Licensing & SaaS Capability

FinOps is a strategic approach that helps organizations effectively manage and optimize their spending on cloud services, which are inherently variable and based on consumption. This becomes particularly crucial as companies transition from traditional on-premises data centers to public and private cloud platforms.

In this cloud-centric environment, businesses typically utilize a mix of Software as a Service (SaaS) products and licensed software, in addition to Infrastructure as a Service (IaaS). These might include operating systems, application software, databases, CRM systems, messaging platforms, and data warehouses. SaaS not only supports core business operations but can also provide deployment, monitoring, analytics, and security services.

The financial management of these services is challenging due to their variable and consumption-based nature. The costs associated with SaaS and licenses may be significant, impacting the overall financial health and operational efficiency of an organization. Therefore, FinOps teams focus on understanding and controlling these costs, which are often not as granular or detailed in billing data as IaaS services.

A critical aspect of FinOps is the procurement process, involving coordination with the procurement department responsible for acquiring these services and software. Additionally, collaboration with IT Asset Management (ITAM) or Software Asset Management (SAM) teams is essential to ensure that externally purchased licenses and software are optimally used, risks are managed, and compliance with contractual obligations is maintained.

Software and SaaS licensing often involves complex billing mechanisms—such as charges per seat, user, core, or storage amount—and may include additional costs for access counts, API usage, and data storage. Unlike typical public cloud usage, these contracts are usually long-term or perpetual, with terms allowing adjustments in license volume (“true ups”) but not reductions (“true downs”). Compliance audits and the dynamic nature of licensing rules (e.g., BYOL or hybrid benefits) necessitate continuous oversight by legal, procurement, and ITAM teams to navigate these complexities effectively.

Purchasing options for licenses and SaaS products vary. They can be procured via organizational agreements or cloud provider marketplaces, which offer flexibility to modify or end usage based on current needs. However, marketplace terms can differ significantly from traditional agreements, requiring careful consideration to avoid unnecessary expenditures.

By working closely with procurement and ITAM, FinOps teams can guide engineering and product teams on the best practices for acquiring and managing licenses. This planning is crucial for adapting to or exiting long-term SaaS or license agreements, aligning the organization’s cloud strategy with its financial and operational goals.