A SaaS license is an agreement between a user and a software provider. The agreement allows the user to access and use the provider’s software on a subscription basis, subject to specific terms and conditions.

Definition of SaaS Licensing

Types of SaaS Licenses

  • Per-User Licensing: Also known as per-seat licensing, this model involves a fixed cost per user. It's often tiered, ranging from a few users to enterprise-wide access.
  • Usage-Based Licensing: Also known as consumption-based licensing, this model ties costs to specific usage metrics, like transactions or data volume.

Main Components of SaaS License Agreement

  • Definitions: Clarifies key terms used in the agreement.
  • Grant of License: Specifies the nature of the license, including exclusivity and transferability.
  • Licensor Services: Outlines the data security commitments of the SaaS provider.
  • License Use Restrictions: Details permissible uses of the software.
  • Fees: Describes the payment structure, including subscription and implementation fees.
  • Term and Termination: Defines the contract duration and termination protocols.
  • Indemnification, Liability, and Arbitration: Covers legal responsibilities and dispute resolution.
  • Service-Level Agreement (SLA): Addresses software performance metrics and support terms.
It's worth noting that free Saas tools may lack a Service Level Agreement (SLA) unlike their paid counterparts. This could result in issues with uptime, performance standards, and timely support.

Importance of Managing SaaS Licenses

Managing SaaS licenses is becoming increasingly important as the SaaS market continues to grow. Gartner predicts that end-user spending for SaaS will surpass 243 million US dollars in 2024. 

Medium-sized companies, on average, use about 150 SaaS applications, and managing all of these tools can be overwhelming. Failure to manage them properly can lead to potential risks such as Shadow IT, unwanted renewals, redundant apps, security and compliance concerns, and unused or underused apps.

  • Shadow IT refers to unauthorized SaaS applications that can pose risks to data security, waste money and resources, and create unknown risks. Without proper SaaS License Management, auto-renewals can result in unwanted renewals without discounts or optimizing the size and type of the subscription. Additionally, unused apps may go unnoticed, and the organization may continue to pay for a SaaS tool that is not even being used.
  • A SaaS License Management process is not just about cost, size, and coverage; it is mainly about examining the security position of the SaaS app. To keep up with company and industry standards and requirements for security and compliance, SaaS License Management is essential. Resmo helps companies gain insights into SaaS apps, detect the app, categorize it, and provide insights regarding the SaaS tool's security controls.
  • Without any data regarding the usage of apps within the company, same-functioned apps may be purchased, or an app that is not being used may be renewed. Having an approach regarding the SaaS adoption within the employees can help in purchasing decisions.

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