Software License Optimisation: Stop Overpaying for Applications

Audit your software licenses to eliminate waste, right-size subscriptions, and negotiate better deals. Most SMEs can save 20-35% on licensing through proper optimisation.

The License Waste Problem

Common Sources of License Waste

Unused Licenses:

Employees who left but licenses weren't reclaimed
Seasonal or project-based licenses still active
Free trial conversions never reviewed
Licenses for features no one uses

Over-Provisioned Licenses:

Enterprise tier when standard would suffice
Admin licenses for users who only need viewer access
Premium features enabled but unused
Higher seat counts "just in case"

Duplicate Licenses:

Same tool licensed through multiple procurement channels
Department purchases overlapping with organisation-wide licenses
Bundle inclusions not recognised (e.g., Visio included in Microsoft 365 E3)
Free alternatives available within existing subscriptions

Typical Savings Opportunities

| License Issue | Typical Waste | Potential Savings | |--------------|---------------|-------------------| | Unused licenses | 15-25% of seats | ₹1-5 lakh/year | | Over-provisioned tiers | 20-30% of cost | ₹1-3 lakh/year | | Duplicate tools | 10-20% of spend | ₹50K-2 lakh/year | | Poor contract terms | 10-15% over market | ₹50K-2 lakh/year |

License Audit Process

Step 1: Inventory All Software Licenses

What to document:

Application name and vendor
License type (per-user, per-device, concurrent, site)
Number of licenses purchased
Current cost (monthly and annual)
Contract start and end dates
Auto-renewal terms and notice periods
Bundle or suite inclusions

Step 2: Map Usage to Licenses

Usage metrics to collect:

Active users vs. licensed users
Login frequency over the past 90 days
Feature utilisation by user tier
Peak concurrent usage (for concurrent licenses)
Storage and bandwidth consumption

Step 3: Identify Optimisation Opportunities

Quick Analysis:

Compare licensed seats to active users
Match user activity levels to license tiers
Find overlapping functionality across tools
Check if bundled features replace standalone tools
Identify upcoming renewals for negotiation

Step 4: Take Action

Immediate savings (no vendor contact needed):

Remove licenses for inactive users
Downgrade over-provisioned tiers
Cancel duplicate subscriptions
Switch from monthly to annual billing (typically 15-20% savings)

Negotiation opportunities:

Volume discounts for consolidated purchases
Multi-year commitment discounts
Competitive pricing (reference alternatives)
True-up and true-down flexibility
Price caps for renewals

Licensing Models Explained

Per-User Licensing

How It Works: Each named user gets a license. Optimise By: Regularly audit active users, reclaim unused seats promptly, use appropriate tiers.

Concurrent/Floating Licensing

How It Works: A pool of licenses shared by users, limited by simultaneous use. Optimise By: Analysing peak usage patterns, right-sizing the pool, scheduling usage across time zones.

Consumption-Based (Pay-as-You-Go)

How It Works: Pay for what you use (API calls, storage, compute). Optimise By: Monitoring usage patterns, setting alerts for spikes, using reserved capacity for predictable loads.

Site/Enterprise Licensing

How It Works: Unlimited use within the organisation for a flat fee. Optimise By: Maximising adoption to increase per-user value, leveraging for all departments, not purchasing individual licenses for included tools.

Contract Negotiation Strategies

Timing Your Negotiations

Start 90 days before renewal
Negotiate at vendor's fiscal quarter or year-end
Leverage competitive evaluations during negotiations
Time new purchases with vendor promotions

Negotiation Leverage Points

Usage data showing low utilisation
Competitive alternatives evaluated
Multi-year commitment willingness
Reference customer or case study participation
Consolidating spend with fewer vendors
Payment terms flexibility (upfront vs. instalments)

Key Contract Terms to Negotiate

Price escalation caps (maximum annual increase)
True-down rights (reduce licenses at renewal)
Early termination provisions
Data portability and exit assistance
SLA commitments and remedies
Audit rights and procedures

Building a License Management Practice

Governance Structure

Designate a license manager or owner
Centralise all software procurement through IT
Establish standard evaluation and approval process
Implement departure checklist including license reclamation
Maintain a central license inventory database

Ongoing Monitoring

Monthly active user vs. licensed user reports
Quarterly utilisation reviews by application
Annual vendor contract reviews
Automated alerts for unused licenses (30-day threshold)
Dashboard showing total license spend and waste

License Compliance

Ensure you're not under-licensed (audit risk)
Maintain documentation for all licenses
Track licence transfers between employees
Monitor vendor audit clauses
Prepare audit response procedures

Quick Wins Checklist

[ ] Export a list of all active software subscriptions
[ ] Compare licensed users to users who logged in this month
[ ] Identify the top 3 applications by per-user cost
[ ] Check if any bundled features replace standalone tools
[ ] List renewals coming up in the next 90 days
[ ] Calculate potential savings from removing inactive licenses
[ ] Contact top 3 vendors about right-sizing options

Every rupee saved on unnecessary licenses is a rupee that can be invested in tools and capabilities that drive your business forward. Make license optimisation a quarterly practice, and the savings will compound year after year.