7 Best Practices for Software Asset Management
According to a recent study, the global software asset management market has been projected to grow to USD 2.32 Billion in 2022. However, Gartner says, “Budget constraints and a general lack of awareness among small and medium-sized enterprises are expected to be one of the major restraining factors for adopting software asset management solutions and practices”. In this blog, we’ll take a broad look at how to implement the above-mentioned software asset management best practices, which can help you save potentially millions of dollars in IT spending.
Please note that software asset management is not to be confused with configuration management/inventory management as there is a widespread misconception that asset management and CMDB are the same, which has resulted in these two terms being used interchangeably. Our blog here helps clear the air and explains why it’s wrong to think they’re the same.
What is software asset management?
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. The core idea behind software asset management is to provide a systematic approach to managing software assets, ensuring that an organization can achieve legal compliance and cost efficiency in its software use.
Software asset management involves several key processes. The first is inventory management, where an organization maintains a detailed record of all the software it owns. This inventory includes the software and details about it, including version, location, and the terms and conditions under which it was acquired. Keeping a comprehensive inventory helps ensure compliance with licensing agreements and aids in software audit readiness.
The next process is license management, closely tied to inventory management. Here, the focus is on understanding and adhering to the terms of software licenses. This includes tracking the number of installations against the number of licenses purchased, ensuring that the organization is not under-licensed (which could lead to legal issues) or over-licensed (which could lead to unnecessary expenses).
Another critical aspect of software asset management is the management of the software lifecycle. From the initial purchase to the retirement of software, software asset management provides a framework for making decisions based on the software’s value to the organization. This lifecycle approach ensures that software is updated, patched, and maintained regularly, reducing security risks and improving performance. It also involves making decisions about renewing, replacing, or retiring software based on its usage, value, and contribution to the organization’s objectives.
Cost management is another essential component of SAM. An understanding of what software is in use and aligning this with the organization’s needs helps businesses avoid unnecessary purchases and identify opportunities for volume discounts or more cost-effective licensing models. This results in direct cost savings and optimizes software investments, ensuring that resources are allocated to software that provides the most value.
Finally, software asset management is crucial in compliance and risk management. With the complexity of software licenses and the severe penalties for non-compliance, effective software asset management helps organizations adhere to legal and regulatory requirements. It minimizes the risk of legal disputes and financial penalties associated with unlicensed software use. Furthermore, by ensuring proper management of software updates and patches, software asset management contributes to the organization’s overall cybersecurity posture, protecting against vulnerabilities that could lead to data breaches or other security incidents.
Why do you need software asset management?
As organizations scale, their internal software asset estate grows exponentially and becomes complex to manage. The assets become highly dependent on each other and need a set of rigid processes for their governance. This demands the development of a well-crafted Software Asset Management (SAM) program — a core functional area of IT asset management (ITAM), that focuses on minimizing IT costs and manual overhead, and optimizing the usage of software assets in your organization.
SAM is a quintessential part of IT asset management and IT service management practices in enterprises. A typical software asset management program includes mitigating risks associated with software licenses and establishing a software inventory across devices, data centers, and the cloud. It also involves evaluating and optimizing complex software license agreements and contracts and ensuring compliance.
Let’s say you already have a carefully crafted SAM program in place. Now how do you get the most out of your organization’s SAM strategy?
The benefits of software asset management
Software asset management offers a range of benefits that can significantly improve an organization’s efficiency, compliance, and financial health. Effective management of existing and new software assets enables businesses to better understand their software environment, ensure legal compliance, optimize costs, enhance security, and align IT investments with their overall business strategy. Learn more about how SAM can benefit your business below.
1. Enhanced compliance and reduced legal risk
SAM plays a critical role in ensuring that an organization adheres to licensing agreements and legal regulations related to software usage. Maintaining accurate records of software licenses and usage helps organizations avoid legal issues and penalties associated with non-compliance. A proactive approach can protect your business from legal risks and help you uphold its reputation and integrity in the market.
2. Cost optimization and avoidance of unnecessary expenditure
One of the most immediate benefits of software asset management is the potential for significant cost savings. SAM helps organizations avoid overspending on licenses or under-utilizing existing ones. Carefully tracking software usage and needs can help your business identify opportunities to consolidate software purchases, negotiate better terms, and eliminate or reallocate underused software licenses. This results in more efficient use of IT budgets and resources.
3. Improved software utilization and efficiency
Through effective software asset management, organizations can ensure they make the most of their software investments. SAM provides insights into how software is being used, who is using it, and whether it aligns with business objectives. This information is crucial for making informed decisions about software deployment and training needs and identifying areas where software can be reallocated to where it’s needed most to improve overall operational efficiency.
4. Enhanced security and risk management:
In addition to maintaining a current software inventory and regular updates, effective Software Asset Management (SAM) involves a comprehensive approach to cybersecurity. This includes conducting regular security audits and assessments to identify potential vulnerabilities in the software environment. By doing so, organizations can proactively address security issues before they become critical threats.
