A Step-by-Step Guide to Software License Optimization for Modern IT Teams

Unused and underutilized licenses are eating up your budget and exposing you to security risks, but you already know that.

Grip's 2025 SaaS Security Risks Report reveals that while there's been a 40% growth in SaaS portfolios in 2023, 91% AI tools and 85% SaaS apps are unknown or unmanaged. What's more, AI adoption is outpacing security governance by a 4:1 margin.

With your teams choosing their own SaaS tools, signing up for freemium plans, or using corporate cards, it's tough to keep tabs on who has access to what.

Spreadsheets may be convenient, but they aren't helping you manage 150+ SaaS tools across departments effectively.

You can't optimize what you can't see. What you need is a platform that gives you full visibility over license usage at scale. Which, in turn, gives you the control you need to recover costs and tighten up security.

In this article, we'll explain how you can implement scalable software license optimization techniques to eliminate wasted SaaS spend and recover budget.

We'll also demonstrate how to manage software licenses by complementing your identity provider (IdP) with a SaaS management platform like Stitchflow.

What is software license optimization?

Software license optimization (SLO) is the practice of managing software licenses such that a company reduces costs, uses its software resources efficiently, and maintains compliance.

It's done by tracking SaaS tool usage, identifying unused or extra licenses, reallocating licenses to active users, and ensuring compliance with licensing agreements. Thus, the goal is to maximize the value of software licenses while reducing the costs incurred.

Optimizing software licenses has several components:

1. Visibility and tracking: IT and security teams must have a clear view of which software licenses are being used, how often they're being used, and which ones are underutilized or unused.

2. License management: The number of licenses must be matched to actual usage to prevent over-licensing or under-licensing. The former bloats costs, whereas the latter poses compliance risks.

3. Reclamation: IT teams recover licenses that are no longer in use, such as when an employee leaves the company or a piece of software is no longer needed, to prevent unwanted renewal costs.

4. Cost control: Companies negotiate with vendors for better pricing based on actual software usage and also attempt to consolidate licenses, where applicable.

Approaches to track software licenses for optimization

You can discover active software licenses either using a cost-based or usage-based approach.

Why usage-based software license optimization is the better option

While expense sheets seem like a simple starting point to track software licenses, solely relying on them means you ignore actual software usage, particularly for freemium and on-prem tools.

Thus, a cost-focused approach fails to provide a clear view of which licenses are being actively utilized.

Underutilized or inactive software increases the risk of unpatched vulnerabilities, security breaches due to unrevoked access rights, and non-compliance with licensing agreements.

Here's how usage-based software license optimization goes beyond cost savings and security oversight:

1. Improves the employee experience

With optimized licenses, companies can remove unused or redundant software from the mix. Employees no longer have to navigate through unnecessary tools or systems, reducing confusion and increasing focus on what truly matters.

In addition, license reclamation and proper allocation during offboarding ensure new hires quickly get the right access to the tools they need without delays. This allows them to hit the ground running, improving their onboarding experience and reducing downtime.

2. Optimizes resource allocation

By reallocating unused licenses, companies can save on unnecessary spending, which can be reinvested into improving the tools employees use. This could mean upgrading to more advanced software or providing additional training to maximize the use of existing tools.

For instance, when a marketing employee transitions into a content strategist role, they need access to design tools like Adobe Creative Cloud, but no longer require the advanced analytics software they previously used.

3. Prevents software overprovisioning

Usage-based optimization prevents overprovisioning. You reassign licenses to only those who truly need them, moving other employees to free alternatives or limiting access to a basic version, reducing wasted costs.

For example, a company provides full Tableau licenses to all employees, but usage data shows that only the Data Science team uses advanced features, while the rest rely on basic reporting.

4. Tracks the lifecycle of SaaS tools

Usage-based optimization supports effective lifecycle management by tracking external users or former employees by preventing the risk of inactive user accounts.

For example, a consultant working on a marketing campaign may be granted access to Hootsuite. Once the project ends, the license should be reassigned or canceled to prevent continued access to proprietary company data.

5. Improves capacity planning

Data-driven insights into software usage help IT and security teams anticipate future needs, especially during renewal periods.

For example, if a design team starts using Sketch more frequently, you can proactively secure additional licenses before renewal, ensuring better planning and budgeting.

This approach prevents last-minute license shortages or over-purchasing, leading to more efficient software management.

