Modern businesses and SaaS are like chocolate and peanut butter: they can exist independently of each other but are better together.

It’s no surprise then that SaaS adoption has grown significantly over the past year for businesses of all sizes. The chart below shows the number of SaaS apps on average in an organization by employee size:

Source: CustomerThink

The reality is that there hasn’t been an on-premises software company funded

since 2007. We’ve written before about what that means and, specifically, the SaaS trends and opportunities for MSPs.

The key takeaway was that SaaS is a double-edged sword. While it brings opportunity, it also creates particular challenges pushing the roles and responsibilities of MSPs in new directions.

In businesses powered by SaaS applications and cloud services, SaaS license management (SLM) becomes increasingly complicated. When we talk to MSPs, we tend to hear some variation: “A customer has a bunch of software from a whole slew of different companies, and we are trying to get it all tracked in one place.”

Tracking SaaS license compliance, detecting unauthorized and illegal SaaS usage, and managing SaaS licenses for your clients are all part of your regular service routine as an MSP. But how do you do it when SaaS is now the system of record?

We answer these questions in the following guide.

The Different Types of SaaS Licenses

A decade ago, software licensing was part of a software purchase, paid as a capital expense upfront.

Today, with the increasing adoption of cloud-based applications, software vendors prefer to provide an application in the software-as-a-service  subscription-based model (SaaS). The cost is a part of operating expenses, paid per month, or year.

SaaS licensing has many benefits like its flexibility, an affordable price tag, and the ability to drop or add a group of users, and much more. There are four types of SaaS licensing:

• Per-user is a standard SaaS licensing type, in which every user who has accessed an application gets a license.
• Usage-based licenses allow companies to pay for the usage of an application–it usually requires a fixed price even if an app is not used.
• Flat rate refers to an annual flat fee offered at a discount to a monthly subscription fee.
• Tired refers to a fee that increases as more features become available.

The Importance of SaaS License Management

Across companies of all sizes, spending on IT is growing. As we wrote in an article on achieving SaaS spend optimization, research indicates SaaS spending is topping $13k per employee per year.

Of that spend, around $4K is wasted. That means a company with 150 employees is losing $600K a year.

That figure doesn’t include additional costs like security audits, potential fines if you’re not complying with regulations like GDPR, and the cost of hardware and software maintenance.

1.   Extra Licenses

There are many reasons why companies end up with extra SaaS licenses.

Sometimes it’s simply because the license is no longer used. It can also come from ad hoc purchases that lead to over-buying. Or not fully leveraging national or international enterprise agreements, and not tracking installation and use.

It can even occur due to a lack of communication between departments and not applying user rights correctly.

2.   Unoptimized Licenses

Some licenses cost more than others, offering access to more advanced features. But what if not everyone in your client’s organization accesses these premium features?

3.   Inactive Licenses

Some people never use the license purchased. And if IT does not manage the app, some employees could need to be de-provisioned. This even happens sometimes when an employee has departed a client’s organization months or years ago.

The problem is that every month, hundreds of thousands of Americans leave their jobs. And they’re bringing their IT access with them—from passwords to the corporate Twitter account to confidential files stored in personal Dropbox accounts. 89% of those surveyed retained access to Salesforce, PayPal, email, SharePoint or other sensitive corporate apps

4.   Disorganized SaaS Renewal Management

Tracking SaaS license renewals can get tricky, especially since they happen at different points throughout the year. While some vendors are great about reminding you about subscription renewals, others just come and go with little fanfare. As a result, many organizations overlook renewals to negotiate pricing and terms or re-evaluate the team’s needs.

The Benefits of SaaS License Management for Your Clients

The most apparent benefit of SLM is that your clients can save on the waste mentioned above. SaaS is particularly prone to overbuying, the purchase of “extra” licenses intended to guarantee availability but often go unused. Reducing this extra cost can save your client’s a considerable amount of money. That’s not all, with more advanced warning, it’s possible to review the contract in greater detail, match it against organizational usage of the application and get employee sentiment around the application for the most leverage in renewal negotiations.

Beyond this, as renewals come up and contracts need to grow (or shrink) based on headcount changes, it’s easier to forecast future budget changes based on accurate data.

