What is Software License Management (SLM)? Process And Tools

Software License Management (SLM) is the process of tracking, managing, and controlling the usage and distribution of software licenses within an organization. 

It involves overseeing how software is acquired, deployed, used, and renewed. It’s a key component of IT Asset Management (ITAM), helping companies maintain compliance, reduce expenses, and ensure that software is used efficiently, securely, and legally.

Why do you need Software License Management?

SLM helps organizations take control of their software environment. It reduces the risk of non-compliance, cuts unnecessary costs, and improves visibility into how software is being used. Without it, companies may overspend, fall short during software audits, or expose themselves to security threats.

In fact, nearly 32% of organizations incurred audit-related costs exceeding $1 million, more than triple the figure reported just two years ago, according to the 2025 Survey on Enterprise Software Licensing and Audit Trends. As financial penalties grow, the need for a structured and proactive SLM approach is more urgent than ever.

5 key benefits of Software License Management

Here are some of the main advantages companies can expect from a proper SLM strategy:

1. Cost optimization: Identify unused or underutilized licenses to reduce waste and control spending.
2. Compliance and audit readiness: Stay aligned with license terms and maintain clean records to pass vendor audits without stress.
3. Improved security: Prevent unauthorized software use and reduce exposure to vulnerabilities.
4. Operational efficiency: Automate software license tracking and software renewals, and reassign licenses based on usage to maximize their value.
5. Better IT planning: Use accurate data to guide software procurement, renewals, and budget decisions.

Software license types

Software licenses define how software can be used, modified, and distributed. At a broad level, they fall into two main categories: commercial and open-source.

Commercial licenses are paid and usually restrict access, usage, and distribution. Organizations must purchase these licenses and follow strict terms set by the software vendor. These licenses are common in proprietary or enterprise software.

On the other hand, open-source licenses are typically free to use and allow users to view, modify, and share the source code (as long as they comply with the specific license conditions). Some open-source licenses are very permissive, while others impose strict requirements for redistribution or modification.

Here are the most common types of software licenses you might encounter:

• Public domain - Software that is free of copyright and can be used, modified, or distributed without any restrictions.
• Permissive license - Allows anyone to use, modify, and redistribute the software with minimal conditions. Typically, the only requirement is to credit the original author. Examples include the MIT and Apache licenses.
• Copyleft license - Requires that any modified version of the software be released under the same license. This ensures that the freedoms granted by the original license are preserved in derivative works. The GNU General Public License (GPL) is the most well-known example.
• LGPL (Lesser General Public License) - A more flexible version of the GPL. It allows developers to link to open-source libraries without having to release their entire project under the same license.
• Proprietary license - The most restrictive type. It does not allow access to the source code, and copying, modifying, or redistributing the software is strictly prohibited. These licenses are typically found in commercial software.

Licensing models 

In addition to license types, software vendors also use different licensing models to control how licenses are assigned and managed. These models include:

• Named license - Assigned to a specific user. Only that person can access the software, even if they aren’t using it at the moment.
  Concurrent license - Limits the number of users who can access the software at the same time, regardless of who they are. It’s useful when multiple users need occasional access.
• Client Access License (CAL) - Grants access to server software for each user or device. Common in Microsoft environments, where a CAL is required for every user or machine accessing the server.
• Subscription license - Provides access to the software for a recurring fee, typically monthly or annually. This model often includes support and regular updates.
• Perpetual license - A one-time purchase that allows the user to use the software indefinitely. However, it may not include upgrades or ongoing support.

How to manage software licenses

There’s no single industry-standard process for Software License Management, but most effective strategies follow a set of common steps. The goal is to keep track of every license you own, ensure it’s being used according to the terms, and avoid unnecessary costs or risks.

A good approach to SLM should be structured, repeatable, and ideally automated. It can be part of your broader IT Asset Management (ITAM) or SAM (Software Asset Management) strategy.

Here’s a practical framework on how to manage software licenses.

1. Inventory your software

Start by identifying all the software currently installed across your organization. Include desktop apps, cloud services, and shadow IT. This gives you a clear picture of what you’re dealing with.

2. Centralize license information

Collect and store license data in one place: purchase records, license keys, renewal dates, usage terms, number of seats, etc. A centralized database helps you stay organized and reduces manual tracking errors.