SAM also facilitates compliance with industry-specific regulations and standards, such as GDPR for data protection or HIPAA for healthcare information security. This enhances the organization’s security posture and builds trust with customers and partners by demonstrating a commitment to safeguarding sensitive information. As cyber threats evolve, the role of SAM in managing risk becomes increasingly vital, ensuring that the organization’s software assets do not become liabilities.
5. Strategic alignment with business objectives:
Expanding on the strategic alignment, SAM plays a pivotal role in driving digital transformation initiatives within an organization. SAM ensures that IT investments enable new business capabilities by aligning software assets with business goals. This strategic alignment involves assessing the impact of software on various business units and projects and reallocating resources to areas with the highest return on investment.
It also means that SAM can help forecast future software needs based on business growth projections and market trends, ensuring the organization remains agile and competitive. In other words, SAM becomes a bridge between IT operations and business strategy, enabling the organization to leverage its software assets as tools for innovation and market differentiation.
Software asset management best practices
The following list of best practices can act as fundamental guidelines for your organization’s SAM strategy.
- Support from senior management
- Choosing the right SAM tool
- Building the right SAM team
- Measuring SAM success
- Categorizing software assets
- Recycling software licenses
- Being audit-ready
Let us now dive deeper into the 7 best practices for software asset management and how to implement them in your organization.
1. Support from senior management
In simple words, the senior-most leader of your software asset management program should be a C-level executive. This ensures that the stakeholders and key influencers in your organization’s decision-making processes are well-informed about your software asset management strategy. In most cases, these stakeholders lie outside your department and might not necessarily understand the importance of piloting a separate program for SAM (read: leaders from various IT departments, finance, and procurement). Gaining executive buy-in and endorsement can go a long way in implementing the SAM strategy in your organization. Engage with them in the early stages of the process, build a strong business case while highlighting cost savings, and communicate why a SAM strategy is necessary for achieving an optimal total cost of ownership.
2. Choosing the right tool
The right Software Asset Management (SAM) tool can be a game-changer for organizations of all sizes. However, navigating the numerous options available in the market can be a challenging task. To streamline this selection process, it’s crucial to ask some fundamental questions that align with your organization’s specific needs and goals. These should cover aspects like functionality, flexibility, scalability, software discovery capabilities, license management proficiency, and the tool’s effectiveness in measurement and reporting.
Before the selection process, be sure to consider the following:
- Flexibility: Is the tool customizable? Does it offer integrations with the existing applications in your IT and business ecosystems?
- Scalability: Does the tool allow for flawless service and support as the organization scales? Is it robust enough to operate across multi-cloud environments?
- Software Discovery: Does the SAM tool possess a powerful asset discovery tool that detects even virtual and mobile instances of software, and how easy is it to deploy in your environment?
- License Management: How sophisticated are the software license management features in the tool? Does it cover license optimization, recycling, reminders for contract expiries, and managing vendor audit requests?
- Measurement and Reporting: Can the tool measure the operational and financial metrics of your SAM program and present them? It should help SAM leaders derive insights and make informed business decisions.
Partnering with the right IT Service Management (ITSM) tool vendor can help empower your business to effectively manage its IT services and assets. For more information, check out these 5 simple tips to pick the right ITSM tool vendor.
3. Building the right SAM team
Great tech isn’t going to solve people problems. You might have invested hundreds of thousands of dollars on expensive cloud tools to manage your organization’s assets. But not having the right people at the right places, working towards the right objectives is the perfect recipe for an organizational black hole.
The primary goal of an effective SAM program is to minimize IT spending and mitigate risks. This demands an IT team of highly skilled and experienced members especially when it comes to verifying licensing models and software entitlements, as they cannot be automated. An ideal software asset management team would consist of positions like Software Asset Administrator, SAM Analyst, Software Asset Manager, SAM Consultant, SAM Specialist, and Director of SAM — some of which could be either permanent or contracted, depending on your organization’s limitations.
Software procurement entails different departments like IT, legal, finance, and procurement. Collaboration between teams, hierarchies, and partnerships is crucial when it comes to effective software asset management. SAM leaders should align themselves with their organization’s SAM goals, encourage and motivate their teams to perform at their full potential with a strong emphasis on collaboration and ensure they all speak the common language.
4. Measuring SAM success
Setting up initial key performance indicators (KPIs) is an essential step in measuring and communicating the success of your Software Asset Management (SAM) strategy. Tracking specific metrics provides tangible evidence of the effectiveness and value of SAM initiatives. Here are a few metrics you can start tracking:
Software utilization rate: This calculates the percentage of software products currently in use by the business compared to the total number of software available. It helps identify underutilized software, enabling decisions on whether to reallocate, retire, or purchase additional licenses. A high utilization rate typically indicates effective software deployment aligned with business needs, maximizing the return on investment.
