBM licences

IBM has managed to create a licensing system that requires experts to manage it. There are multiple challenges facing IBM software licenses. Firstly, there is no constraint on the number of installations. This means that clients can download software without any restrictions. As such, it’s easy for unprepared businesses to stray away from compliance. Secondly, the agreement terms are split between multiple documents. Those include: the IBM Customer Agreement (ICA), International Product License Agreement (IPLA), International Passport Advantage Agreement (IPAA), License Information (LI) documents, and Software Announcement Letters.

IBM has two types of licenses: user-based and capacity-based.

User-based licensing: supports both desktop and server software and aligns to the number of users having access to an application. These include:

  • Authorised user: A unique person given access to an application
  • Concurrent user: Able to access an application at the same time as other users, up to the number of concurrent license
  • Floating user: May only access a single instance of a software at any given time under a single licence
  • User value unit (UVU) is a unit of measure by which a program can be licensed. This is an important part of IBM licensing. We recommend further investigation for any IBM users

Capacity-based licensing: aligns to the available hardware resources (processor cores, memory) on host machines. These include:

  • Processor value unit (PVU) is a unit of measure used to differentiate licensing of software on distributed processor technologies. As with the UVU, we recommend further investigation on this topic
  • Server based license: Required for each server that is running software, regardless of the number of processor cores or partitions in the server
  • Virtual server: Typically a virtual machine created through either hard or soft partitioning.

Managing SAP licences

SAP tops the list in terms of number of licenses available, with over 100 types of licenses.

One thing to keep in mind when employing SAP solutions is being wary of SAP consultants. Due to the complexity of SAP licenses, many businesses turn to third parties for expertise. However, consultants have more loyalty to SAP than to their customers. SAP has a comprehensive guide available online for those interested in buying. It should offer enough details to avoid a company’s full reliance on third party consultants.

“Licensing experts can be either brought in when securing a deal with a vendor, to help assist when being audited, or regularly to ensure compliance is maintained”

Another aspect to be aware of is the ‘indirect usage’ policy. This regards third parties having access to a company’s SAP portal. The SAP v Diageo case has put this practice into the spotlight. Even though SAP won the case, the company afterwards announced a new model for its digital-access licensing policies commonly. One SAP representative said: “The model is intended to make it easier and more transparent for customers to use and pay for SAP software licences. This new model will operate alongside the existing named users and SAP engines which are still necessary for the direct access scenarios.” This resulted after many SAP customers had concerns following the legal action against Diageo.

Managing Adobe licences

Due to the nature of its software, Adobe has previously suffered from piracy issues. This has prompted the company to launch many audits to protect their products. Over the past years, we have seen the company transition from hardware-specific licenses to cloud licenses. As such, Adobe now has two types of licenses: Perpetual and Subscription-based. Perpetual ones consist of a single payment, permanent usage licences.

Perpetual licenses can be bought under Adobe’s cumulative licensing program (CLP) and transactional licensing program (TLP). On the other hand, many of their most popular products are subscription-based. This mainly covers the Creative Cloud, which includes Photoshop and Premier.

The subscription-based licences are easier for Adobe to manage. They are also more profitable from their perspective. This results in Adobe pushing for more customers to adopt the subscription-based licenses. At the same time, perpetual licenses are easy to pirate unintentionally. This leaves many companies vulnerable. Adobe seizes this and makes the offer to clear any outstanding licensing issue by transitioning to the cloud. This is where businesses should pay careful attention. SAM tools have the ability to detect and notify any rogue copies of any perpetual


As the size of your IT estate increases, licensing becomes more complex. Rather than leaving your licensing needs on the back burner, you will need to actively manage those. This should ideally be managed by dedicated IT asset management resources. These resources can either be internal or external.

Internally, having a dedicated IT team for managing licences and other assets is a great way to ensure compliance. These dedicated resources would be responsible for ensuring accurate records, optimize usage and report any issues. In times of need, you can also use external specialists to help with your licensing needs. As the licencing agreements are difficult and non-intuitive, hiring somebody with expertise in specific vendors will help you secure a better deal. Licensing experts can be either brought in when securing a deal with a vendor, to help assist when being audited, or regularly to ensure the compliance is maintained.

Photo by Kevin Ku on Unsplash

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