According to the statist With the growth of the enterprise software market in recent years, by 2022 IT spending on enterprise software is expected to reach around $672 billion worldwide, an increase of 11% over the previous year.
With all this growth, it is essential to monitor software signatures in order to reduce costs and not impact your company's budget so much.
Software License
O licensing is a contractual document used by developers of digital programs. It is used to define if the application is in the public domain or if it is blocked by copyright, in addition to determining how the source code can be used.
Despite the various types of software licenses, the principle is similar: licensing grants or limits the right to use a certain program to the end consumer, which can be an organization, a government entity, or even a person who will use it at home.
The rules are established in the application contract, defining how copies and modifications to the program code will be treated, in addition to possible penalties in case of non-compliance with the aforementioned terms.
The licenses still serve to outline user support, deal with update policies and the list of services provided.
What types of software licenses are available?
The way in which each license works varies according to the category in which it belongs. Check out the main ones:
- Self funding: It is the software license developed by the company that will use it. In this way, the organization owns the software, being able to use the program in the way that best suits it. When the software is developed and used by more than one company, the type of license applied is co-sourcing
- Perpetual Acquisition: Works like a program purchase. This is because, after acquiring it, the user has the right to use it for life. However, the option does not include program updates and maintenance.
- Use license: Allows the use of the program on only one machine, with updates included. This type of software license, however, provides for the payment of administrative fees and does not include maintenance.
- ASP: The acronym refers to the English term Application Service Provider. The option works like a software lease, in which the company pays a monthly fee to use the software, which is not hosted on its machines and/or servers.
- SaaS: The acronym refers to Software As A Service, or Program as a Service, in Portuguese. SaaS works similarly to ASP, but no installation is performed – the software is stored in a cloud. In addition, payment is made according to the number of users of the program.
- Open Source: Since the code is open, the user can modify it so that the program fits his needs. However, there are limits and restrictions – what differentiates the option from free software
- Free software: It offers the user complete freedom to copy, distribute and modify the program's source code. However, this does not mean that the software is free.
- Freeware: It can be used and distributed free of charge, but it is not necessarily open source for customization.
It is also worth remembering that there is a trend towards new forms of software licensing. As a sales strategy in the era of high-end computing, they must be increasingly adjustable and customizable for each customer.
How to classify software subscription expenses?
The acquisition of software started to be classified in element 40 – Information and Communication Technology Services – Legal Entities”. The new classification comprises the provision of services by legal entities to Public Administration bodies and entities, related to Information and Communication Technology - ICT, not classified under other expenditure elements.
Software can be classified as current expenses or as capital expenses. In the first case, when the expense not contribute, directly, for the formation or acquisition of a capital asset, such as software leasing, as it is a current expense.
when the expense contribute, directly, for the formation or acquisition of a capital asset, such as the development of software that will be part of the intangible asset, the expense must be classified as an expense as a capital expense, given that it represents an investment.
In this way, we will have the possible budget classifications according to the nature of the expenditure.
3.3.XX.40 in the case of software leasing expenses (Current Expenses).
4.4.XX.40 when it comes to contracting a company for the development of software that will be part of the fixed assets (Capital expense).
How to count software subscription?
Accounting varies depending on whether it is a software subscription or the settlement of the expense of software development.
This is because the software developed will represent an increase in intangible assets, being an investment that directly contributes to the formation of capital goods.
In the case of software subscription, the equity effect is diminutive, since the software signature is a service expense that does not directly increase equity.
Thus, the software subscription, which is a current expense, must be accounted for as follows:
In active:
D - asset / diminutive equity variation / services / leases
On liabilities:
C – short-term liabilities / suppliers and accounts payable
How to optimize the financial management of software subscription expenses in practice?
the management of IT costs presents major challenges, such as the dispersion of software subscriptions by departments and the difficulty in prove the return on IT.
Here are some tips to optimize the financial management of software subscriptions and other IT management expenses.
1. Take a software subscription inventory
O active license inventory will allow identify possible idleness and signing of software that is no longer used.
With this, there is the possibility of IT cost reduction without losing in quality.
In this inventory, also consider details about the software subscription, such as purpose, resources, expiration date and other relevant data to avoid financial waste.
2. Adopt cost centers
cost center it is a form of internal division that creates independent units in relation to the calculation of expenses and income. This division associates costs and payments to each of the company's projects, departments, or company branches.
In the financial management of software subscription, it is interesting consider company departments or projects as cost centers.
Thus, it is possible to have greater transparency of software subscription costs and other expenses depending on the department or project.
Spending transparency is essential to greater financial control and resource optimization.
3. Use a financial management tool
The use of a financial management tool allows automation of tasks, greater financial control and transparency in IT costs. It also covers dashboards and management reports on expenses.
When managing software subscriptions and other IT expenses, it is important to have a tool that already allocates expenses by cost centers.
