7 Types of Software Licenses and Tips for Reducing License Costs

Today, most companies utilize various software to operate their businesses, maximizing productivity and efficiency. However, using software comes with inherent costs, and improper license management can lead to unnecessary expenses. A significant portion of a company's IT budget is often consumed by software license-related costs, making effective management and optimization crucial for cost savings.

In this article, we will explore the different types of software licenses and share tips on how to efficiently reduce license costs.

Source: Freepik

1. The Necessity of IT Cost Management

Source: Freepik

Corporate IT expenditures span various areas, including software licenses, cloud services, network maintenance, and hardware management. Maintaining unused software licenses, subscribing to duplicate services, and excessive cloud resource usage can waste the company's budget. This can ultimately lead to financial pressure, making IT cost management essential.

Systematic IT cost management helps minimize unnecessary expenditures and allocate resources efficiently. For instance, monitoring cloud service usage in real-time allows for resource adjustments as needed, and streamlining unused software can lead to significant cost savings. Optimized IT asset management enhances the financial efficiency of a company, ensuring the continuity of business operations and positively impacting overall corporate performance in the long run.

2. What is Software License?

Source: Freepik

A software license is a contract that grants the right to use specific software. It does not involve owning the software product itself but rather obtaining the permission to use it under certain conditions. License agreements include various terms such as scope of use, duration, number of users, and number of devices, all of which must be adhered to in order to use the software legally. These licenses are legal contracts between the user and the software provider, serving to prevent unauthorized use and protect the intellectual property rights of software developers.

3. 7 Types of Software Licenses

Source: Freepik

① Perpetual License

A perpetual license allows the software to be purchased outright for indefinite use. Once purchased, it can be used continuously without additional usage fees, although maintenance and upgrades may incur separate costs.

👍: Potential for long-term cost savings and continuous usage
👎: Initial costs can be high, and upgrading to the latest version may require additional fees

② Subscription License

A subscription license involves paying a fee to use the software for a specified period (monthly, annually, etc.). This model is primarily used in cloud-based software and SaaS (Software as a Service) applications.

👍: Lower initial costs and automatic access to the latest versions
👎: Can be more expensive than a perpetual license in the long run

③ User License

A user license is granted based on the number of users allowed to use the software. One person can use the software on multiple devices, but the number of users may be limited.

👍: Cost-effective as it allows management of usage per person
👎: Additional costs may arise with an increase in the number of users

④ Device License

A device license permits the installation and use of the software on a specific device. Multiple users can use the software on one device, but the number of devices is restricted.

👍: Multiple users can access the software on the same device
👎: Additional licenses may be needed as the number of devices increases

⑤ Site License

A site license allows multiple users and devices to use the software within a specific physical location (site). It is commonly used by organizations such as schools, businesses, and research institutions, allowing large groups to utilize the software efficiently without limits on the number of users or devices.

👍: A site license allows multiple users to use the software within a single location, making it very advantageous for many people to use it simultaneously in one place.
👎: A site license is tied to a physical location, which can impose restrictions if users attempt to use the software outside of that site.

⑥ Volume License

A volume license provides licenses through bulk purchasing, typically used by businesses that buy multiple licenses at once. Discounts may be available based on the number of licenses purchased.

👍: Can offer licenses at a lower cost for large user bases
👎: There's a risk of purchasing more licenses than needed

⑦ Open Source License

An open source license allows the source code of the software to be publicly available, enabling anyone to use it freely. Users can modify and distribute the software, and commercial use is often permitted.

👍: Free to use with the ability to modify and distribute freely
👎: Must comply with licensing terms when used commercially

4. Tips for Reducing Software License Costs

Source: Freepik

Effective license management is a crucial factor in reducing IT costs and using resources efficiently. Below are specific methods to help lower license expenses.

1) License Review

It’s important to periodically review the current status of licenses related to the software used by the company. This process helps identify duplicate licenses or software that is no longer in use, allowing for the removal of unnecessary expenses. Additionally, adjusting the number of users or devices to maintain only the necessary licenses is a key strategy. This approach enables efficient allocation of IT resources and helps prevent budget waste.

2) Optimizing Subscription Licenses

For subscription-based software, analyze usage patterns to switch from costly plans with unnecessary features to more affordable options. It’s also important to disable automatic renewals and reassess software usage at each renewal. By doing this, you can select plans that only include essential features or cancel subscriptions for unused software, thereby reducing costs. For software intended for long-term use, consider switching to an annual subscription to receive additional discounts.

3) License Management Automation Tools

Software license management automation tools significantly assist companies in efficiently managing their software assets. These tools allow for real-time monitoring of software usage and help identify unused licenses. Automation tools provide renewal or expiration notifications, enabling timely adjustments or removals of licenses. This reduces internal manual management costs and prevents unnecessary expenditures due to inefficient license usage.

4) Using Cloud-Based Software

For companies using on-premises software, transitioning to cloud-based software is an effective way to reduce license costs. Cloud software typically has lower initial installation costs and reduces hardware management and maintenance expenses, making it particularly beneficial for small and medium-sized enterprises. Cloud software operates on a pay-as-you-go model, allowing resources to be scaled up or down as needed. This flexibility helps alleviate the burden of IT infrastructure on companies and maximizes operational efficiency.

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5. Reducing Cloud Storage Costs : Check Out Rakuten Drive!

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👉 Check Rakuten Drive Pricing Plans

Rakuten Drive offers custom pricing plans tailored to fit the business environment of companies, helping to avoid wasting unnecessary storage capacity. This allows for more efficient storage management at a lower cost compared to other cloud storage services that provide a single plan for all employees. Additionally, companies can flexibly adjust their services based on usage, which can greatly assist in long-term cost savings and management.

So far, we’ve explored various types of software licenses and tips for reducing costs. Utilizing cloud services can be an effective way to lower hardware installation and maintenance expenses, thus reducing the overall software purchasing costs for companies. Why not consider Rakuten Drive, which offers pricing plans that perfectly fit your business situation, to efficiently reduce file storage costs?

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