The hidden licensing cost: unused licenses aren't (just) about inactivity
Most businesses know they are paying for more SaaS licences than they actually use. Yet, the costs continue to grow year on year.
Why does “license waste” occur in practice?
Unused licences aren't just about users who never log in. Licence wastage typically arises at the intersection of complexity, lack of insight and manual processes.
In theory, license management is simple: buy licenses, assign them, remove them when the need disappears. In practice, many businesses see something quite different, particularly because:
- Product catalogues are complex
Suppliers like Microsoft and Adobe offer a large number of products, SKUs, and bundled solutions that are constantly changing. This makes it demanding to understand what you are actually paying for – and what overlaps.
- Organisations are in constant change
New employees, role changes, leaves of absence and terminations happen continuously. In larger organisations, this is constant movement, not isolated events. - The data is spread out
Licensing information is often held by resellers, while user and access data is in Microsoft Entra ID (Azure AD), and cost data in financial systems. Few have a full overview across these. - Suppliers have few incentives to help
It is worth being honest: software vendors have little vested interest in helping customers reduce their license consumption.
Inactivity is just the tip of the iceberg
Many start a license review with one question: Who hasn't logged in?
This is an important signal, but it is far from sufficient in complex businesses.
Licence revocation also occurs when:
- Users have a licence but do not need the functionality.
- Roles change, but access does not keep up
- Licenses are issued “as a precaution.”
- Offboarded users are removed from systems, but the license volume is not reduced.
To identify real overconsumption, several data types must be combined:
- Purchased vs. Assigned Licence
- Logins and activity
- Role, group and organisational affiliation
- Leadership responsibility
- The user's actual needs for the application
From technical use to business requirement
An important insight many people gain only when they start using a dedicated system is that usage is not the same as need.
I Otheo, technical data is combined with qualitative signals, including through a simple survey model where users (or managers) can classify licenses as:
- Mission Critical
- Essential
- Important
- Supportive
- Non-essential
This provides a completely different basis for decision-making than just login data.
One licence may be underused – but business-critical. Another may be used often – but not necessary.
It is only when these perspectives are brought together that genuine and reliable cost savings become possible.
Why this is difficult without a dedicated system
Many companies attempt to do this manually, often in Excel, reports, or ad-hoc analyses. The challenge is not willingness, but scalability and precision.
Without a system, you have to manually gather data from multiple sources yourself. If you succeed in identifying all data types, you then have to clean and compile the information. And it’s not enough for this to be done just once. Regular follow-up is key to an updated and useful overview.
In a manual world, one misses out on:
- Insights based on other customers' experiences
- Continuous further development of functionality
- Licence volume automation (up and down)
What can be automated – and what shouldn't be automated?
It is tempting to think that the solution is full automation: remove licences automatically based on inactivity. In practice, this is risky.
In Otheo, it is a conscious choice not to automate actions that could have negative consequences for users or the business, such as:
- Automatic user removal
- Automatic termination of critical licences
The reason is simple: your data, your control.
Instead, the system automates:
- Adjusting license volume (stop paying for more than needed)
- Clear recommendations based on data
- Highlighting potential savings
Overall, this provides updated decision support for leaders and IT. This strikes a balance between automation and governance.
In summary, licence optimisation is continuous work.
Unused licences are not a one-off problem solved by a clean-up. They are a result of continuous change within the organisation.
Therefore, license management must also be:
- Data-driven
- Continuous
- Closely linked to both IT and business
With the right system support, it becomes possible to move from gut feelings and assumptions to actual figures and confident decisions.