What are Enterprise License Agreements (ELAs)?

SaaS solutions are prolific in the business world. Blissfully’s 2020 SaaS Trends Report found that app usage continued to rise 30% year over year in companies of all sizes from 2018 to 2019 — not to mention where we are today in 2021.

This explosion has made it difficult for companies to keep track of their various software licenses. Additionally, Blissfully’s report showed that SaaS waste was nearly doubling year over year. It’s easy for companies to end up with duplicate or orphaned apps. This waste is especially evident if there is no clear protocol for processes like procurement and employee on- and offboarding.

Could enterprise license agreements be one of the solutions your business needs to maximize profits and minimize SaaS waste?

What is an enterprise license agreement?

Enterprise license agreements (ELAs), also known as enterprise software licenses, are contracts between software vendors and customers. These agreements usually allow unlimited company-wide use at a discounted rate for a set period.

Some restrictions and limitations might apply, but an ELA can reduce time and labor spent on SaaS license management if you use a provider’s software products company-wide. Also, it may provide the best pricing for your licensing agreement needs.

SLA vs. ELA

According to Blissfully’s 2020 SaaS Trends Report, the average business used anywhere from 100 to almost 300 apps across the company. Understandably, keeping track of each software license agreement (SLA) can become cumbersome at that scale. However, poor tracking of changes and additional licenses can lead to SaaS waste, costly true-ups, and expensive fines.

Addressing SaaS waste is where enterprise license agreements come in. Instead of managing each software license independently, many software providers offer ELAs that cover subscriptions in a single deal. The volume and specifics of each ELA can vary greatly depending on your company’s needs, though there are some typical elements.

Period: Most ELAs span three to five years. However, many also include an out year (also known as a grey year). It refers to an additional discounted year at the end of the ELA contract. Most providers offer this year as an option. After that, you can sign a new ELA or revert to full-price for renewal and support.

License substitutions: Most ELAs allow license substitutions so you can have flexibility as your company’s needs change and grow. But be sure the agreement clearly outlines the terms for exchanges.

Usage rules and restrictions: The contract should outline guidelines for using the software, updates, and support. Plus, it usually includes pricing and the provider’s right to check for compliance.

What are the benefits of enterprise license agreements?

ELAs can save or cost you money, depending on how strategically you use them. Understanding your company’s needs and the terms of the ELA can help you navigate one successfully. Enterprise license agreements are not a one-size-fits-all solution, however. But if you anticipate your company’s continued growth, they could be a valuable asset worth exploring.

Reduced spend: Since you are effectively pre-buying software for all of your foreseeable needs, most vendors offer significant discounts for ELAs. However, keep in mind that you should have a good grasp of your software license management for ELAs to save you money. Otherwise, ELAs will only add to your company’s SaaS waste.

Simplified software licensing management: When done right, enterprise license agreements can help companies return to business instead of spending precious time on license management. They can help you consolidate multiple purchase and support contracts into one contract.

More accurate budgeting: With the continued rise of software use, licensing can become virtually impossible to manage manually as your company grows. And not using your software licenses is wasted spend. On the other hand, using your apps above and beyond the terms of service can result in expensive true-ups and unexpected fines. ELAs can eliminate these issues with bundled contracts that eliminate multiple payments, renewal dates, and license types.

Improved efficiency: Poor management of a la carte licensing can sometimes cause business delays when annual licenses have unknowingly expired. Thankfully, ELAs can provide a streamlined way to keep your business agile and able to pivot as needed at any time.

Enterprise license agreement best practices

While ELAs can help your company, they can also cause more harm than good if not executed wisely. Understandably, providers usually write contracts to protect themselves. Fortunately, there are steps you can take to protect your company’s assets, too. Here are some best practices to keep in mind to make sure an ELA works for you.

Clarify when deployment begins

Create a shared contractual definition of deployment. Does the license term begin as soon as you receive associated hardware, even before installation? Or does deployment begin once usage begins? Make sure you and the vendor are on the same page to avoid future conflict.

Have a consumption tracking process

Have a system for receiving regular consumption reports from the vendor. In addition, you will need a protocol for regularly disseminating this information to IT, procurement, and asset management. Software management often runs into issues because of a lack of cohesion among these teams. Enterprise license management is no different in this regard.

The IT team should be checking these reports for accuracy. End users with a first-person perspective must be tracking consumption even with an external software license manager. Team members will be able to provide valuable insights into how the setup is working for your organization.

Ensure you have a right to request audits

In enterprise license contracts, providers will ensure their right to onsite audits. Make sure you also have this prerogative. This safeguard will allow you the right to verify the vendor’s metrics on usage and deployment.

Make sure to outline substitution methodology and credits clearly

Find out what happens with software units you don’t deploy. Can they be converted into credits you can use on other offerings? Make sure to outline the specifics in your contract.

If you have had setbacks with true-ups and fines, an ELA can help by offering you the access you need at a significant discount. However, you should adjust the terms as soon as possible if your company is not even coming close to the ELA’s consumption limitations.

Other Considerations

Most importantly, make sure you enter an agreement that works for you and doesn’t contain burdensome limits. For example, suppose your company is growing, and management changes are likely. In that case, you’ll want to be sure there aren’t any clauses penalizing your organization’s development. ELAs should help your business operations become more effective, not stunt your flexibility. So work with the provider to develop the licensing program and pricing model that work for both parties.

Enterprise license agreements like Cisco’s True Forward reward your growth instead of penalizing it. If you have a good software license manager, your SaaS management can work hand in hand with your enterprise licenses. ELAs can help you spend less time on procurement, true-ups, and license renewals than traditional a la carte methods.

Enterprise license agreements can be valuable or detrimental depending on your company’s needs and your software stack’s visibility. They can be a great asset to companies that expect to grow during the contract. Still, they are not a good solution for everybody. Different areas of your organization may also benefit from alternative ELA structures.

ELAs are at least worth your careful consideration as you aim to create the most efficient systems for your company.

How Blissfully can help

With Blissfully, teams can easily track apps, people, and spend in one place. It helps manage key license management workflows, including employee on- and offboarding, team changes, vendor approvals, renewals, app usage, and more.

Also, Blissfully’s system of record provides consistency within ever-changing SaaS organizations and empowers simpler collaboration across stakeholders. For example, it allows teams to input new SaaS licenses or import existing ones. It also integrates with vendors, such as Salesforce and Zendesk, to sync key license and user metadata into the system. So when a license is up for renewal, or an employee is onboarded or offboarded, Blissfully notifies key stakeholders about required changes or approvals.

To learn more about how Blissfully can help you manage your software licenses and help you decide if an ELA is right for your company, request a demo.