Software License: How to manage your expenses

Software License Expenses: How to Reduce Costs and Strengthen IT Governance

According to data from statist, the enterprise software market has been growing rapidly in recent years. In 2022, global spending on enterprise software reached about 672 billion dollars, representing a growth of 11% compared to the previous year.

Given this scenario, the monitoring of software signatures becomes essential to reduce costs, avoid waste and maintain the company's financial health.

What are software license expenses?

At software licenses are contractual documents that determine how a program can be used — whether it is public domain, protected by copyright or based on open source.

Generally speaking, a license defines:

– Usage rights (who can use it and how);

– Rules for copies and modifications of the code;

– Update policies and technical support;

– Penalties in case of non-compliance.

Therefore, understanding license types and their financial impacts is essential for efficient IT cost management.

Types of software licenses and their financial impact

The way in which each license works varies according to the category in which it belongs. Check out the main ones:

1. Self funding: Software developed by the company itself. The organization owns the program and can use it freely. When software is shared between companies, the co-sourcing license applies.
   
2. Perpetual Acquisition: It works like purchasing the program. After purchasing, the user can use it for life, but without the right to updates or maintenance.
   
3. Use license: allows you to use the program on just one machine, with updates included. However, it requires payment of administrative fees and does not include maintenance.
   
4. ASP: It works like software rental. The company pays monthly to use the program, which is not hosted on its servers.
   
5. SaaS: Similar to ASP, but the software is stored in the cloud and does not require installation. Payment varies depending on the number of users.
   
6. Open Source: The source code is open, allowing the user to make modifications to adapt the program. However, there are limits that differentiate it from free software.
   
7. Free software: It offers the user complete freedom to copy, distribute, and modify the program's source code. However, this does not mean the software is free.
   
8. 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.

To better understand how these models impact your company's costs, also see our content on financial management in IT.

How to classify leave expenses

Expenses can be classified as currents or of capital, according to its impact on the company's assets:

Current Expenses

• Temporary licenses, subscriptions and leases;

• Classified in element 3.3.XX.40 (software rental).

Capital Expenditure

• Software development that integrates intangible assets;

• Classified in element 4.4.XX.40.

This distinction is essential for the business accounting, impacting financial reporting and investment strategies.

How to account for software subscriptions

Accounting varies depending on the model purchased:

• Software subscriptions → registered as current expenditure (diminutive asset variation).

• Development of own software → registered as intangible asset, as it contributes to capital formation.

Tip: the use of financial management tools facilitates the automation of these releases and ensures greater control.

4 practical tips to optimize costs

What is the risk of using unlicensed software?

The use of pirated software can have serious consequences:

• Vulnerability to attacks and data theft (phishing and malware);

• Technical instabilities due to lack of support;

• Loss of company credibility;

• Fines and legal penalties.

Therefore, investing in official licenses is not only a matter of security, but also of business strategy.

License management as a pillar of IT Governance

THE IT Governance requires alignment between technology and corporate strategy. In this context, license control:

• Avoid non-compliance and fines;

• Guarantees operational continuity;

• It favors the data-driven decision making;

• Supports the reducing IT costs and risks.

Governance References: ITIL, COBIT and ISO in License Control

Several frameworks reinforce the importance of license management:

• COBIT: focuses on control, optimization and value of IT investments;

• ITIL: guides asset and configuration management (ITAM/CMDB);

• ISO/IEC 38500: defines principles for ethical and responsible IT governance.

Conclusion 

Incorporating these frameworks into your company’s routine is a way to ensure not only compliance, but also maturity in the use of digital resources. And the good news is that this starts with simple steps, such as mapping and periodically reviewing your existing license fleet.

Do you want to understand how to optimize software license management and strengthen IT Governance in your company? Talk to one of our experts now and discover how 4MATT can help you reduce costs, gain visibility and ensure compliance.