5 manual methods for software license optimization

To track software license usage, you don't always need expensive tools. To begin with, you can manage software licenses by using some of the following methods:

1. Spreadsheets or databases

Some companies have a system where employees or department heads log their software usage details into a spreadsheet, such as which software they're using and how frequently. This is relatively easy to set up but requires ongoing effort to maintain. It's also prone to human error, including typos, duplicate records, and missed updates.

Moreover, as the company grows or the number of tools increases, keeping track of all this data in spreadsheets becomes overwhelming and leads to inaccurate or outdated information.

2. Survey teams to identify software utilization

You can identify underutilized tools or redundancies by asking department heads and individual users about their software usage. This approach is effective in companies with multiple departments using different tools, as it gathers insights from a variety of sources.

That said, surveying each department is time-consuming. Coordinating surveys, gathering responses, and ensuring accuracy requires significant effort. Employees may also forget to report all the tools they use or overlook those they use infrequently.

3. Usage metrics from admin consoles

Some software tools, particularly cloud-based ones, provide admin consoles with built-in usage metrics. These consoles show which features are being used, how often they're accessed, and which users are involved. Admins can pull this data to track usage trends and identify underutilized licenses.

However, this approach requires checking each software tool individually, and not all tools offer detailed usage reports. Also, it requires regular manual checks and is time-consuming when dealing with diverse sets of tools across different departments.

4. Periodic audits

During an audit, IT teams or department heads review software records, installation histories, and may even directly engage with employees to confirm which tools are still in use.

However, audits are time-consuming and resource-intensive, especially in large companies that require coordination between multiple departments. Moreover, they only provide a snapshot at the time they are conducted and need to be done regularly to ensure up-to-date information.

5. Built-in usage reports from IdPs

Many IdPs, like Okta or Azure AD, provide built-in usage reports that offer valuable data on user activity with software tools, helping you quickly identify whether employees are actively using the software they're licensed for.

However, this approach is limited to software tools that are integrated with the IdP. For instance, standalone SaaS platforms or on-premise software that doesn't authenticate through the IdP won't have usage data tracked.

Manual software license optimization methods are not sustainable in the long term

With manual methods of tracking software license usage, it's difficult to get a consolidated, real-time view of software usage across the entire organization, leading to data visibility problems.

Performing regular audits using spreadsheets or manual methods is time-consuming and resource-intensive. IT teams need to pull reports from various departments, coordinate with multiple stakeholders, and update information regularly to keep the data accurate. For mid-size companies, these audits become a significant drain on resources and reduce the time IT teams can dedicate to other critical projects.

Besides, manual methods are prone to human error. IT teams may make mistakes when inputting or updating data, leading to discrepancies in the software inventory.

These errors can go unnoticed, especially when spreadsheets are shared across teams or rely on individual updates. Even small mistakes can snowball into larger issues, such as paying for unused licenses or missing compliance requirements.

Finally, in many companies, SaaS purchasing decisions are decentralized, with individual departments or teams independently selecting and purchasing software.

While this provides flexibility, it increases the risk of shadow IT. This makes it nearly impossible to create a "single pane of glass" for software usage and spending, further complicating license optimization efforts.

How to build systems for sustainable software license optimization

While the IT team handles license management and ensures security, decentralized spending isn't inherently bad. But for this approach to be effective, software usage and license optimization must become a company-wide initiative.

Executives and department heads must recognize that SaaS management has a direct impact on the company's bottom line.

And not just through cost savings, but also by enhancing security and improving operational efficiency.

When all teams understand the importance of optimizing software usage, it's easier to gain buy-in and ensure alignment across departments.

To kickstart this shift, take the following steps to foster a collaborative approach for software license optimization:

1. Improve SaaS procurement workflows to support decentralized purchases

A defined SaaS procurement process enables employees to make software purchases independently while adhering to company policies and security protocols. This reduces the risk of unauthorized tools or violations slipping through the cracks.

With a structured procurement workflow, IT teams can establish granular controls and collaborate with key stakeholders, including finance, procurement, and legal departments, from the start.

This proactive collaboration helps avoid issues like unaccounted expenses or IT compliance breaches, fostering transparency throughout the organization.

Also, when SaaS activations are funneled through a standardized approval process, it becomes much easier to discover all the software being used, including those on the fringes that would not have been formally tracked.

2. Invest in real-time software license usage tracking tools

Manual tracking tools do not provide up-to-date usage data, whereas real-time license usage tracking via tools, such as Stitchflow, enables you to address issues as they arise.