Thus, the survey of IT costs and indicators is more accurate and time is gained to carry out more in-depth analyzes in financial management.
4. Use corporate card for payments
The use of corporate card brings several advantages to financial management, not just subscription software.
The prepaid PJ card, for example, allows schedule recurring software subscription payments, in addition to counting cost cap function.
It is a means of corporate payment interesting for financial management by cost center as indicated. Some of the benefits are:
- Facilitates the division of expenses by cost centers, making it possible to use a prepaid card for each cost center (department or project) with a balance referring to the pre-approved budget;
- Promotes greater cost control with the centralization of software subscription expenses and other department/project expenses in the same invoice;
- Greater control over budgeted and realized costs across departments and projects.
With the adoption of a prepaid PJ card per department, for example, much easier to identify the origin of expenses in real time – minimizing phantom expenses common when there is the same corporate card for several departments.
As it also works as a spending cap, a prepaid PJ card also avoid budget overruns.
When the prepaid PJ card is integrated into the financial management platform, the benefits are even greater.
In that case, the Expense reconciliation is automatic. That is, when an expense is made on the prepaid PJ card, it is automatically assigned to the respective cost center in the financial management platform.
As expenses are automatically assigned to your cost center, the month closing of finance is also facilitated.
This payment method also improves department autonomy, that have greater freedom to manage your available budget, reducing finance approval requests for each investment/payment.
Thus, expense management and accountability, not only signing software, it becomes much more practical – with saving time for finance and other departments. To better understand how prepaid cards work, access the guide: all about prepaid card.
What is the risk of using unlicensed software?
Giving up on contracting software or “cheating” the contract by downloading the application illegally can be much more expensive. To begin, user data becomes vulnerable, especially on account of the phishing (data theft common in pirated software).
With this security hole, your sensitive information can be accessed by malicious users, facilitating criminal practices. Exposure to viruses and malware is in the package, which can cause irreparable damage to your information and cause serious damage.
Instabilities are another problem with pirated programs. They are made even more harmful by the lack of technical support, which is a benefit that only regularized users can enjoy.
In addition to exposure to these numerous risks, the company's credibility is compromised. Your processes may suffer damage and delays that will harm the relationship with your consumer.
About the software license
A software license, or computer program license, is a definition of authorized (or prohibited) actions, within the scope of a software programmer's right. computer software granted (or imposed) on the user of this software. User means any legal entity, companies or an “end (domestic) user”, from which the term end user license agreement originates.
When a license adds restrictions in addition to those existing in copyright, the user normally has to accept that these restrictions are imposed in order to be able to legally use the software, this being one of the differences between a free software license and a non-free software license: free software licenses add rights to those already granted by copyright, leaving the only rules they impose to the act of redistribution.
In general, the user of a software needs a license that can be paid or not, temporary or not, to use certain software. In the case of commercial and non-free software, the license is only granted to users who pay for the use of the software. It is a form of product authenticity protection and the use of means to circumvent a software license can constitute an illegal act.
temporary licenses are those in which the computer program will operate for a specific time, and perpetual use licenses are licenses without restriction of use with respect to time. This type of license is more recent and works linked to the operating system that always has the date automatically updated. There are some licenses for the amount of use of a certain software, which for example performs specific calculations for a certain activity. The quantity license can limit the number of times the computer program will run. If the specified value of the license is exceeded, the program blocks for new uses. The cost of this type of license may be lower due to usage restrictions.
With the increase in internet speed and the computers and game consoles mostly connected to the internet, the licenses became virtual, on servers of companies providing licenses. Many computer programs will not run unless they are connected to the internet to obtain authorization or license to run. This type of license made it very difficult to use pirated programs, and facilitated access control by the software provider, ensuring that most users are duly authorized people, that is, with a license to use the software.
At network licenses, that is, through the internet and linked to the software provider's server and new software versions make perpetual use licenses practically discontinued. Annual licenses are increasingly becoming a trend, leading users and companies to continually pay for the use of a certain computer program. This is even more common in the case of computer programs that are part of the business of a particular company, such as 3d modeling linked to the database. Through this type of computer program license it is possible to monitor in real time the users who are using the program.
Key-type licenses have not fallen into disuse and are widely used to install the program on the computer. They continue to be used to increase the security of the software license system, to try to prevent unauthorized people from using a certain license. Although the cost of a software license is often considered high, it is the main source of income for software development companies. One of the ways to reduce the cost of licenses is through competition between computer programs. One of the main barriers of this competition is that the files generated by a given software are rarely opened in competing software, and when conversion is possible, it is not perfect. It is even possible to verify this occurrence within the same software when the version is changed. Usually the older version is opened by the newer version, but the opposite does not happen, requiring the user to always have the updated version of the product. In this way, perpetual type licenses are less and less interesting, as they are limited to the files generated in the version of the time, for example, a software version 2013 only opens files from 2013 and from previous years and the license does not allow updating of the software to the current version.
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