What Is A SaaS License? What You Need To Know In 2021

The SaaS business model is more popular than ever – the market is growing at 30% per year, with SaaS revenue expected to reach $143 billion in 2020.

Companies worldwide are using more SaaS tools than ever before.

According to the 2020 Blissfully SaaS report, the average enterprise uses over 288 SaaS applications company-wide.

Unfortunately, this also creates new problems.

When an organization uses numerous SaaS tools, they need to constantly manage their software inventory. Are all the tools they’ve purchased being used? Are there duplicate tools? Are there opportunities to cut costs?

To find out, companies have to constantly manage their SaaS licenses. In this article, we’re going to teach you how you can do that.

Here’s what we’re going to cover:

  • What is a SaaS License?
  • The Importance of SaaS License Management
  • How to Take Control of Your Software with a SaaS Management Tool

What Is a SaaS License?

The software-as-a-service (SaaS) model is a business model for software licensing. Before the rise of SaaS, businesses used to buy software for a one-time fee, install it on their network, and own it forever.

A SaaS license, on the other hand, means “renting” the software and paying a monthly fee to maintain access to the tool.

There are numerous benefits that come with the SaaS model, including:

  • Constant updates, support, and new features without your IT team having to implement it on your own systems.
  • On-the-go access: your employees can use the SaaS tools from just about any device.
  • You don’t need to have your own servers to host the SaaS, or an IT team to maintain it.

There is, however, a big downside to the SaaS model. Over time, companies end up accumulating a ton of SaaS tools in their software inventory.

Before you know it, you’ll realize you don’t even know which tools you’re still paying for…

The Importance of SaaS License Management

To get the most out of your SaaS tools, it’s very important to constantly be managing and keeping track of your active SaaS licenses (also known as the SaaS license management process).

Otherwise, you’re opening yourself up to tons of potential risks, such as:

#1. Duplicate Apps

In an average company, many different employees across departments and functions have the authority to purchase SaaS tools.

This eventually leads to numerous duplicate applications – i.e. different SaaS tools bought for the exact same use-case.

For example, a PR team could be using Trello for project management, while the digital marketing team could be using Asana.

To lower your expenses, it makes sense to track cases like this and ensure that you’re not using duplicate apps.

#2. Shadow IT

Shadow IT is a term that refers to the purchasing and use of IT resources without explicit approval from the IT department.

Usually, this occurs in companies that don’t have a strict SaaS vendor approval process set up.

In practice, it works like this:

  1. An employee finds a tool they think is more efficient than the software they’re currently using.
  2. The employee purchases the new software without review or approval from the IT department.
  3. More employees use and like the new software, and so they buy more licenses.

In the end, the company spends a lot of money on two different tools because the IT department wasn’t aware of the new SaaS license purchases.

Shadow IT can also lead to:

#3. Security & Compliance Issues

Using SaaS tools that aren’t secure can open companies up to a slew of security vulnerabilities.

Whenever a purchasing request goes through the IT department, it’s researched by the team. IT ensures that the vendor company has a good reputation and that the tools being purchased are both secure and compliant with relevant regulations.

Let’s say, for example, you’re buying a SaaS tool to manage your company finances. It’s very important for the tool to be secure and protected from any potential data leaks.

Acquiring SaaS tools without involving the IT department, however, bypasses this step, and can result in security or legal liabilities.

#4. Unused SaaS Licenses

Oftentimes, companies end up paying for SaaS licenses they never use.

For example, you can buy a new tool, but you realize that it’s not user-friendly, and your team isn’t too keen on using it.

Or maybe, you no longer need the SaaS you purchased, but you forgot to cancel the license.

Whatever the case is, given enough time, your company ends up with several SaaS licenses in their software inventory that they’re paying for but aren’t using.

Take Control Of Your Software with a SaaS Management Tool

Without the right tool, managing SaaS licenses isn’t easy. Many companies use Excel for this, but it’s an incomplete, inefficient solution that isn’t scalable:

  • Manually inputing all purchased tools into the sheet leaves it open to human errors.
  • There’s no ability to track which tools are actually being used and which ones have been abandoned.
  • The sheet ends up extremely clogged.
  • The sheet doesn’t work for vendor approvals.

Want a solution that actually works? You’ll need to use a SaaS management tool like Blissfully.

Blissfully - SaaS License Management

SaaS management software allows you to manage your SaaS licenses with ease:

  • Automatic SaaS discovery. The moment you sign up on Blissfully, the software will uncover all the SaaS tools your organization is using, and automatically keep it updated. You won’t have to manually add new SaaS tools.
  • All your SaaS in one place. You’ll get a single, top-down view of all your SaaS tools, licenses, payment dates, and more.
  • Discover unused apps. See which of your SaaS apps are actually being used (and unsubscribe from the ones that aren’t).
  • Manage your approvals & vendors. Approve/disapprove SaaS acquisition requests from a single dashboard.
  • Create transparency. Know who’s in charge of SaaS acquisition in any given department or team.

Other than SaaS license management, Blissfully also allows you to automate your employee onboarding and offboarding workflows, optimize your SaaS spending, and more.

Want to see Blissfully in action? Schedule a demo now.

SaaS License FAQ

Still have questions on how SaaS licenses work? We’ll answer them here.

#1. What should be in a SaaS contract?

  1. Contract start date.
  2. Contract end date.
  3. Notification length. How many days in advance do you need to cancel your subscription before the license is automatically renewed.
  4. Quantity of licenses bought, and type of licenses.
  5. The total value of the contract. How much are you paying for the SaaS?
  6. Billing frequency. How often will you be charged?
  7. What you get for the price. Features, limitations of the plan, etc.

#2. What are examples of a SaaS?

Some SaaS examples are:

  • Netflix
  • Hubspot
  • MailChimp
  • Salesforce

#3. How does the SaaS model work?

SaaS software is hosted centrally on a cloud server and sold to customers on a subscription basis, as opposed to buying it for a one-time fee.