Four License Optimization Best Practices

When you’re managing different client accounts’ IT assets, you need to watch for two things:

1. Having too many licenses
2. Not monitoring license renewal dates

With a SaaS license management system, you can reach that delicate balance of achieving SaaS license optimization and compliance. Here are the five steps you need to take to make sure you avoid that.

1. Gather Your Client’s SaaS Licenses & Related Information

Of course, before you can implement an effective SLM strategy, you need to know what SaaS assets exist in the first place. This will give you a good idea of your client’s SaaS ecosystem and licenses.

If you asked a CFO or IT Manager to do this, how quickly would you get a response? They’d likely have to don their Sherlock Holmes cap and start investigating. If you rewind to a decade ago, it would have been a much easier process.

This difficulty comes from what’s known as Shadow IT. Shadow IT refers to SaaS applications used within organizations without explicit organizational approval. If you don’t know something exists in the first place, it’s impossible to manage it.

Knowing what your client’s employees are using allows you to understand your SaaS license management. But it doesn’t tell you whether these licenses are efficient or not. Theoretically, you might have all the right SaaS tools that can help you scale your business and give your employees what they need to do their best work.

The first thing you’ll likely find is that users have access to duplicative apps, like Zoom and Hangouts, or Dropbox and Google Drive. You can quickly discover those apps and determine whether you can eliminate one of the duplicates.

Beyond duplicates, you can tell SaaS usage by employees. Are your clients getting the most from each license they’ve provisioned? Are they provisioned at the right feature tier for each user? And are they spending the right amount of money on each SaaS license or application?

In addition to the actual licenses they have, you need to gather all related information that will be important to have around when you need it, such as purchase costs, maintenance contracts, and service fees.

This doesn’t have to be a painstaking process. Bringing together all of this information into one central location only takes significant time and effort if you don’t automate it. With the volume of SaaS used across organizations today, it is impossible to track and optimize each license manually.

To have consistent information, organizations should implement a  SaaS License Management solution like Augmentt. Solutions such as these automate the process of locating deployed licenses. (You can learn more about that here.)

We don’t only record if a license is deployed but also how often it is used. If an employee has a program installed on their device but rarely uses it, IT can notify the user, uninstall it, and add the license to the license pool.

2. Continually Track Costs and Spending

Many organizations find that they are inadvertently wasting money on licenses because they lack the knowledge to manage these costs. Do a breakdown of your client’s SaaS expenditure to get a clear picture of all fees per user. Create reports to get a better understanding of past, current, and future spending to know your patterns and plan accordingly.

Future expenditure is an especially important metric to be aware of. It can help clients estimate what they are likely to spend in the future and therefore optimize as needed. These reports can also tell you license and budget availability so that you can put these resources to optimal use.

3. Set Reminders

With multiple clients, it can be challenging to remember all of the tasks that must be completed, and some tend to slip the mind inevitably. Just as you would set every day meeting times on your desktop calendar, employ this process for license reminders. License subscription renewals, maintenance times, and approvals should all be set as reminders through email or another channel of your client’s choice. Without reminders, these significant events can go unnoticed, which will make you fall behind in compliance and up-to-date license management.

4. Communicate the Value of SaaS License Management

Lastly, it is vital to make license management a business priority. This means informing all necessary employees of the steps to be taken, and merely outlining the process to others, even if it is not part of their department. The IT team should take the reins on creating processes and procedures to be followed, and clearly explain them to the appropriate groups. If everyone is kept informed and proper practices are in place, license management will become a regular part of the business. Your organization will never have to worry about meeting compliance requirements.

The Wrap on SaaS SLM

For SaaS to serve as the system of record effectively, IT must regain control. MSPs can help lead the charge.

MSPs know that the right license management software can save organizations time and money. These decision-makers recognize that without SLM, you can quickly lose track and control of your IT inventory, potentially creating security, compliance, and budget issues for organizations. They also understand that you need the right tools to mitigate these risks and reap the benefits.

One such tool is Augmentt: it allows you to manage your customers’ SaaS ecosystem, saving them money and giving you greater visibility and control. It stops the guesswork, and starts putting SaaS usage data to work for you! It’s why the world’s leading MSPs professionals rely on Augmentt.

If you have any questions about Augmentt, call us at 888-670-8444. You can also email us at [email protected].