According to Wikipedia, Software Asset Management (SAM) is a business practice that involves managing and optimizing the purchase, deployment, maintenance, utilization, and disposal of software applications within an organization. But what does that really mean or look like in a practical sense?

Software Asset Management is a vital process in any organization. Understanding how much software you own, which vendors you buy from, terms and conditions of the contracts you’ve signed with these vendors, program limitations, license entitlements and use rights, user needs vs. license installment, and accuracy of inventory are all essential functions of SAM.

Executing an effective SAM program is very difficult for most companies. For many organizations, SAM is a complex, unwieldy challenge, especially if the organization spans more than one location. But companies who are found to be non-compliant with their licensing agreements can face massive fines, sometimes into the millions of dollars, or be subject to legal action.

A good Software Asset Management strategy is key to maintaining compliance and avoiding hefty true-up fees and other noncompliance costs.

1. What Are Software Licenses?
Software licenses are the agreements that allow a company or individual to use proprietary software owned by a vendor. Software License agreements dictate how and where businesses can deploy software, ranging from the operating systems on each computer throughout the organization, to the workplace software used on each machine/device, but may also include database servers and other back-end infrastructure. The licenses also address what sorts of tasks can be performed with the software, how the software is configured, and which features the organization is approved to use..

2. Staying in Compliance
Companies need to ensure that they purchase an appropriate number of licenses for either the number of devices the software will be installed and used on or; for the number of people who will be using the software. Historically, we’ve seen two main ways that many companies rely on to try to mitigate their risk around compliance with their licensing: (1) choosing to over-license (aka: “better safe than sorry”) practice or; (2) budgeting year-long for eventual true-ups. Being out of compliance can result in the publisher of the software performing a Software Audit, which can result in massive fees for companies found to be missing licenses, plus the added disruption of having your software environment audited.

3. Over-Licensing
Over-licensing occurs when an organization purchases more licenses than they need for their environment. While this ensures that the organization will be compliant, the overspending of purchasing more licenses than required is a costly practice, especially when you consider that the licenses won’t be used. A solid SAM strategy will help to ensure that your company does not overpay in the long run by maintaining only the number of licenses necessary.

4. True-Ups
If a software publisher finds that you are out of compliance, a true-up will be necessary to settle the difference. Depending on the scale of non-compliance, true-ups can cost companies hundreds of thousands or even millions of dollars. Accurate inventory count, proper maintenance, and regular assessment of software asset requirements and use ensures that true-up costs don’t creep up on you too significantly and can help keep auditors at bay.

5. Contract Re-negotiation
Part of having a strong Software Asset Management strategy is understanding how to re-negotiate license contracts. At the end of your software license contract term, you will be given the opportunity to re-negotiate with the vendor. When an organization enters into these negotiations with a current view of their software needs and use and a projected view of their future requirements, that information can be leveraged for better pricing and can help avoid unnecessary over-purchasing of new or unneeded licenses.

6. Maintaining Compliance
Staying in compliance may seem like a daunting task, but a strong Software Asset Management strategy can make compliance a much more manageable process. It may seem like the most prudent way to avoid true-up costs or an audit by a vendor would be to purchase more licenses than you need, but this comes with its own costs, especially over the long-term. Unless the organization is in a growth cycle where more employees will be brought on to consume those licenses before the next purchasing cycle, the money spent on over-purchasing licenses is wasted.

A good practice to assist in maintaining compliance should include performing a Self-Assessment at least once a year.

Ultimately, an organization is in its best position to make software license decisions when they have a full picture of their software environment.