How Software Licensing Costs Are Eating Your Budget

Have you ever stumbled on a great airline deal only to find out there's an additional cost for checked luggage? Or signed up for a credit card offer with amazing perks, only to get stung by a higher-than-normal annual fee? You're not alone. It’s these experiences that remind us that if something sounds too good to be true, it probably is.

Companies in all industries have learned the same lesson when it comes to their legacy technology. With on-premises software, organizations tend to face hidden costs that go way beyond the initial investment. This includes time and money spent on maintenance, backups, and updates, as well as deploying patches—all of which can make a significant dent in your organization’s IT budget. In addition, buying and renewing licenses for your employees can become a big spending area, especially if you can’t easily audit who should and shouldn’t have a license within your organization. To minimize how much they spend on software, companies should consider modernizing their IT infrastructure by moving to the cloud.

Cloud-based applications simplify the approach to licensing, providing centralized portals that make it much easier for your IT team to have insight into who has a license and when. It also has the added benefit of freeing up your IT team from conducting updates, maintenance, and patching, allowing them to focus on driving strategic business initiatives forward.

What are the true costs of on-premises software licenses?

It’s no secret that on-prem, legacy technology has become burdensome to organizations. This dated and inflexible software presents a number of challenges maintaining, managing, and securing a company’s IT infrastructure—and that includes hidden costs that are hard to account for when budgeting for your IT team. These costs are manifested through practices like over-licensing and lack of compliance, both of which are likely to take place in environments that require manual oversight over an organization’s software licenses.


When IT teams don’t have a centralized view of the number of licenses they own and which ones are in use, they can fall subject to over-licensing. This tends to happen when there’s no clear process for transitioning licenses from someone who has left to the next new hire. Over-licensing is also a significant risk when organizations want to provide third-party vendors and partners with access to their systems and applications, but don’t have clear insight into which of these users are active at a given time.

Unused licenses create up to 38% of technology waste for companies that don’t have visibility into their software, making it a notable inefficiency when it comes to their IT budget. It’s also difficult to get a comprehensive view into how many licenses have been granted, and how much they’re costing the organization when different teams are managing software costs between employee and third-party access.


Just as a lack of visibility can cause over-licensing, it can also lead to under-licensing, putting organizations in a position where they can be penalized by software providers, databases, and more. In addition to that, changes in hardware specifications can make licenses that are tied to processor models and core counts easily fall out of compliance. Often, these discrepancies aren’t discovered until a provider conducts their own audit—when it’s too late to resolve them. Multiple fines can quickly rack up, and hiring professionals to audit and review your organization’s compliance also comes with a sizeable price tag. So, what can you do?

Reduce licensing costs by moving to the cloud

Enterprises need solutions that help them reduce licensing costs, meet their compliance needs, and address the expectations of their auditors. This means adopting a cloud-based IT model that offers more flexibility.

From a cost perspective, moving to the cloud means companies can pay for subscription-based models on a monthly or annual basis, with servers, networks, and software maintenance all included in the total price. This way, IT teams don’t have to waste time granting and reviewing licenses across the organization—and can instead focus on their core tasks.

Adopting a cloud-based IAM solution can also help companies gain visibility into license usage and allocation. With a single-pane view that comes with solutions like Okta’s Identity Cloud, IT can have centralized visibility across different user types and access requirements. This way, an IAM solution helps reduce licensing costs, while also supporting organizations with their compliance requirements—and helping them avoid hefty penalty fees from their providers.

It’s worth noting that moving to the cloud isn’t a transition that organizations can accomplish all at once. Throughout the move, it’s important to establish a robust process for reviewing licenses across any remaining on-prem technology. This helps you stay compliant by removing any unused licenses from your IT budget.

Address your hidden costs

Just as it’s important to check the fine print of any deal from budget airlines or credit cards, businesses need to identify the hidden costs in their technology infrastructure. By modernizing their IT and taking control of their identity management, businesses can establish a tighter grip on their software costs and simplify their approach to licensing.

For more information on how Okta can help your business reduce costs and step into the future, check out our Modernizing Enterprise IT: Motivators and Challenges infographic.