Solving License Management Challenges during Mergers & Acquisitions with AWS License Manager

The purpose of this blog is to provide guidance on how AWS License Manager can solve common license management challenges faced by organizations during Mergers & Acquisitions (M&A). In Deloitte’s white paper “Making a ‘poison pill” easier to swallow: How to manage M&A-related software licensing costs and compliance risks”, Deloitte highlights three major obstacles faced by stakeholders: software usage compliance, timely establishment of software license agreements, and the need for unique software knowledge. This blog will provide high-level guidance to M&A stakeholders on how AWS License Manager may solve these software licensing challenges. Additional M&A thought leadership is located at AWS Executive Insights: Mergers & Acquisitions.

Challenges in license management during M&A

Effective software license management is critical for organizations to maintain compliance, optimize costs, and enable IT governance across a complex landscape of applications, vendors, and licensing agreements. Managing software licenses involves dealing with various usage terms and conditions set by different software vendors. Even within the same vendor, various software products can have different and complex licensing models, such as subscription-based or perpetual licensing terms, charging based on the number of hosts or CPU cores, and so on. The tasks involved in software license management include controlling and visualizing software license usage, optimizing license costs, and streamlining the software license lifecycle events like upgrades, replacements, and deprecations. Managing software licenses for a large company, including commercial operating systems, databases, and applications, can be a complex and challenging endeavor.

Managing software licenses during mergers and acquisitions can be especially difficult due to the complexity of consolidating license agreements, usage terms, and compliance requirements across multiple entities. In certain scenarios, if the buy-side entity intends to transition to a cloud-based infrastructure but the target company’s software licenses only permit on-premises usage, the buy-side may face challenges in extending the software’s usage to the cloud. This means that bringing your own license (BYOL) to the cloud may not be possible, requiring negotiation and re-contracting with the software vendor. For example, Microsoft SQL Server licenses require Software Assurance to enable license mobility for deploying servers on-premises or in the cloud. For customers who have Red Hat Enterprise Linux (RHEL) workloads, they would need Red Hat Cloud Access to run eligible Red Hat product subscriptions in the cloud.

Sometimes license management may even be neglected during the due diligence and integration phases, as it may be considered by organizations conducting M&A activities to have less of an immediate business impact compared to other integration or value realization activities, such as the integration of business applications, defining a data strategy, or enabling revenue-generating processes. License restrictions as a result of immature license governance or lack of license visibility during M&A may lead to delays in technology integration initiatives. Additionally, unplanned disruptions to systems or services could occur as a result of license non-compliance. These events cause the organization slowed timelines and operational impairments, negatively impacting the ability to realize anticipated M&A and cost reduction goals. M&A stakeholders need to be addressing license management to minimize business disruption, in order to fully realize the value of their transaction’s investment thesis.

Introduction to AWS License Manager

AWS License Manager is a service that helps companies manage their software licenses from different vendors (for example, Microsoft, SAP, Oracle, and IBM). This includes managing the number of licenses, the number of compute instances, and the number of users who are accessing the software. This service is particularly helpful for organizations that use multiple software applications and need to make sure they are using each one within the parameters of the licensing agreements. It can also help to reduce the risk of license non-compliance, which can result in costly fines and legal action. Furthermore, there is no charge for customers using the AWS License Manager service. Customers only pay for the resources created in their account.

AWS License Manager is integrated with Amazon EC2 Dedicated Hosts, dedicated hardware to support existing software licenses and improve license governance. Dedicated Hosts allow customers to use their existing per-socket, per-core, or per-VM software licenses, including Windows Server, SQL Server, SUSE Linux Enterprise Server, Red Hat Enterprise Linux, or other software licenses that are bound to VMs, sockets, or physical cores, subject to your license terms. This helps stakeholders optimize cost by leveraging existing licenses during M&A. Refer to AWS License Manager Features to learn more about the capabilities that AWS License Manager provides.

How does AWS License Manager solve challenges during M&A?

AWS License Manager should be a key consideration for any M&A stakeholder looking to optimize license costs, minimize disruption, and accelerate integration during a merger or acquisition. By centralizing license management, License Manager provides the visibility and control needed to effectively consolidate and govern software licenses across acquired entities. AWS License Manager enables stakeholders to focus on driving value from deals rather than getting slowed down by licensing logistics. Let’s discuss how AWS License Manager solves common challenges related to license management during M&A:

Licensing Discovery and Usage Tracking: AWS License Manager offers a centralized solution for efficiently tracking and managing software licenses, providing a comprehensive inventory view, usage insights, and helpful dashboards for informed decision-making during new purchases, procurement reporting, and vendor audits. AWS License Manager streamlines license transfer between entities by enabling the management and tracking of licenses across various AWS accounts.

AWS License Manager is a valuable tool for M&A activities, offering capabilities to oversee software license agreements in both AWS and on-premises environments. AWS License Manager allows users to view and manage their commercial Linux subscriptions (e.g., RHEL, SLES, Ubuntu Pro) on AWS by enabling license discovery and tracking across specified AWS Regions and accounts within whole AWS Organizations.