Ratio of total to unused software licenses: This ratio compares the total number of software licenses owned by the organization with the number of licenses that remain unused. Tracking this metric can help you identify over-purchasing or under-utilization trends. Optimizing this ratio ensures that the organization is not wasting resources on unnecessary licenses, thereby improving cost efficiency and reducing financial waste.
Percentage and monetary value of recycled licenses: This KPI measures the effectiveness of the SAM team in recycling licenses, which involves reassigning unused or underutilized licenses to new users or projects. This metric calculates the percentage and the monetary value of recycled licenses and allows you to quantify the cost savings and efficiency gains achieved through SAM. This metric is crucial for demonstrating the financial impact of SAM practices and for justifying the SAM program to stakeholders.
These metrics not only help in assessing the performance of the SAM strategy but also serve as vital communication tools. Regularly reviewing and reporting these KPIs will help you provide clear, quantifiable insights into how SAM contributes to your organization’s efficiency, compliance, and cost-saving objectives.
5. Categorizing software assets
Use the discovery/probe and inventory features of your software asset management tool to build a list of all the existing software assets in your organization—open source, licensed, and customized software alike. Sometimes, the creation of virtual machines in your IT environment may create duplicate instances of software. Note that it’s easy to miss software programs like these. Once you’ve inventoried all the software assets, you can then categorize them into three major buckets.
- High priority – Software assets with the highest business implications, license costs, or compliance risks. These are typically core applications critical for daily operations, like enterprise resource planning (ERP) systems or customer relationship management (CRM) tools, which demand careful management due to their substantial impact on business continuity and legal exposure.
- Low priority – This includes (license) free software programs that do not impact IT costs. These assets, often used for non-critical tasks, might include basic utilities or tools that, while useful, don’t significantly affect the organization’s operational efficiency or financial bottom line.
- Blacklisted – Malware and software programs that are prohibited. This category is essential for maintaining organizational security and compliance. It includes unauthorized applications, potentially harmful software, or programs that are non-compliant with company policies, presenting serious risks to data integrity and network security.
This categorization will help you gain a clear idea of what software assets you own and how much of it is being utilized efficiently.
6. Recycling software licenses
Recycling software licenses essentially prevents your procurement team from purchasing new licenses, thereby cutting down software spending and supporting maintenance costs. For example, when an employee leaves the company, their existing software licenses can be recycled and assigned to a new employee, instead of releasing the license. In other cases, a user may have a software program installed but never actually use it. Recycling software licenses is quite common in high-maturity IT organizations where there are rigid process controls. But even organizations with low maturity levels can slash their IT spending significantly through license optimization processes.
7. Being audit-ready
Software audits are on the rise. Bad audits can not only attract hefty fines but also tarnish a company’s reputation. It is important to note that there is no such thing as too small a software for an audit. Hence, your SAM program should always stay on top and ensure that your organization is always audit-ready. As preparation, you can perform the following analyses:
- Gap analysis: A gap analysis involves comparing the software assets currently in use within your organization with the licenses available for those assets. This process helps identify discrepancies, such as unlicensed software or software with insufficient licenses. The goal is to highlight any ‘gaps’ between what is being used and what is legally permitted. Identifying these gaps enables an organization to take corrective action before an audit occurs, such as acquiring necessary licenses or discontinuing other use of unauthorized software. This proactive approach mitigates the risk of non-compliance and ensures that the organization is always ready for an unexpected software audit.
- Compliance analysis: This analysis evaluates the current state of software licensing against the terms and conditions stipulated by the software providers. The compliance analysis aims to list over-licensed and under-licensed software within the organization. Over-licensed scenarios occur when an organization owns more licenses than necessary, which could lead to unnecessary financial expenditure. On the other hand, under-licensed situations happen when there are more installations of software than licenses available, posing a significant compliance and legal risk.
This comprehensive gap and compliance analyses also ensure that your organization’s software asset management program complies with SAM ISO 19770-1, ISO 19770-2, and ISO 19770-3 standards. Performing these analyses from your end will give you insights into how software assets in your company are configured and utilized. Using this data, you can avoid over and under-licensing your renewals and purchases, thereby optimizing the configurations for your software assets and being audit-ready.
Organizations that can efficiently manage their SaaS assets can have a significant cost advantage over their counterparts. But for this goal to attain fruition, a non-ambiguous and well-planned SAM program that clearly defines roles and responsibilities should be implemented and managed by a team of experts. The 7 software asset management best practices described in this blog post should give you a clear idea of how to extract the maximum benefits from your existing SAM strategy, or even fine-tune a few processes. While the adoption of these software asset management best practices might not happen overnight, they can still be realized pretty quickly, provided you have the right people with the right skill set, and an org-wide mindset to adapt to a major cultural shift.
Freshservice, a cloud ITSM solution developed by Freshworks, helps businesses successfully implement software asset management best practices in their organizations that are tailor-made to their IT environment.