3. Reconcile licenses and usage

Compare the software in use with the licenses you actually own. This helps spot over-licensing (wasted money), under-licensing (compliance risk), and unapproved software (security threat).

4. Monitor usage continuously

Use automated tools to track how often software is being used and by whom. This allows for smarter renewals, reallocation of licenses, and identification of shelfware.

5. Set up alerts and renewals

Stay ahead of renewals, audits, and license expirations by setting up automated reminders. This minimizes the chance of surprise costs or service interruptions.

6. Define policies and roles

Establish internal rules for software acquisition, usage, and decommissioning. Assign responsibilities to ensure ongoing license management isn’t left to chance.

7. Run internal audits regularly

Perform internal audits to catch issues early and be better prepared for vendor audits. This step helps maintain software compliance and avoid last-minute scrambles.

Using InvGate as your Software License Management software

InvGate Asset Management is a comprehensive ITAM solution designed to simplify and automate SLM across the entire license lifecycle. Here’s how it helps you implement an effective process:

1. Centralized software and license inventory - With InvGate, you can build a complete inventory of your software applications and link them directly to licenses, users, devices, and contracts. All your license data (including contract terms, renewal dates, and usage limits) is consolidated in one place.
    
2. Software metering and real-time usage tracking - InvGate’s Agent continuously monitors installed applications and tracks actual usage. This software metering feature provides accurate, up-to-date data to identify underutilized licenses, detect unauthorized software, and ensure the right users have access to the right tools.
    
3. License compliance monitoring - The Software Compliance module automatically cross-references license contracts with real-time usage data to flag compliance issues. It detects installations without proper licenses, calculates the cost of becoming compliant (true-up cost), and identifies low-usage licenses that can be reassigned or canceled to reduce waste.
    
4. Cost control and Contract Management - By associating software licenses with contracts, devices, and users, InvGate lets you track spending, set renewal alerts, and avoid unexpected expirations. The Contracts section provides detailed insights into assigned and available licenses, contract costs, expiration dates, and more. 
    
5. Automation, alerts, and smart tags - With custom automation, smart tags, and proactive alerts, InvGate ensures you never miss a license limit or renewal date. Tags help categorize and organize licenses automatically, while alerts notify your team about critical thresholds or potential compliance gaps.
    
6. CMDB integration for full context - By mapping licenses to your Configuration Management Database (CMDB), InvGate Asset Management helps you understand how software connects to hardware, users, and services – giving you the full context for troubleshooting, support, and license planning.
    
7. Actionable reports and insights - The platform includes customizable dashboards and reports that make it easy to monitor license status, usage trends, compliance risks, and potential savings. These insights support better decisions during renewals and audits.

6 Software License Management best practices

To make the most of your software investments and avoid compliance risks, it's important to approach Software License Management with the right practices in place. Here are six essential ones to follow.

1. Centralize your license data - Keep all license-related information (contracts, purchase records, expiration dates, terms, and assigned users) in one place. This makes tracking easier and reduces the risk of missing important details.
    
2. Track usage continuously - Monitor how often and by whom software is being used. This helps you detect underused licenses, identify potential savings, and ensure licenses are allocated where they’re needed most.
    
3. Start small and build on solid data - Don’t try to solve everything at once. Focus on one area (such as understanding your license inventory) and build from there with a clear plan and reliable data.
    
4. Plan for renewals and avoid surprises - Set up alerts or automated reminders for license expirations, renewals, and maintenance deadlines. Staying ahead of these dates prevents service interruptions and last-minute spending.
    
5. Buy only what you need, when you need it - Avoid over-licensing by reviewing actual usage data before making purchases. Don’t stock up on licenses for future growth unless there’s a clear, short-term need.
    
6. Audit and reassess regularly - Perform internal audits to ensure compliance and spot issues early. Use these checkpoints to optimize your license portfolio and renegotiate contracts if needed.

"Get good at one small thing. That way you can actually do the next one and build your foundation on solid data that’s trustworthy."

David Foxen, Lead consultant at SAM Beast Consulting Ltd.

Episode 64 of Ticket Volume - IT Podcast