License Optimization and Cost Savings: AWS License Manager identifies underutilized licenses, allowing for reallocation and cost reduction. This optimization leads to cost savings, contributing to post-merger synergies. Additionally, AWS License Manager offers flexibility in adapting to changing Windows licensing needs, facilitating switches between AWS-provided licenses and BYOL. This flexibility enables efficient license management, whether deploying licenses on-premises or in AWS, ultimately aiding in cost optimization during and after the merger process.

Licensing Governance and Entitlement Management: M&A activities will require license governance policies and processes. AWS License Manager helps you define and enforce license governance rules, ensuring consistent license management practices (allocation, expiration, utilization) across the merged entities. 

How to get started with AWS License Manager

You can use AWS License Manager to manage both cloud and on-premises licenses:

• AWS Organizations facilitates the consolidation of multiple AWS accounts into a centrally managed organization. The service is often used during M&A to integrate AWS account structures for the purpose of multi-account governance. You can refer to “Strategies to Merge AWS Organizations during M&A” for additional details. After merging into one AWS Organization, you can re-use existing licenses or create new self-managed licenses, attach them to your AWS AMIs and instances, and track license usage. Refer to the following documentation on how to turn on cross-account resource discovery in AWS License Manager settings.
• For scenarios where software licenses are used both in AWS and on-premises, AWS License Manager allows you to discover licenses using Systems Manager Inventory, and then attach licensing rules to them. After licensing rules are attached, you can track them along with your AWS servers in the AWS License Manager dashboard.

AWS License Manager uses Systems Manager Inventory to discover software usage on Amazon EC2 instances and on-premises instances. The following steps enable users to automate the discovery of license usage inventory for both Amazon EC2 instances and on-premises instances:

1. Enable cross-account inventory search by integrating AWS License Manager with your AWS Organizations account.
2. Install AWS Systems Manager SSM Agent on your Amazon EC2 and on-premises instances. You can refer to setting up Systems Manager for hybrid environments for additional details about this step.
3. Create a self-managed license and enable automated discovery rules. Below is an example on how to create the self-managed license of SQL Server 2019 and automate the discovery for all managed nodes in Systems Manager inventory.

Figure 1 Create the self-managed license of SQL Server 2019

Figure 2 Automate the discovery for all SSM managed nodes

4. After enabling automated discovery, users can find the license inventory as shown below:

Figure 3 AWS License Manager License inventory

5. AWS License Manager reporting dashboard provides ongoing visibility into license usage and assists with vendor audits:

Figure 4 Sample dashboard after discovering SQL Server license usage:

In addition to the dashboard, users can also track the history of their self-managed licenses by scheduling periodic (daily/weekly/monthly) snapshots of license usage and save to Amazon S3 for future audit purposes. The following is a sample weekly SQL Server usage report.

Figure 5 Weekly SQL Server usage report

Users also have the ability to view the hourly license usage in CloudWatch metrics. Stakeholders can set alarms that watch for certain thresholds and send notifications. For example, you can watch for the percentage of licenses by using the LicenseConfigurationUsagePercentage metric and take action before limits are exceeded. You can find the full list of metrics in the documentation. 

Figure 6 License usage metrics in CloudWatch

For commercial Linux subscriptions, customers can start by enabling Linux subscription discovery for AWS Regions and Organizations in License Manager settings, and then License Manger will automatically help discover the Linux subscriptions and display by subscription or instance as below:

Figure 7 Enable discovery of Linux subscriptions in Settings

Figure 8 Linux subscription console by subscription

Figure 9 Linux subscription console by instance

Refer to the AWS License Manager Workshop, part of the AWS Management and Governance Tools Workshop, for hands-on guidance. You may also refer to your organization’s aligned AWS Account Solutions Architect or AWS Support for additional guidance on how to set up AWS License Manager.

Conclusion

AWS License Manager offers significant benefits for organizations going through M&A activities. M&A transactions likely involve the consolidation of multiple companies with different software assets and licensing agreements. This complexity makes it challenging to manage software licenses. By leveraging AWS License Manager, companies can establish standardized license management processes, thereby confirming that software assets are used in adherence to licensing agreements. This standardized approach minimizes the risk of license non-compliance and allows the newly merged entities to optimize the utilization of its software assets while remaining cost-efficient, legally compliant, and aligned.

Refer to the following resources for additional information:

• AWS Management and Governance Tools Immersion Day: This Immersion Day introduces AWS management and governance services, including AWS License Manager and AWS Systems Manager mentioned in this blog.
• AWS License Manager & Dedicated Host Workshop: This workshop educates learners on the best approaches for managing Microsoft Windows-based infrastructure on AWS with AWS License Manager.
• AWS Executive Insights: Mergers & Acquisitions: Public webpage hosting AWS’s thought leadership, content, and solutions for customers conducting mergers & acquisitions activities.

About AWS M&A Advisory

The AWS Mergers & Acquisitions Advisory Team (AWS M&A Advisory) is a group of subject matter experts at AWS that provide advisory engagements to AWS customers conducting M&A transactions. If your organization is going through an M&A transaction and would like to learn more about how AWS supports customers, please reach out to AWS Mergers & Acquisitions Advisory Team through the following link: Mergers and Acquisitions Cloud Strategy Support.

About the authors: