Uncovering Hidden Costs: How to Manage Licensing Bloat in Your Organization

Submitted by peter on Tue, 09/10/2024 - 12:00

Companies often overlook the silent killer of their IT budgets—licensing bloat. I'm referring to the unnecessary costs while your software and SaaS purchases go unchecked, which drain financial resources and create significant security risks. As your trusted IT partner, the Facet team and I are here to shed light on this persistent issue and guide you through effective strategies to manage and mitigate licensing bloat.

The Silent Cost Center

Licensing bloat emerges from a lack of understanding and oversight in managing software licenses. A common example are Microsoft 365 licenses, which offer various licenses that quickly become a spider’s web of features and functionality, especially if you aren’t using one of their catch-all “E” class licenses. Companies often purchase a minimum license and add on features without fully understanding their options, leading to mismatched and redundant subscriptions. Even more of a risk is that users also cycle out of these licenses, but the counts are never updated, so you pay twice for the same user.

The Microsoft 365 Conundrum

  • Multiple Licensing Models: Microsoft 365 offers several licensing options, such as monthly and yearly commitments. Often, companies mix and match these without a cohesive strategy, resulting in inefficiencies and licenses you must continue to pay for.
  • Inconsistent Agreement Duration: For instance, you cannot have half of your division on a month-to-month E5 license while the other half uses an annual E5. This requires addressing your overall license growth and consistency to take advantage of reduced yearly pricing or staying with month-to-month agreements to be more flexible and reduce risk in the case of a large reduction in force.

Strategic Deployment

Despite these challenges, a bespoke solution is possible. For example, you can deploy month-to-month E5 licenses across one division and annual Power BI (PBI) licenses across another, optimizing both cost and functionality.

Lifecycle Management: The Key to Efficiency

The most overlooked cause of bloat is lifecycle management. Many companies empower staff to add or remove users, but for many services that doesn’t remove the license. You may believe you are off-boarding users when, in reality, their cost hangs around for months or years. There are ways to combat this with standard procedures and tooling, but it all comes down to having the right team in place to understand how to set up your lifecycle management. 

Effective Off-Boarding Strategies

  • Identity Management Systems: Tools like Okta and Jumpcloud can manage your staff as well as your licensing. When you onboard or offboard a user, in some cases, you can also provision licensing.
  • Off-Platform Data Backup: Utilize services like Backupify and Dropsuite to back up your user data. These services are an affordable way to provide searchable, editable, and fully recoverable data without needing to keep the original user and license.
  • Robotic Process Automation: Working through a platform like PowerAutomate, Zapier, or Make to connect to available services and address provisioning can be a low-cost way to level-up your lifecycle management.

Real-World Examples

Consider a recent instance where a business had an excess of Microsoft 365 accounts. Staff kept these accounts open to maintain mail forwarding rules and use them as distribution lists. This practice resulted in a significant amount of spam being forwarded to other users. By fixing the routing rules and cleaning up the system, the company saved a substantial amount of money annually, at scale.

The Over Licensing Trap

Another issue we frequently see is over licensing — a company buys the same license for every user without the need for all the features of that license. Companies often buy the same licenses out of habit, without reassessing actual needs.  A user might only need email access (E1 @ $8.00/mo), but the company buys a license that covers everything from endpoint security to phone service (E5 @ $54.75/mo).

Optimizing License Purchases

  • Assess Actual Needs: Regularly review the specific needs of each user class within your company. Pay special attention to contractors or others in your BYOD plan or that are out at satellite locations. Tailoring license purchases to actual requirements will significantly reduce costs.
  • Implementing Review Processes: Establish a routine review process to ensure that licenses align with current user needs and business objectives. Shifting licensing accordingly frees up higher tier licenses for users who derive more value out of the features and keeps your finance team off your back.

Implementing an Effective License Management Process

To combat licensing bloat, it’s essential to establish a robust process for managing software licenses. Here’s how to get started:

Step-by-Step Guide

  1. Define Your Purchasing Procedure: Clearly outline how software purchases are made and who is responsible for them. Make sure that there is someone available to the team who can become an expert in the vendor licensing schemes for your business. This can be another team member, or your managed service provider.
  2. Regular License Reviews: Schedule periodic reviews of all software licenses to identify and eliminate redundancies. You can even automate license reviews with the right tools.
  3. Lifecycle Management Tools: Ensure your lifecycle management tool (like Okta or JumpCloud) is properly configured to match headcount with license count.
  4. Assign a Keeper: Designate a specific individual or team responsible for maintaining accurate licensing contract terms and records.

What Facet Can Do for You

At Facet, we specialize in conducting thorough license reviews to identify and eliminate bloat. We work methodically with your HR and internal IT teams to ensure that all licenses are accounted for and optimized for cost and efficiency. We even build review workflows so that you can rest easier knowing you aren’t throwing money out the window.

Actionable Steps to Take Now

  • Conduct a License Audit: Start by auditing your current software licenses to identify any redundancies.
  • Evaluate Off-Boarding Processes: Review and improve your off-boarding processes to ensure that licenses are not being wasted on inactive accounts.
  • Engage with Facet: Let us help you streamline your license management and reduce unnecessary costs.

Licensing bloat is a hidden but significant cost for many organizations. By understanding the root causes and implementing effective management strategies, you can not only save money but also enhance your team’s capabilities and free up budget for improvements. At Facet, we are committed to helping you navigate these challenges with expert guidance and tailored solutions.

Reach out to Facet today for a comprehensive license audit and discover how much you can save by eliminating licensing bloat.

By following these guidelines, you can take control of your software licensing, reduce costs, and improve your overall IT efficiency. Share this article with your network to spread awareness about the importance of managing licensing bloat. Together, we can create a more efficient and secure digital landscape.

 

References

Understanding Licensing Bloat: The Silent Cost Center

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The Microsoft 365 Conundrum

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Strategic Deployment

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Lifecycle Management: The Key to Efficiency

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The Habitual Purchase Trap

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Implementing an Effective License Management Process

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