For instance, when a marketing contractor finishes a project, they no longer need access to tools like Adobe Photoshop. Instead of waiting for the next audit, real-time tracking flags unused licenses, allowing you to revoke access immediately. This reduces license waste and eliminates unnecessary access to sensitive data.

Plus, real-time data establishes a baseline for typical software usage. If your customer support team uses Zendesk daily but accesses Tableau only occasionally, usage data enables you to reassign or scale down Tableau licenses, optimizing costs without waiting for audits.

Stitchflow connects to all your IdPs, company-wide and SaaS tools, and on-premise/internal tools

Stitchflow connects all your SaaS tools (including on-premise ones) to provide real-time usage patterns. You can take bulk actions immediately, whether it's reallocating licenses, renegotiating pricing, or adjusting plans as usage fluctuates.

3. Set standards for prioritization with real-time license usage data

By setting clear thresholds, you can better prioritize intervention efforts and minimize unnecessary disruptions. For example, setting a rule where accounts with 90 days of inactivity and admin access are flagged for review as high-risk users.

This prioritization, however, goes beyond just log-ins and log-outs. It extends to actual usage patterns, such as which features users engage with, how long they stay active, and when usage drops off.

Other software license usage data use cases are:

Session length and activity patterns: If a user has typically long sessions (e.g., 60+ minutes), but suddenly drops to five-minute sessions, it is a red flag that needs to be investigated. Setting thresholds, such as a 70% reduction in session length, helps you focus on the most significant changes rather than monitoring every small fluctuation.

Feature utilization drop: When features, such as dashboards or file sharing, see a decline in usage, the instance should be investigated. These shifts signal that users are either not adopting features or finding them irrelevant.

Activity decline trends: IT teams should also focus on activity trends, such as a 50% drop in team activity over two weeks. This indicates disengagement, dissatisfaction, or even a possible issue with the software, all of which need timely intervention.

A word of caution: you need to tailor these standards on a case-by-case basis, especially by interacting with teams to understand their usage patterns. For instance, a usage pattern shows a drop-off in engagement, but after speaking with the team, IT finds out that the drop-off is due to the need for additional training. This feedback leads to optimizations that wouldn't have been obvious from data alone.

4. Remediate license usage based on real-time data

With real-time software usage data, you can cancel unnecessary renewals, downgrade subscriptions, or reallocate licenses based on actual usage patterns.

However, prompt remediation requires that you notify users about changes to their access. Automated email sequences can be set up to inform users of license downgrades or reassignments, preventing confusion and frustration.

Tools like Stitchflow make this process efficient. IT teams can bulk-remediate licenses, adjusting access for multiple users at once. AI-driven chatbots directly interact with end users and gather information on their needs.

You also get integration with ticketing systems for seamless coordination across departments, ensuring all changes are logged and tracked for transparency.

5. Automate onboarding and offboarding workflows

Automation streamlines access control, allowing IT teams to grant new hires the necessary resources while revoking unused licenses.

Without automation, onboarding and offboarding can easily miss tools, leaving employees without the right access and ex-employees with lingering access to company data, which impacts efficiency and creates security risks.

Automating this process ensures that all tools, whether cloud-based or non-API, are properly managed, reducing both security risks and waste.

Smarter license optimization: visibility, security, and efficiency in one

Managing software licenses manually with spreadsheets and periodic audits is inefficient and leads to hidden costs and security risks. IT teams spend precious time reconciling data, chasing unused licenses, and handling policy enforcement, while employees face disruptions due to delayed access or unexpected deactivations.

Stitchflow eliminates these challenges by providing a centralized SaaS management platform that offers real-time license usage insights, automates access management, and ensures compliance.

Stitchflow continuously audits every app to identify and resolve orphaned, hidden, and unused accounts, helping companies eliminate security risks and save over 20% on SaaS spend.

Thus, by automating these tasks, the platform solves the critical "last mile" problem for IT, Security, and Finance teams. It expands visibility and control across the entire application portfolio, including manually managed, non-federated, and legacy tools that IdPs typically can't access.

AI-powered access reviews pinpoint which accounts need intervention, cutting down unnecessary noise while improving operational efficiency.

Getting started with Stitchflow is simple. Within 30 minutes, you can connect your key tools, analyze your current software environment, and benchmark usage against industry peers.

In addition, with a free pilot, you can identify and remediate inefficiencies, automate renewals and access reviews, and receive a business value report quantifying savings on licenses, IT time, and compliance improvements.

Book a demo today to see how Stitchflow helps your team optimize software license management with real-time data.